Trump 1.0: Regulatory Capture at the U.S. EPA, Forecast for the Future

In a previous post, I discussed the evolution of the Republican Party away from its roots which included significant pro-environmental protection sentiment. Today, by contrast, few Republican politicians will even acknowledge climate-change as being primarily human-caused, and the Party is deeply committed to the expansion of burning fossil fuels. While this view had been advancing since the mid 90’s, the election of Trump in 2016 brought the perspective firmly into power. What did the Trump 1.0 team accomplish in support of a “drill-baby-drill,” deregulatory agenda? This post provides an overview from the forthcoming tenth edition of my college textbook, Economics and the Environment (which includes the references cited in the post).

Capturing the EPA

The idea of regulatory capture was introduced in the early 1970s by Nobel-Prize-winning economist George Stigler. It refers to capture of an agency by the industry it was supposed to regulate: the “fox guarding the henhouse” phenomenon. Stigler used capture theory to argue that trucking and airline regulators at the time were benefitting their regulated industries rather than consumers. Stigler explained capture as a result of the fact that regulated industries had much to gain from cooperating to insure political control of the agencies. On the other hand, the general public who the agencies were supposed to serve were much less able to organize to defend their interests. The Trump administration’s across-the-board appointment of industry lobbyists and former executives to head the agencies appears to be a classic case of this fox-running-the-henhouse type of regulatory capture.

Consider the first 2 years of Trump’s EPA. He appointed former Oklahoma Attorney General Scott Pruitt to head the agency, who had sued the EPA 14 times to try and reduce the stringency of regulations. Among other Trump appointees were:

Andrew Wheeler, a former coal industry lobbyist, was appointed the EPA Deputy Administrator.
Nancy Beck, formerly an executive at the American Chemistry Council, was appointed Deputy Assistant administrator of the EPA’s Office of Chemical Safety and Pollution Prevention.
Erik Baptist, formerly senior counsel at the American Petroleum Institute, was appointed the EPA Senior Deputy General Counsel.
Samantha Dravis, who was formerly the attorney for an organization of conservative political donors led by billionaire brothers Charles G. and David H. Koch, was appointed the EPA's Senior Counsel and Associate Administrator for Policy.

Within four months, Pruitt had moved to roll back 30 existing EPA regulations, bypassing much consultation with EPA technical staff. By June 2019, the number of rollbacks was up to 83. Pruitt also outsourced “the crucial work [of rewriting the regulations] to a network of lawyers, lobbyists and other allies especially [through] the Republican Attorneys General Association. Since 2013, the group has collected $4.2 million from fossil-fuel-related companies like Exxon Mobil, Koch Industries, Murray Energy and Southern Company,” (Davenport, New York Times).

The rules being revised covered areas ranging from pesticides to wetland protection to chemical plants to climate change. Over the first six months Pruitt was in charge, enforcement efforts also plummeted with the EPA collecting 60 percent less in penalties imposed on polluters than under the same time periods for Presidents Obama or George W. Bush.

In the process, Pruitt’s schedule revealed that he met with industry representatives 25 times more frequently than with public interest or environmental groups. Dravis—one of Pruitt’s appointees above—had 90 meetings with industry interests during a nine-month period in 2017, while meeting with just one public interest organization. Pruitt also fired many members of the EPA’s Science Advisory Boards. He prevented EPA-funded scientists (many of the experts in the relevant fields) from serving on those boards, and he also welcomed industry lobbyists onto the scientific advisory boards.

The New Normal: Incoherence at the EPA?

Whether industry is generally overregulated relative to what the law requires is not the point here. On individual cases of environmental regulation, one can argue that EPA regulatory decisions may be right or may be wrong. Rather, it is critical to recognize that 2016 marked a watershed change in U.S. regulatory policy. Again, while there has always been something of a political seesaw—with Republicans appointing more industry-friendly agency heads while Democratic appointees were more environmentally connected—the United States had never before witnessed the level of industry occupation of high-level environmental agency positions seen after the 2016 election. Nor had we seen an attempt at this scale to roll back regulations across the board, through processes that disregarded established scientific and economic expertise, and that excluded non-industry actors in the process.

With Biden’s victory in 2020, the EPA tried to return its operations to a more “normal” pre-2016 role. Most of President Trump’s regulatory rollbacks had been delayed by lawsuits, and were then reversed by President Biden. However, the EPA found it hard to advance tough regulations against a difficult backdrop of a highly partisan congress. In addition, President Trump’s three Supreme Court picks, as well as the large number of Federal judges he appointed are generally sympathetic to the view that industry is overregulated. So court decisions were beginning to restrict the room for environmental regulatory action relative to what was possible pre-2016. In particular, in a major ruling in the summer of 2024, the Supreme Court gave Federal Judges much more authority to over-rule EPA and other regulatory agency decisions based on technical interpretations of statutes. This ruling has created the potential for an explosion of industry lawsuits that can now be brought before Trump-appointed judges seeking to overturn new and existing environmental regulations.

Going forwards on the outlook for U.S. environmental regulation, much depends on the outcome of the 2024 election, as well as the longer run evolution of the Republican view on environment and climate. If an aggressive deregulatory perspective prevails within the Republican party over the long run, then U.S. policy going forward is likely to see large-scale instability, with Democratic administrations pushing aggressive global warming pollution reduction and other environmental policies, and subsequent Republican administrations working just as hard for regulatory rollbacks. Because it is harder to build something up than to tear it down, the net effect of such a dynamic would likely be a loosening of the U.S. environmental regulatory framework. At the same time, this is a very destabilizing environment for business, who will face a whipsaw of regulatory tightening and loosening. This kind of uncertainty discourages investment, as firms are unable to reliably make investments in such an unstable regulatory environment.

Alternative Futures

A Democratic presidential win in 2024 will give the EPA another four years to re-institute a new version of normal, albeit one restrained by a Supreme Court dominated by Trump appointees - returning us to more or less a stalemate on climate regulation. The reality is that the Court can, and will, constrain the EPA, within its current legislative mandate, from doing more than nibble around the edges of the climate change crisis. This in turn means that any next, post-IRA round of serious U.S. climate action is very likely to require passing new laws, with some Republican support in the U.S. Senate and House.

Yet another Trump defeat at the polls might also create breathing space for the Republicans to re-evaluate their stance on issues like climate. Accelerating climate change impacts, combined with efforts by younger Republicans and other remaining environmental voices within the party, could begin to revive the long-standing U.S. tradition of bipartisan support for environmental stewardship. Some have argued that the apparently deep partisan divide on the environment could reverse quickly. Prominent Republican pollster Frank Luntz has written that rising grassroots concern among Republican voters about climate change was creating an immediate imperative for Republican politicians to move back toward the center on the issue.

Republican re-engagement is the best case future for U.S. climate action. The worst case is a successful-on-its-own-terms Trump 2.0 presidency. What would that look like? The answer is here. And a very specific forecast for the Trump 2.0 impact on the planet's temperature is here.