Debunking the ‘Race to the Bottom’ Theory of Regulatory Competition

A putative “race to the bottom” is a galvanizing and consequential belief in environmental law. The only problem is that it’s false in theory and practice.

Here’s how the race to the bottom is supposed to work. States want to attract industry. So they “compete” with one another by lowering environmental standards, in the hope of engendering economic growth. During the 1970s, this theory was instrumental to the creation and design of the statutes that give the federal government the final say over state environmental policy (Clean Air Act, Clean Water Act, etc.).

Its success in policymaking notwithstanding, the race to the bottom theory has fared poorly with the passage of time. In a landmark 1992 law review article, “Rehabilitating Interstate Competition,” Prof. Richard Revesz persuasively put the lie to the thesis’s theoretical foundations. And in a 2014 congressional hearing, Profs. Revesz and Jonathan Adler noted that, in addition to being theoretically unsound, there is no empirical evidence that any state ever engaged in such activity.

I hadn’t given any thought to the race to the bottom theory since the 2014 congressional hearing. But earlier this week, a very smart lawyer brought up the thesis in conversation in order to make a point about federalism. While I responded about race to the bottom’s absence of theoretical soundness and empirical evidence, it occurred to me that evidence undermining the theory is unfolding before our eyes. Far from a race to the bottom, we have a bunch of states and municipalities pledging to implement the Paris climate treaty. California effectively sets national fuel economy standards. New York City is suing Exxon. Of course, I think all of these climate measures are wrong-headed; my point is only that they are completely incompatible with the race to the bottom thesis.

For that matter, I also suspect that these locally-driven climate policies indicate a general desire among Americans for environmental quality (the real kind—i.e., clean air and water right now, as opposed to supposed climate benefits centuries off). That is, I think the overwhelming majority of Americans believe environmental quality is a political good, and that climate alarmism represents a fringe mindset, one that is concentrated in progressive cities. So I strongly doubt there are any states willing to trade environmental degradation (the real kind) for industry.

Given the false premise behind the federal government’s majority stake in state environmental policymaking, Congress would do well to reconsider which sovereign merits judicial deference when the states and federal government disagree over state environmental decision-making.