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Passing the buck: federalism and Canadian environmental policy Harrison, Kathryn J. 1993

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PASSING THE BUCK:FEDERALISM AND CANADIAN ENVIRONMENTAL POLICYbyKATHRYN JO-ANNE HARRISONB.E.Sc., The University of Western Ontario, 1980S.M., The Massachusetts Institute of Technology, 1984S.M., The Massachusetts Institute of Technology, 1986A THESIS SUBMITTED IN PARTIAL FULFILLMENT OFTHE REQUIREMENTS FOR THE DEGREE OFDOCTOR OF PHILOSOPHYinTHE FACULTY OF GRADUATE STUDIES(Political Science)We accept this thesis as conformingto the required standardTHE UN VERSITY OF BRITISH COLUMBIAMarch 1993© Kathryn Jo-Anne HarrisonIn presenting this thesis in partial fulfilment of the requirements for an advanceddegree at the University of British Columbia, I agree that the Library shall make itfreely available for reference and study. I further agree that permission for extensivecopying of this thesis for scholarly purposes may be granted by the head of mydepartment or by his or her representatives. It is understood that copying orpublication of this thesis for financial gain shall not be allowed without my writtenpermission.(SignatDepartment ofIgJ„,,04-,00coAtc,eThe University of British ColumbiaVancouver, CanadaDate^0 %/9 DE-6 (2/88)Abstract This thesis examines how the current division of federal andprovincial responsibilities for environmental policy in Canadaevolved, and the implications of that arrangement for protectionof the environment. At a theoretical level, the example ofenvironmental protection is used to explore the relationshipbetween federalism and public policy more generally.It is accepted wisdom that governments seek both to claimcredit and avoid blame. However, to date, students of Canadianfederalism have been much more attentive to the dynamics ofintergovernmental credit claiming than to opportunities forintergovernmental blame avoidance. A central argument of thisthesis is that the implications of federalism for public policyare very different when both levels of government are eager toassume responsibility for a particular policy than when one orboth are content to vacate the field. It is argued that becauseenvironmental protection typically involves diffuse benefits andconcentrated costs, it offers few political benefits andsignificant political costs. Thus the case of environmentalprotection is used to explore the implications of policy inactionwithin the federal system.The thesis presents a study of the evolution of the federalgovernment's role in environmental protection and of federal-provincial relations concerning the environment between 1968 and1992. The exclusive focus of the thesis is the federalgovernment's role in "federal Canada," that is, within thei iprovinces, rather than the Northern territories. It is arguedthat the federal government has taken advantage of overlappingjurisdiction to shirk its responsibility for environmentalprotection for most of the last two decades. In light of federaldeference to the provinces, federal-provincial relationsconcerning the environment have been relatively cooperative, withthe important exception of two brief periods of heightenedsalience of environmental issues, during which both levels ofgovernment were more inclined to adopt a broad view of theirjurisdiction.A case study of federal and provincial regulation of pulpmill effluents offers considerable evidence of provincialreluctance to strengthen environmental standards for fear ofplacing local industry at a competitive disadvantage. Scholarstroubled by the environmental implications of interprovincialeconomic competition typically look to the federal government toestablish national standards. However, it is argued that manyhave underestimated the political obstacles to such a federalresponse.iiiTable of ContentsAbstractTable of Contents^ ivList of Tables viiiList of FiguresAcknowledgements^ xiChapter 1 - Federalism and Environmental Policy^ 1Introduction 1Federalism and Public Policy^ 7Assigning Jurisdiction for the Environment 9Overlapping Jurisdiction: Problem or Panacea?14Research Methodology^ 22Outline of the Thesis 23Chapter 2 - Policies and Intergovernmental Politics^26Introduction^ 26The Politics of Environmental Protection^ 27Evolving Federal and Provincial Rolesin Environmental Protection^ 37Policy vs. Jurisdiction 37Evolving Roles in Environmental Protection^40Implications for Federal-Provincial Relations 41Policymaking Amid Provincial Interdependence 44Interprovincial Competition: Healthy or Destructive?^52Game Theory and the Real World of Provincial Policymaking 56The Federal Response^ 58Federalism and Blame Avoidance^ 61Political Decisionmaking in Context 63"Politicians have Personal and Institutional Objectives" 64"Governments are not Monolithic" 65"Governments Influence Public Opinion"^ 67"Political and Constitutional Context Matters"^69Summary^ 71Chapter 3 - The Constitutional Framework: Constraints andOpportunities^ 74Introduction 74Sources of Provincial Authority^ 77Provincial Proprietary Powers 78Provincial Legislative Powers 81Limitations of Provincial Powers^ 82ivSources of Federal Authority^ 85Federal Proprietary Powers 85Federal Legislative Powers 87Limitations of Federal Jurisdiction over the Environment 118Conclusion^ 120Chapter 4 - The Emergence of Federal Involvement, 1969-1972^123Introduction 123The First Wave of Public Concern^ 124Attitudes Toward Federal Jurisdiction 132Testing Federal Jurisdiction at the Legislative Level^136The Canada Water Act^ 136The Fisheries Act 142The Creation of Environment Canada^ 147The Clean Air Act 148Federal-Provincial Relations Concerning the Environment^151The Site of Intergovernmental Negotiation: The CanadianCouncil of Resource Ministers^ 152Diversity of Provincial Perspectives^ 153Provincial Responses to the Canada Water Act^156Provincial Responses to Other Federal Legislation^161The Constitutional Negotiations^ 162The Federal Position^ 163Federal-Provincial Negotations on the Constitution^165Public Hearings on the Constitution^ 168Summary^ 170Chapter 5 - The Federal Retreat: 1972-1985^176Introduction 176The Decline in Salience^ 178Attitudes Toward Federal Jurisdiction^ 185The Federal Government Perspective 185The Opposition Perspective^ 195The Constitutional Function 196The Legislative Function^ 198The Ocean Dumping Control Act 199The Environmental Contaminants Act^ 2001977 Amendments to the Fisheries Act 202The Canada Environment Act^ 209Amendments to the Clean Air Act 211The Regulatory Function^ 212Implementation of Regulatory Statutes^ 216The Enforcement Function 222Delegation of Enforcement^ 225The Federal-Provincial Accords 229The "One Window" Approach 231Unconditional Surrender? 235Federal-Provincial Relations^ 236Federal-Provincial Relations in International Affairs^238Evaluation of CCREM 243Conclusion^ 246Chapter 6 - The Second Wave: The Reemergence of the Federal Role, 1985-1992^ 253Introduction 253The Resurgence of Public Opinion^ 255Attitudes Toward Federal Jurisdiction 259The Government Perspective 259Other Perspectives on Federal Jurisdiction^268The Constitutional Function^ 271The Legislative Function 274The Canadian Environmental Protection Act 275The Canadian Environmental Assessment Act^287The Regulatory and Enforcement Functions^ 299Implementation of CEPA^ 301Federal-Provincial Relations 304The Canadian Council of Ministers of the Environment^305The Statement on Interjurisdictional Cooperation:Partnership or Obstruction?^ 306Federal-Provincial Relations in Environmental Assessment 309Conclusions^ 326Whither -- or Wither -- the Federal Role?^331Chapter 7 The Regulator's Dilemma: Federal and Provincial Regulation of Pulp Mill Effluents^ 333Introduction^ 333The Political Economy of the Pulp and Paper Industry^337Analysis of Actors' Incentives 341Environmental Groups^ 341The Pulp and Paper Industry^ 342The Provinces^ 345The Federal Government 351Round 1 - Negotiating the 1971 Federal Effluent Regulations 351The Industry Position^ 355The Provincial Position 356The Federal Response 359Round 2 - Provincial Resistance 361The Industry Position^ 361The Provincial Position 363The Federal Response 364Round 3 - Industry Resistance 366The Industry Position^ 367The Provincial Position 368The Federal Response 369Comparison of Provincial Standards^ 371Regulating the Industry in Ontario 372Regulating the Industry in British Columbia^373Regulating the Industry in Quebec 374Regulating the Industry in New Brunwick and Alberta^376Comparison of Provincial Standards^ 376viRound 4 - Public Pressure^ 382The Industry Position 388Environmentalists' Position^ 393Provincial Perspectives 395Multilateral Federal-Provincial Negotiations^398The Federal Response^ 411Summary^ 417Conclusions 419Chapter 8 - Regulatory Enforcement in a Federal System^427Introduction^ 427The Cooperative Canadian Approach to Enforcement^429Trends in Discharges from the CanadianPulp and Paper Industry^ 434Responding to Chronic Noncompliance^ 438The Sulphite Crackdown 439Substituting the Carrot for the Stick^ 442Determinants of Regulatory Effectiveness 446Dependent Variables^ 448Independent Variables 453Results^ 458Summary 468Conclusions 470Government-Industry Cooperation Revisited^470Intergovernmental Cooperation Revisited 477Chapter 9 - Conclusions^ 491Introduction^ 491Assertion of Jurisdiction 493Provincial Policymaking Amid Economic Interdependence^498Federalism and Blame Avoidance^ 502Federal-Provincial Relations and the Environment^505Competition and Cooperation Revisited^ 508Institutions and Public Policy 510Institutional Objectives^ 512Politicans' Personal Objectives^ 514Governmental Influence on Public Opinion^ 517Political Context^ 518Governments as Complex Organizations 520Whither Canadian Environmental Policy?^ 523Bibliography^ 527Appendix A - Comparison of Federal and Provincial RegulatoryRequirements 545Appendix B - Discharge Trends by Regions and 1987 Discharge Datafor Individual Mills^ 557vi iList of Tables Table 7-1^Predominance of "Company Towns" 425Table 7-2^Average Provincial Permit Requirements 425Table 7-3^Comparison of Provincial and Federal Standards 426Table 8-1^1987 BOD and Suspended Solids Dischargesby Province 483Table 8-2^1987 Average Discharges from Different Mill Types 483Table 8-3^Analysis of BOD Discharges 484Table 8-4^Analysis of TSS Discharges 484Table 8-5^Analysis of Toxicity Compliance 485Table 8-6^Effect of Grants on Compliance in Eastern Canada 485Table A-1^Federal vs Provincial TSS Requirements, 1987:British Columbia 546Table A-2^Federal vs Provincial BOD Requirements, 1987:British Columbia 547Table A-3^Federal vs Provincial TSS Requirements, 1987:Alberta 548Table A-4^Federal vs Provincial BOD Requirements, 1987:Alberta 548Table A-5^Federal vs Provincial TSS Requirements, 1987:Ontario 549Table A-6^Federal vs Provincial BOD Requirements, 1987:Ontario 550Table A-7^Federal vs Provincial TSS Requirements, 1987:Quebec 551Table A-8^Federal vs Provincial BOD Requirements, 1987:Quebec 553Table A-9^Federal vs Provincial TSS Requirements, 1987:New Brunswick 555Table A-10 Federal vs Provincial BOD Requirements, 1987:New Brunswick 556viiiList of Figures Figure 4-1 Trends in Public Concern 173Figure 4-2 Trends in Salience 174Figure 4-3 Rank of Pollution Among Most Important Problems 175Figure 8-1 Trends in National BOD Discharges 486Figure 8-2 Trends in National TSS Discharges 487Figure 8-3 Trends in National BOD Compliance 488Figure 8-4 Trends in National TSS Compliance 489Figure 8-5 Actual and Projected Discharges for TSS 490xAcknowledgementsThis dissertation could not have been completed withoutassistance from a great many sources. A graduate fellowship fromthe Social Sciences and Humanities Research Council of Canadaprovided financial support during four years of graduate studies.In addition, a research grant from the Science Council of BritishColumbia was invaluable for the pulp and paper case study. I amindebted to Don Munton for facilitating my involvement in thatproject.Sincere thanks are owed to Andrew Fabro, the librarian inEnvironment Canada's Pacific and Yukon Region, who cheerfullytracked down my innumerable requests for documents, and to TrevorRuthman, from Environment Canada's Industrial Programs Branch,who responded to my frequent calls to ask "just one lastquestion" concerning the Canadian pulp and paper industry. I amparticularly indebted to several dozen federal and provincialofficials, pulp and paper industry representatives, and membersof environmental groups who generously gave their time forinterviews. While their names are not listed in order tomaintain confidentiality, their anonymity in no way reflects theextent of my appreciation of their contribution.Kent Weaver's bitnet messages have been a source ofinsightful and challenging questions. I am especially gratefulto the three members of my dissertation committee. Peter Nemetzencouraged me to pursue a PhD some five years ago, and since thenhas provided thoughtful comments on many papers, in addition tothis dissertation. As my professor, Richard Johnston offeredvaluable assistance, particularly with the pulp and paper casestudy. And as a friend, he has been a source of trusted counselas I went through the traumas of academic job-hunting. My thesissupervisor, Alan Cairns, always managed to strike just the rightbalance between leaving me on my own, and offering timely andextensive feedback whenever I sought it. My work has beenstrengthened not only by Professor Cairn's challenging questions,but by the inspiring example of his own scholarship, which servedas the basis for an ongoing, often lively, hypotheticalconversation with him as I wrote.My friends Lynda and Gaalen Erickson have cheerfullyentertained frequent digressions onto the subject of pulp millpollution in unlikely settings, like ski lifts and mountaincabins. They also have provided a much appreciated home awayfrom home for my frequent trips back to Vancouver this year. Myparents have been a constant source of support from my first dayof school through what must have seemed like a never-endingformal education. It's impossible to say just how much that hasmeant to me. Finally, my most profound debt is to my husband andcolleague, George Hoberg, who has been a sounding board for myideas, a willing reader of chapters even longer than they arenow, a last-minute graphics consultant, and a source ofencouragement whenever my confidence or enthusiasm flagged. Thisthesis is dedicated to him.xiChapter 1Federalism and Environmental PolicyIntroductionWithin Canada, the renewed salience of environmental issuesin recent years has given rise to legislative and regulatoryinitiatives by both the federal and provincial governments and,not coincidentally, to increased intergovernmental conflict.Jurisdictional disputes have emerged over the Quebec government'sJames Bay hydro development, the Al-Pac pulp mill and the OldmanRiver Dam in Alberta, and the Rafferty-Alameda dam inSaskatchewan, to name but a few. As a result, questionsconcerning the appropriate balance of federal and provincialroles in environmental policy have assumed increasing prominence.This thesis will consider how the current division offederal and provincial responsibilities for environmental policyevolved, and the implications of that arrangement for protectionof the environment. The case of environmental policy also willbe used to explore the relationship between federalism and publicpolicy more generally. As virtually all human activity has someimpact on the environment, it was necessary to narrow the focussomewhat. Thus, the primary concern of this thesis will beenvironmental protection, that is, policies to maintain orenhance the quality of environment. Policies to conserve orallocate the quantity of natural resources will not generally beaddressed.In light of recent developments, it is striking that there1actually were remarkably few intergovernmental disputes overenvironmental matters until recently. As late as 1989, scholarlypublications praised the cooperative atmosphere of federal-provincial relations in the environmental field.' The degree ofcooperation achieved in environmental protection between theearly 1970s and the late 1980s was particularly noteworthy incontrast to the often hostile climate of federal-provincialrelations in other fields during the same period, includingenergy policy and constitutional reform.In order to understand why conflicts emerged in the late1980s, one first must understand why cooperative federal-provincial relations prevailed in earlier years. It will beargued that the low level of federal-provincial conflictconcerning the environment between the early 1970s and the late1980s reflected the fact that the federal government did notchallenge provincial dominance in the field. In 1980, Thompsonconcluded that "a summary of federal/provincial regulations showsprovincial control over environmental matters being exercisedagainst a background of minimum federal interference." 2 Untilrecently, the federal government played a largely supporting role1 O.P. Dwivedi, R. Brian Woodrow, "Environmental Policy-Making and Administration in a Federal States: The Impact ofOverlapping Jurisdiction in Canada," in William M. Chandler,Christian W. Zollner, Challenges to Federalism: Policy-making inCanada and the Federal Republic of Germany, (Kingston: Instituteof Intergovernmental Relations, Queen's University, 1989).2 Andrew R. Thompson, Environmental Regulation in Canada: An Assessment of the Regulatory Process, (Vancouver: WestwaterResearch Centre, 1980), 25.2of conducting research, offering technical expertise, regulatingmobile source emissions, and encouraging the provinces to adoptconsistent national standards. In contrast, provincialgovernments assumed the role of "front line" protectors of theenvironment -- setting standards for environmental and effluentquality, issuing permits for individual sources, and enforcingboth provincial and federal standards.Two explanations for the historically weak federal role havebeen offered: constitutional constraints and provincialresistance. A number of authors have suggested that the federalgovernment was constrained by limited constitutional authority. 3There is little disagreement that the provinces have strongclaims to jurisdiction over the environment within their borders.They have considerable authority both by virtue of theirlegislative jurisdiction over "property and civil rights" andtheir ownership of Crown resources. In contrast, federaljurisdiction over the environment is both indirect and uncertain.3 Lennart J. Lundqvist, Environmental Policies in Canada, Sweden, and the United States: A Comparative Overview, (BeverlyHills: Sage, 1974); O.P. Dwivedi, "Environmental Administrationin Canada," International Review of Administrative Sciences, 39(1973): 149-157, 156; O.P. Dwivedi, "The Canadian GovernmentResponse to Environmental Concerns", in O.P. Dwivedi, ed.,Protecting the Environment: Issues and Choices -- Canadian Perspectives, (Vancouver: Copp Clark, 1974), 180; L.J.Lundqvist, "Do Political Structures Matter in EnvironmentalPolitics? The Case of Air Pollution Control in Canada, Sweden,and the United States," Canadian Public Administration, 17(1974): 119-142, 135; Dominique Alheritiêre, "Les problêmesconstitutionnel de la lutte contre la pollution de l'espaceatmospherique au Canada," La Revue du Barreau Canadien 50 (1972):561-579, 571; Kernaghan R. Webb, Industrial Water Pollution Control and the EPS, unpublished background study prepared forthe Law Reform Commission of Canada, May 1983, 1-4.3Although most legal scholars believe that the federal governmenthas at least some authority concerning environmental problemsthat cross international and interprovincial borders or thatthreaten public health, the limits of that authority are unclear.The problem with the constitutional constraint argument,however, is that uncertain authority has not always stopped thefederal government before. Why would the federal governmentdisplay such self-restraint with respect to the environment, whenit did not do so with respect to health care, post-secondaryeducation, or oil-pricing? In fact, legal scholars have beeninclined to argue that the federal government has taken a limitedview of its environmental powers. 4 Federal authority concerningthe environment remains unclear twenty years after the passage offirst wave of environmental statutes largely because successivefederal governments have declined to test the limits of thatauthority.Franson and Lucas have suggested that "the excuse ofconstitutional difficulties is used as a smokescreen to hide abasic unwillingness on the part of those involved to take the4 J. Owen Saunders, Interjurisdictional Issues in CanadianWater Management, (Calgary: Canadian Institute of Resources Law,1988), 28-9; D.R. Percy, "Federal/Provincial JurisdictionalIssues," in Harriet Rueggeberg, A.R. Thompson, eds., Water Lawand Policy Issues in Canada, (Vancouver: Westwater ResearchCentre, 1984), 86; Paul Muldoon, Marcia Valiante, Toxic Water Pollution in Canada, (Calgary: Canadian Institute of ResourcesLaw, 1988), 26; Donna Tingley, "Conflict and Cooperation on theEnvironment," in Douglas Brown, ed., Canada: The State of the Federation 1991, (Kingston: Institute of IntergovernmentalRelations, 1991), 132.4actions that are necessary." 5 Along with other legal scholars,they have attributed federal timidity to an unwillingness toconfront the provinces, which are highly protective of theirjurisdiction over natural resources. 6 Again, however, it isnoteworthy that the federal government has not been so reluctantto provoke the provinces in other fields. For instance, whenquestions arose about which level of government could taxwindfall profits from the oil industry, the federal governmentdid not hesitate to challenge provincial authority with respectto natural resources. One is left to wonder why provincialresistance in the environmental field was so successful.While not denying the existence of either constitutionallimitations or resistance from at least some of the provinces,this thesis will argue that an explanation for federal andprovincial roles in environmental protection is not completewithout considering governments' incentives to extend or defendtheir jurisdiction over the environment in the first place.5 Robert Franson, Alastair Lucas, "Legal Control ofHazardous Products in Canada," in Science Council of Canada,Canadian Law and the Control of Exposure to Hazards,  (Ottawa:Science Council of Canada, 1977), 25. See also H. Scott Fairley,"The Constitutional Conundrum of Jurisdiction over theEnvironment," in Canadian Bar Association, Canada's Environmental Laws, (Toronto: Canadian Bar Association, 1990), 1.6 Alastair R. Lucas, "Harmonization of Federal andProvincial Environmental Policies: The Changing Legal and PolicyFramework", in J. Owen Saunders, Managing Natural Resources in a Federal State, (Toronto: Carswell, 1986), 39; Thompson,Environmental Regulation, 22; Saunders, Interjurisdictional Issues, 21; Muldoon and Valiante, 27; Barry G. Rabe, "Cross-MediaEnvironmental Regulatory Integration: The Case of Canada,"American Review of Canadian Studies 19 (1989), 261-273, 262.5Environmental protection typically involves diffuse benefits andconcentrated costs, and thus offers few political benefits butsignificant political costs.' The absence of electoralincentives, rather than constitutional constraints or provincialopposition per se, may explain why the federal government did notpursue a larger role in environmental protection throughout the1970s and early 1980s. The federal government's resultingreluctance to challenge provincial control of natural resourcescould also stem from fear of electoral "fed bashing" byprovincial governments. Thus, the reality may be closer to afederal surrender than the provincial victory implied by manyauthors.Why then have provincial governments been so eager to defendtheir environmental jurisdiction? An argument that will bedeveloped in the following chapter is that a crucial differencebetween the federal and provincial perspectives is that theprovinces are the owners of virtually all Crown resources.Although both orders of government would be expected to respondpreferentially to the concentrated interests of resourcedevelopment industries rather than the diffuse interests of thebeneficiaries of resource conservation and protection, in theprovinces' case, their ability to do so is inextricably tied totheir authority to control the rate and terms of resourceexploitation. Thus, the provinces can be expected to defend7 James Q. Wilson, "The Politics of Regulation," in JamesMcKie, ed., Social Responsibility and the Business Predicament,(Washington: Brookings Institution, 1975).6their jurisdiction over natural resources, not so much to protectthem, as to manage their exploitation.Public opinion, and thus electoral incentives, are notstatic, however. During periods in which environmental issuesenjoyed a high level of public salience, in the early 1970s andagain in the late 1980s, the federal government did in fact adopta more expansive view of its environmental jurisdiction, despiteconstitutional uncertainty and despite objections from a numberof provinces. Analysis of the subsequent withering of federalenvironmental programs as the first wave of public attention tothe environment declined over the course of the 1970s may offerimportant lessons as the second wave ebbs in the early 1990s.Federalism and Public policyIn recent years, there has been renewed interest in howinstitutions affect public policy by shaping the opportunitiesand incentives available to different political actors. 8 It isargued that it is not only the strength of the players, but alsothe "rules of the game" that determine policy outcomes. One ofthe most fundamental rules of the game in Canadian politics isfederalism and the associated division of powers between federaland provincial governments. Indeed, long before the movement to"bring the state back in" to studies of politics, there was anextensive literature on the implications of federalism for public8 For instance, see Theda Skocpol, "Bringing the State BackIn: Strategies of Analysis in Current Research," in Peter Evans,Dietrich Rueschemeyer, Theda Skocpol, eds., Bringing the State Back In, (Cambridge: Cambridge University Press, 1985).7policy in Canada.Although the state arguably has been well-entrenched inCanadian political science all along, the literature is far fromconsensus on the relationship between federalism and publicpolicy. 9 Many of the theories that have been offered are indirect conflict. For instance, Professor Cairns' imagery ofdirigiste governments competing to expand their jurisdiction 10contrasts with other authors' arguments that the vetoes andobstruction in the federal system constrain the scope of publicpolicy." There is disagreement between scholars like Trudeau,who argue that federalism promotes diversity and innovation,"and those who see interprovincial competition for investmentinevitably leading to conservative policy outcomes." And, thereis debate over whether federalism promotes intergovernmental turf9 Frederick J. Fletcher, Donald C. Wallace, "Federal-Provincial Relations and the Making of Public Policy in Canada:A Review of Case Studies," in Richard Simeon, ed., Division ofPowers and Public Policy, (Toronto: University of Toronto Press,1985).m Alan C. Cairns, "The other crisis of Canadian federalism,"Canadian Public Administration, 22 (1979): 175-195.11 ^Banting, The Welfare State and Canadian Federalism,(Kingston: McGill-Queen's University Press, 1987); David R.Cameron, "The Expansion of the Public Economy: A ComparativeAnalysis," American Political Science Review, 72 (1978): 1243-1261; Fletcher and Wallace, "Federal-Provincial Relations."12 P.E. Trudeau, "The Practice and Theory of Federalism," inMichael Oliver, ed., Social Purpose for Canada, (Toronto:University of Toronto Press, 1961).13 Frank R. Scott, "Centralization and Decentralization inCanadian Federalism," in Essays on the Constitution, (Toronto:University of Toronto Press, 1977).8wars, or is instead the stuff of backroom deals." Part of thediversity of the literature lies in the fact that differentauthors have been asking different questions. Two of thosequestions, which level of government should be assignedresponsibility for a particular problem, and what are theimplications of overlapping jurisdiction for public policy, willbe considered in turn.Assigning Jurisdiction for the Environment In considering which level of government should be assignedresponsibility for a particular policy problem, the dilemma isthat both levels of government offer characteristic strengths andweaknesses. With respect to environmental protection, arguablythe strongest point in favour of federal authority is theexistence of interjurisdictional spillovers. When pollutantscross provincial boundaries, the downstream province can dolittle to control sources of pollution located outside theprovince, while the upstream province has little incentive toaccept the costs of regulating polluters in its own province inorder to deliver environmental benefits to another province.Like physical spillovers, economic spillovers also can createproblems. Elliott et al. have noted the propensity of U.S. stategovernments to shift the costs of air pollution control out ofstate by regulating products that originate elsewhere, such as14 ^Breton, "Supplementary Statement," Report of the Royal Commission on the Economic Union and Development Prospects for Canada, (Ottawa: Minister of Supply and Services Canada,1985), Vol. 3, 493.9automobiles and coal, rather than controlling discharges fromsources within their own borders. 15The federal government is less likely to face geographicconstraints or related perverse incentives given its largerphysical jurisdiction. However, as awareness of transboundaryenvironmental problems has evolved from discrete instances ofcontamination of interprovincial rivers to global environmentalproblems, such as climate change and depletion of the ozonelayer, it is increasingly clear that even federal jurisdictionmay not be large enough. Nonetheless, it is often argued thatfederal authority is preferable to provincial, sinceinternational negotiations normally take place between national,rather than subnational, governments.A second argument in favour of federal jurisdiction is thatthe federal government is less vulnerable to prisoners' dilemmas.Since individual provinces compete to attract investment and tomaintain existing industries, they may be reluctant to imposestringent environmental standards for fear of placing localindustry at a disadvantage relative to competitors in otherprovinces. 16 As a result, each province could end up adopting15 E. Donald Elliott, Bruce A. Ackerman, John C. Millian,"Toward a Theory of Statutory Evolution: The Federalization ofEnvironmental Law," Journal of Law, Economics, and Organization,1 (1985):^313-340, 329.16 A critical underpinning of this argument is the assumptionthat regulated industries in general enjoy greater politicalinfluence than voters at large, by virtue of their greatermobility. See Susan Rose-Ackerman, "Does Federalism Matter?Political Choice in a Federal Republic," Journal of Political Economy, 89 (1981): 152-165.10standards that are lower than they would have chosen had theybeen acting independently of the others. At the limit, provincesthat are particularly vulnerable to threats of job losses,whether by virtue of high unemployment or non-unique resourceassets, might offer particularly generous concessions toindustry, effectively creating "pollution havens."The third argument in favour of federal responsibility isthat the federal government can capture economies of scale inadministration. As Mashaw and Rose-Ackerman have noted, "Someinformation relevant to the entire country can be mostefficiently created by the federal government."" It may be moreefficient for the federal government to review available controltechnologies, devise effluent standards, and take the variousprocedural steps necessary to promulgate a single regulation,than for ten provincial governments to replicate each of thoseactivities.The fourth argument in favour of federal jurisdictionconcerns the possibility that the extent of influence ofdifferent interest groups may be different at the federal andprovincial levels. Stewart has argued that economies of scale inpolitical organization allow environmental groups to have the17 Jerry L. Mashaw and Susan Rose-Ackerman, "Federalism andRegulation," in George C. Eads and Michael Fix, eds., The ReaganRegulatory Strategy, (Washington: Urban Institute Press, 1984),118.11greatest impact at the national level." Environmental groupscan exercise greater leverage by organizing once on a nationalscale, than by attempting to fight the same battles in each andevery province. Although similar economies of scale also areavailable to regulated industries, they are likely to be moremeaningful to groups with limited resources inasmuch as theyallow them to achieve a "critical mass" at the national level.Provincial control of environmental policy also offersimportant advantages. First, administrative diseconomies ofscale may outweigh national economies of scale. Local officialsare likely to be more familiar with local problems and also in abetter position to devise solutions tailored to the circumstancesof a particular community.Second, it is often argued that smaller scale governmentsare "closer to the people" and thus, better able to discerncitizen preferences. Although it may be more resource-efficientfor environmental groups to fight a battle once at the nationallevel than to wage war on ten different fronts, they maynonetheless be more effective closer to home if it is easier forthem to organize and to be heard among their neighbours.Proponents of provincial jurisdiction argue that the problem isn Richard B. Stewart, "Pyramids of Sacrifice? Problems ofFederalism in Mandating State Implementation of NationalEnvironmental Policy," Yale Law Journal, 86 (1977): 1196-1272,1213-4. See also Anthony Scott, "Piecemeal Decentralization:The Environment," in Robin Boadway, Thomas Courchene, DouglasPurvis, eds., Economic Dimensions of Constitutional Change,(Kingston: John Deutsch Institute for the Study of EconomicPolicy, 1991).12not that local governments are too sympathetic to powerfulminorities, but that national governments are insufficientlyresponsive to local majorities. 19Third, to the extent that the public's preferences aregeographically diverse, they can be satisfied more fully bygeographically diverse policies. When national governmentsimpose uniform standards, as they are wont to do," they forceresidents of some provinces to pay for more environmentalprotection than they want, and others to settle for less. Aclosely related argument is that multiple jurisdictions tend tobetter satisfy voter preferences, since citizens retain theoption of "voting with their feet" by moving to a jurisdictionthat offers a more favourable package of environmental and19 ^classic statement of this argument can be found inJames Madison's "Federalist Paper No. 10," reprinted in James Q.Wilson, American Government, 3rd ed., (Toronto: D.C. Heath,1986). It should be noted, however, that Madison offered theargument in favour of national jurisdiction, since he wasmotivated to overcome the "tyranny" of local majorities.Although the quite different argument, presented above, thatdiffuse interests can be better represented at the national levelis often attributed to Madison (see, for instance, Mashaw andRose-Ackerman, "Federalism and Regulation," 121), in fact,Madison was concerned exclusively with shifting majorities,rather than Olsonian notions of obstacles to collective action.20 Theoretically, the federal government could adoptregionally tailored standards that would mimic those that wouldbe adopted by individual provinces. However, as Breton and Scotthave argued, using an analysis of governments' and citizens'transaction costs, that is unlikely to occur. (The EconomicConstitution of Federal States, (Toronto: University of TorontoPress, 1978.)) Richard O. Zerbe offered a similar argument, withparticular emphasis on administrative costs, in "OptimalEnvironmental Jurisdictions," Ecology Law Quarterly, 4 (1974):193-245.13economic services."The fourth argument in favour of provincial jurisdiction isessentially that ten heads are better than one -- with diversitycomes innovation." Studies in both Canada and the United stateshave shown that new ideas that emerge in one state or provinceoften diffuse to other states and provinces." A related finalargument is that interprovincial competition is healthy in ademocratic society. Short of "voting with their feet," voterscan compare their own government's performance with that ofneighbouring jurisdictions and, if it is found wanting, vote foranother party come election-time.Overlapping Jurisdiction: Problem or Panacea? More recently, scholars in both political science andeconomics have acknowledged that we seldom face an either/orproposition between provincial and federal government. Aconstitution written more than a century ago simply cannotallocate responsibility for contemporary policy problemsexclusively to one level of government or the other. More oftenthan not, today both federal and provincial governments are21 ^Tiebout, "A Pure Theory of Local Expenditures,"Journal of Political Economy, 64 (1956): 416-424.22 ^"The Practice and Theory of Federalism." Theclassic statement of this argument in the U.S. is Louis Brandeis'depiction of the States as "little laboratories of democracy."23 ^L. Walker, "The Diffusion of Innovations Among theAmerican States," American Political Science Review, LXIII(1969): 880-899; Dale H. Poel, "The Diffusion of Legislationamong the Canadian Provinces: A Statistical Analysis," CanadianJournal of Political Science, 9 (1976): 605-26.14involved in a given policy field, a phenomenon Leslie hasreferred to as "entanglement. X24However, just as scholars have offered competing theories ofthe implications of federal vs. provincial jurisdiction, theyalso disagree about the implications of overlapping jurisdiction.Norrie, Simeon, and Krasnick have summarized the literature interms of two distinct models of intergovernmental relations:competition and collaboration. 25 As depicted in the matrixbelow, advocates of the collaborative model stress the advantagesof joint federal-provincial action and the disadvantages ofunilateralism, while advocates of competition stress theadvantages of independent action and disadvantages of jointdecisionmaking. 26Advantages^DisadvantagesCollaboration Complementarity^CollusionVetoesUnilateralism Diversity^Duplication"Backup" ObstructionHealthy Competition Unhealthy Conflict24 ^Leslie, Federal state, national economy, (Toronto:University of Toronto Press, 1987).25 Kenneth Norrie, Richard Simeon, Mark Krasnick, Federalismand Economic Union in Canada, (Toronto: University of TorontoPress, 1986), 129.26 ^matrix is similar to one offered by Martin Painter, in"Intergovernmental Relations in Canada: An InstitutionalAnalysis," Canadian Journal of Political Science, 24 (1991):269-288.15Proponents of collaboration have argued that the greatestasset of federalism is its flexibility, which facilitatesintergovernmental arrangements that capture the strengths of bothlevels of government. 27 In the field of environmental policy, itis often suggested that the federal government can captureeconomies of scale by developing national effluent standards,while provincial officials can take advantage of theirfamiliarity with local sources by taking the lead role inenforcement. Alternatively, the federal government could electto play a stronger role in provinces with limited resources,while leaving more capable provinces to their own devices.Proponents of coordination stress the wasteful duplicationand conflict that can result from unilateralism. 28 Duplicationis not only costly for taxpayers, but also for regulated firmsthat must satisfy often-inconsistent federal and provincialrequirements. Moreover, independent action could lead toobstruction. Conflicting federal and provincial environmentalregulations may well constrain the effectiveness of either one.Along a similar vein, Alan Cairns has argued that governmentleaders within the federal system tend to be preoccupied with the27 See, for instance, Mark Sproule-Jones, Public Choice andFederalism in Australia and Canada, (Canberra: AustralianNational University, 1975), 30.28 Richard J. Schultz, "Federalism and Telecommunications:Multiplication, Division and Sharing," Osgoode Hall Law Journal,20 (1982): 745-761, 754; Steven Alexander Kennett,"Interjurisdictional Water Resource Management in Canada: AConstitutional Analysis," L.L.M. Thesis, Queen's University,1989, 99.16extent of their own jurisdiction, rather than their voters'preferences, leading to wasteful "turf wars" and unwarrantedexpansion of the scope of activities of both levels ofgovernment. 29In contrast, proponents of competitive federalism haveargued that "Constitutional 'messiness' may be the servant, notthe enemy of political responsiveness." 30 They favour thediversity that results from independent federal and provincialpolicies. In the environmental field, it often is asserted thatan important advantage of overlapping jurisdiction is that withtwo levels of government in the business of pollution control,there is a greater chance that at least one of them will do thejob. 31 Independence could be particularly important when itcomes to governments regulating each others' activities.Albert Breton has taken the argument a step further inasserting that federal-provincial competition is actually quitehealthy. Because both levels of government have to appeal to thesame voters, they have incentives to respond to each others'29 Cairns, "The other crisis of Canadian federalism."30 ^Simeon, and Krasnick, Federalism and EconomicUnion in Canada, 317.31 See, for instance, Thompson, Environmental Regulation inCanada; Peter Nemetz, "The Fisheries Act and federal-provincialenvironmental regulation: duplication or complementarity,"Canadian Public Administration 29 (1986): 401-424; Webb,Industrial Water Pollution Control and the EPS; Dale Gibson,"Environmental Protection and Enhancement under a New CanadianConstitution," in Stanley M. Beck, Ivan Bernier, eds., Canada andthe New Constitution, Vol. 2, (Montreal: Institute for Researchon Public Policy, 1983); Franson and Lucas, "Legal Control ofHazardous Products," 48.17initiatives, thus strengthening their own proposals. Bretondraws an analogy between political and economic markets, andasserts that competition between suppliers leads to greatersatisfaction of consumers preferences in both types of market.In the environmental field, Ilgen has offered the analogousargument that federal-provincial competition extends the scope ofconflict and thus opens up otherwise closed and consensualpolicymaking. 32Where proponents of collaboration see opportunities forefficient joint administration, advocates of competitivefederalism see collusion." Simeon has expressed concern aboutthe lack of public accountability that attends secretive"federal-provincial diplomacy," and argued that in the absence ofpublic scrutiny, governments' own interests become paramount. mOthers focus on what kind of decisions are likely to emerge frombehind closed doors. Involvement of multiple governments maycreate a "joint decision trap" that allows any one government toveto a decision, and thus to block new policies or to resistpolicy change when social conditions or public preferences32 ^Ilgen, "Between Europe and America, Ottawa and theProvinces: Regulating Toxic Substances in Canada," CanadianPublic Policy, 11 (1985): 578-590, 588." Breton, "Supplementary Statement."m Richard Simeon, Federal-Provincial Diplomacy, (Toronto:University of Toronto Press, 1972).18change. 35 In environmental standard-setting, joint decision-making could deliver the lowest common denominator, rather thanthe "best of both worlds."Scholars who study Canadian federalism disagree over whetherintergovernmental competition or collaboration is likely toprevail, and over which outcome is to be preferred. However, onecommon assumption implicit in much of the literature is that bothlevels of government invariably seek to expand or at least fullyexploit their available jurisdiction. 36 Norrie, Simeon, andKrasnick have asserted that "Responding to new citizen needs,governments expanded to occupy the full 'jurisdictionalpotential' allocated to them under the Constitution, and indeedsought to extend their reach beyond it." 37 Similarly, Alan Cairnshas portrayed federal and provincial governments as "pyramids ofbureaucratic power and ambition" capped by "protectionist andexpansionist" political authorities, "steadily extending their35 Fritz Scharpf, "The Joint-Decision Trap: Lessons fromWest German Federalism and European Integration," Public Administration, 66 (1988): 239-278. A similar argument isoffered in Banting, The Welfare State and Canadian Federalism.36 An important exception is R.A. Young, Philippe Faucher,Andre Blais, "The Concept of Province-Building: A Critique,"Canadian Journal of Political Science, 17 (1984): 783-818.Their paper argues that not all provinces have attempted toextend their jurisdiction. This thesis takes a similar approachin arguing that not all types of jurisdiction provoke eitherprovince- or nation-building.Norrie, Simeon, and Krasnick, Federalism and EconomicUnion in Canada, 123. It is noteworthy that in devising theirtypology, the authors as well as Painter ("IntergovernmentalRelations in Canada") assume that the reverse of "collaboration"is "competition," rather than merely independence orunilateralism.19tentacles of control, regulation, and manipulation intosociety." u While there is no denying the dramatic growth of thescope of government activity in recent decades, the questionremains whether that growth has been indiscriminate, or whetherone or both levels of government have declined to act in certainfields even while seeking to extend their jurisdiction in others.It is accepted wisdom that governments within the federalsystem seek both to claim credit and to avoid blame. 39 However,to date students of Canadian federalism have been more attentiveto opportunities for credit claiming than to blame avoidance. Itis true that some authors in passing have noted opportunities forgovernments to shirk responsibility within the federal system. °Certainly, environmentalists long have complained of"jurisdictional buck passing" in the environmental field. 4138 ^C. Cairns, "The Governments and Societies of CanadianFederalism," in Douglas E. Williams, ed., Constitution, Government, and Society in Canada: Selected Essays by Alan C. Cairns, (Toronto: McClelland and Stewart, 1988), 150-151.39 For instance, see Richard Simeon, Federal-Provincial Diplomacy, (Toronto: University of Toronto Press, 1977), 185.40 ^Skogstad, "Federalism and Agricultural Policy," inHerman Bakvis, William M. Chandler, eds., Federalism and the Role of the State, (Toronto: University of Toronto Press, 1987); D.V.Smiley, The Federal Condition in Canada, (Toronto: McGraw-HillRyerson, 1987), 21; Garth Stevenson, "The Division of Powers," inRichard Simeon, Division of Powers and Public Policy, (Toronto:University of Toronto Press, 1985), 113. An exception whichplaces greater emphasis on "buck passing" strategies is JamesStruthers, No Fault of Their Own: Unemployment and the CanadianWelfare State 1914-1941, (Toronto: University of Toronto Press,1983).41 See Tingley, "Conflict and Cooperation," 132; CanadianEnvironmental Law Association, cited in Colin P. Stevenson, "ANew Perspective on Environmental Rights After the Charter,"20However, the intergovernmental dynamics evoked by less desirablepolicy fields have received relatively little scholarlyattention.A central argument of this thesis is that the implicationsof federalism for public policy are very different when bothlevels of government are eager to pursue their own programs thanwhen one or both is content to vacate the field. To a largedegree, government attitudes toward their available jurisdiction,and the type of intergovernmental dynamics that emerge in a givenpolicy field, will depend on the political costs and benefits ofthe policy in question. In effect, there is less need to "bringthe state back in" to Canadian scholarship on federalism andpublic policy than to bring society back in, to reconsidersocietal influences on governmental strategies of action and of inaction within the federal system. The argument here is notthat institutions do not matter. Indeed, the dissertation ispreoccupied with the impact of one particular institution --federalism. Rather, it is that institutional analysis cannotproceed independently of social analysis.Oscroode Hall Law Journal 21 (1983): 390-421, 412; David Estrin,J. Swaigen, Environment on Trial: A Handbook of OntarioEnvironmental Law, (Toronto: Canadian Environmental Law ResearchFoundation, 1978), 13; Barbara Rutherford, Paul Muldoon,"Designing an Environmentally Responsible Constitution,"Alternatives, 18 (1992): 26-33, 30; Ian Jackson, in House ofCommons, Standing Committee on the Environment, Minutes of Proceedings and Evidence, October 23 1991, 12:26. Although theseauthors have expressed concern about "buck-passing," they havenot offered a theory for when and why governments seek to avoidresponsibility for environmental protection.21Research MethodologyVarious documentary sources were used in the research,including secondary literature, case law, newspapers, federal andprovincial government reports, and legislative debates. However,a critical source of information, particularly concerningfederal-provincial relations, was unstructured interviewsconducted with 76 individuals. As summarized below, withingovernment, they ranged from former Ministers of the Environmentto technical specialists. In addition, representatives of thepulp and paper industry and environmental groups across thecountry were interviewed for a case study of federal andprovincial regulation of the pulp and paper industry. Subjectswere guaranteed confidentiality, with the exception of severalpoliticians who agreed to be interviewed "on the record."Federal^Provincial^Other TotalFormer Ministers^2 3 5Departments/Ministries of the EnvironmentSenior Executives^3 4 7Federal-ProvincialRelations Specialists^5 8 13Technical Specialists^19 9 28Other Departments^6e.g., Fisheries4 10Intergovernmental AffairsPulp and Paper Industry 8 8Provincially-Based Environmental Groups 5 5Total^ 35 28 13 7622Both because the theoretical argument of the thesis concernsenvironmental policymaking in the context of overlappingjurisdiction, and because the bulk of the population andassociated environmental problems are concentrated in SouthernCanada, the research focused on the federal government's rolewithin "federal Canada," that is, within the provinces. Noeffort has been made to investigate federal environmentalprotection efforts offshore or in the Northern territories in anydepth.Interviews were conducted in Ottawa and five provinces:British Columbia, Alberta, Ontario, Quebec, and New Brunswick.Each of the provinces chosen brings unique characteristics to thestudy. Ontario is the largest and, historically, wealthiestprovince, which one would expect to be least affected by resourceand scale limitations. Quebec was included because governmentsof that province historically have been defensive of theirjurisdiction in order to promote the province's distinctfrancophone identity. Both Alberta and British Columbia havenatural resource-based economies, and their provincialgovernments often have been aggressive in defending provincialjurisdiction over natural resources. Finally, New Brunswick wasincluded as a representative of the smaller and more economicallyvulnerable provinces.Outline of the Thesis This thesis uses the case of environmental protection toexplore the phenomenon of policy inaction within Canadian23federalism. The questions addressed by the thesis -- why has thedivision of federal and provincial responsibilities forenvironmental protection evolved as it has, and what are theimplications of different federal-provincial arrangements forprotection of the environment -- are primarily empirical, ratherthan normative. Although those seeking discrete policyprescriptions thus will be disappointed, I believe that empiricalresearch need not be detached from normative analysis. We willhave greater success in reforming public policy if we begin froman empirically-grounded understanding of the factors thatinfluence existing current policies and institutionalarrangements.The theoretical chapter which follows discusses in greaterdepth the implications of policy type for federal-provincialrelations and policy outcomes. The empirical component of thedissertation then is divided into two parts. The first tracesthe evolution of federal and provincial roles in environmentalprotection over a twenty-three year period from 1969 to 1992. Tolimit the scope of the study, those chapters focus primarily onthe evolution of the federal role as public attention to theenvironment waxed and waned over time. However, close attentionis paid to provincial reactions to federal initiatives and tofederal-provincial relations concerning the environment. Chapter3 reviews federal and provincial governments' sources ofconstitutional authority with respect to the environment, whileChapters 4 to 6 trace federal environmental policy and federal-24provincial relations over three periods corresponding to theemergence of federal involvement (1969-1972), the federal retreat(1972-1985), and the resurgence of the federal role (1985-1992).In the second part, Chapters 7 and 8 present a case study offederal and provincial regulation of effluents from the pulp andpaper industry. In contrast to the preceding chapters, whichconsider relatively broad questions of jurisdiction, the casestudy is more focused on policy outcomes. What actually happenswhen both levels of government regulate a given industry? Sincefederal powers over the environment are strongest in the area ofwater pollution, the pulp and paper industry provides a criticaltest of the federal government's willingness to exercise itsenvironmental jurisdiction. Finally, concluding remarks areoffered in Chapter 9.25Chapter 2Policies and Intergovernmental PoliticsIntroductionWilson has offered the important observation that policiescharacterized by different distributions of costs and benefitstend to evoke different types of politics. 1 Policies withdiffuse beneficiaries and concentrated victims are likely toelicit very different politics than those where, for instance,both "winners" and "losers" are concentrated. The criticalconcept underlying Wilson's argument is Olson's insight thatorganizations to pursue collective goods and information aboutpublic goods are themselves public goods. 2 Thus, individuals whoare diffusely affected, whether winners or losers, are unlikelyto organize to pursue their shared political goals, or even toinform themselves about the nature of the costs and benefits theybear. It follows that democratic governments, motivated to claimcredit and avoid blame from voters, would be inclined to pursuepolicies with concentrated benefits and to resist policies withconcentrated costs.This chapter represents an attempt to extend those insightsto the study of federalism and public policy, with particular1 James Q. Wilson, "The Politics of Regulation," in JamesMcKie, ed., Social Responsibility and the Business Predicament,(Washington: Brookings Institution, 1975). A similar point wasmade in an earlier article by Theodore Lowi ("American Business,Public Policy, Case-Studies, and Political Theory," World Politics, 16 (1964): 677).2 Mancur Olson, The Logic of Collective Action, (Cambridge:Harvard University Press, 1965).26attention to the concentrated costs and diffuse benefits ofenvironmental protection. Following Wilson's example, it isargued that policies with different distributions of costs andbenefits are likely to provoke different intergovernmental politics. Moreover, the ways in which the institution offederalism affects policy outcomes are likely to depend on thecharacteristics of the policy at issue.The chapter is organized in six sections. The first appliesWilson's insights to the field of environmental policy.Thereafter, the next four sections examine different aspects ofthe relationship between federalism and public policy: theshifting balance of federal and provincial roles in theenvironmental field, federal-provincial relations, the impact offederalism on provincial environmental policymaking, and theimpact of federalism on federal environmental policymaking. Thetheoretical focus in each of those sections is on theimplications of the distribution of costs and benefits ofenvironmental policy. The final section considers the influenceof other factors on federal and provincial policymaking.The Politics of Environmental ProtectionBefore going further, it is useful to distinguish betweenthree government functions: taxation, spending, and regulation. 33 The typology is similar to Stevenson's four-foldclassification of constitutional powers of taxation, spending,regulation, and service provision. I have treated serviceprovision as a special case of spending. (Garth Stevenson, "TheDivision of Powers," in Richard Simeon, ed., Division of Powers and Public Policy, (Toronto: University of Toronto Press,Toronto, 1985.)27Taxation and spending are familiar and require no explanation.Regulation will be defined broadly as rules of behaviour backedup by the legitimate sanctions of the state. 4 In effect, ratherthan providing a public service itself, in choosing regulation,the government exercises its coercive powers to force someoneelse to provide the service and to pay for it. Thus, animportant characteristic of regulation is that the government'sadministrative costs are small, at least relative to the costsborne by the private sector.Regulation typically is perceived as imposing concentratedcosts on regulated industries in order to confer diffuse benefitson the public. As such, one would not expect governments topursue regulatory policies aggressively, since diffusebeneficiaries generally would be uninformed, unorganized, andthus, unappreciative, while regulated interests would be well-organized and unyielding in their opposition. However,regulation also can be used to deliver concentrated benefits atdiffuse cost. Regulations such as those establishingagricultural marketing boards are actively sought by those whowould be regulated. 5 In such cases, the diffuse victims ofregulation are unorganized and uninformed, allowing government to4 G. Bruce Doern, "Introduction: The Regulatory Process inCanada," in G. Bruce Doern, ed., The Regulatory Process in Canada, (Toronto: Macmillan, 1978), 14.5 George J. Stigler, "The Theory of Economic Regulation,"Bell Journal of Economics and Management, 2 (1971): 3-21.28purchase beneficiaries' support with consumers' dollars. 6All else being equal, one would expect governments to preferdiffusely applied taxes, spending programs that deliverconcentrated benefits, and regulations that impose diffuse coststo achieve concentrated benefits. ? The absolute magnitude ofcosts and benefits can also come into play, however. Evendiffuse costs can add up and cause taxpayers to revolt, if onlyat the ballot box. In addition, the particular identity ofwinners and losers may be relevant. Policies that appear toreward undeserving interests may provoke opposition, even if thecosts are widely diffused. 8How does environmental policy fit within the precedingdiscussion? A government seeking to protect the environment canchoose among the governing instruments described above. Ananalogy commonly offered is that of motivating a donkey to pull acart with either a stick or a carrot. The "stick" corresponds tothe use of regulation, encompassing both the traditional "commandand control" form of regulation and incentive-based approaches,such as marketable permits and discharge fees. 9 The "carrot"6 Douglas G. Hartle, Public Policy Decision Making andRegulation, (Toronto: Institute for Research on Public Policy,1979), 91.7 M. J. Trebilcock et al., The Choice of GoverningInstrument, (Ottawa: Economic Council of Canada, 1982).8 Hartle, Public Policy Decision Making, 87.9 Although discharge fees could be considered a tax, theyhave been considered a form of regulation here since their intentis to promote regulatory objectives, rather than merely to raisemoney.29corresponds to government spending to subsidize pollutionabatement costs. However, spending is best seen as a supplementrather than an alternative to regulation, since subsidies alonecannot eliminate regulated interests' economic incentive topollute. m Governments also can choose to pull the hypotheticalcart themselves, by relying on public enterprise. However, giventhe ubiquity of activities that affect the environment, thisapproach would entail an implausible degree of public ownership.In the end, some form of regulation, possibly supplemented bysubsidies or public enterprise, is necessary to overcomeeconomically rational polluting behaviour.Environmental regulation presents a classic case of diffusebenefits and concentrated costs. In general, the public at largebenefits from improvements in environmental quality, but thecosts are borne by a smaller number of regulated firms orindividuals. An Olsonian analysis suggests that the opponents ofenvironmental protection would be better organized and betterinformed than the beneficiaries. Moreover, those most directlyharmed by environmental regulation tend to hold privilegedpositions in society. Regulated industries can offer politiciansmore than just votes or even campaign contributions. Mostimportantly, they create jobs, and thus offer extremely valuableindirect benefits. As a result, one would expect governmentsnormally to be more responsive to the concentrated interests,10 William J. Baumol, Wallace E. Oates, The Theory of Environmental Policy, 2d ed., (New York: Cambridge UniversityPress, 1988), Chapter 14.30that is, to the polluters. The logic of collective action isheavily weighted against strong environmental policy.As Farber has noted, "The Olson paradigm appears to have astraightforward implication for environmental legislation: thereshould not be any." n If that is the case, then why dogovernments ever adopt environmental policies? A number ofexplanations have been offered. First, however improbable itmight seem to Olson, numerous environmental groups have emergedsince the 1960s to pursue policies that involve diffusebenefits. 0 The presence of "policy entrepreneurs," who derivepersonal satisfaction from pursuing collective benefits, clearlyis a critical factor in the emergence of such groups. Althoughonly a minority of those who would benefit from environmentalprotection are persuaded by policy entrepreneurs to actually joinenvironmental groups, the substantial number that do joinnonetheless provide an important voice for the interests of anotherwise silent constituency. Moreover, environmental groupsprovide information that "rational" individuals diffuselyaffected by environmental regulation would not take the troubleto seek, and thus stimulate greater attentiveness toenvironmental issues even among non-members. The presence of anactive environmental community effectively serves to concentrate11 ^A. Farber, "Politics and Procedure in EnvironmentalLaw," Journal of Law, Economics, and Organization, 8 (1992): 59-81, 60.12 ^response, see Mancur Olson, The Rise and Decline of Nations, (New Haven: Yale University Press, 1982), 34-5.31the interests of those diffusely affected by environmentalpolicy.Although more sophisticated interest group theory canaccount for the emergence of interest groups representing diffuseinterests, 13 it nonetheless predicts that such groups will remainweak relative to those representing concentrated interests, aproposition for which there is considerable empirical support. mMoreover, in Canada, the first generation of environmentalstatutes passed in the early 1970s coincided with, rather thanfollowed, the emergence of organized environmental groups, andthus cannot be attributed to their influence. 15 In sum, interestgroup politics offers at best an incomplete explanation for theemergence of environmental protection policies.Others have argued that governments adopt environmentalpolicies primarily in response to rent-seeking industries.Elliott, Ackerman, and Millian have asserted that the U.S.federal government involvement in air pollution control was aresponse to lobbying by the coal and auto industries for13 On why people join public interest groups despitecollective action problems, see Jack Walker, "The Origins andMaintenance of Interest Groups in America," American Political Science Review, 77 (1983): 390-406.14 ^"Politics and Procedure," 61.15 R. Brian Woodrow, "The Development and Implementation ofFederal Pollution Control Policy," unpublished Ph.D. thesis,University of Toronto, 1977, 124.32consistent national standards. 16 Along a similar vein, Canadianauthors have argued that the earliest provincial environmentalstatutes were passed to protect polluters from private litigationunder common law. 17 Although this argument often is persuasivein the case of discrete regulated industries, it fails to accountfor the breadth of environmental statutes or the very real coststhat have been imposed on many sectors of industry that not onlydid not pursue environmental regulation, but actively opposed it.Still others have implied that environmental statutes areall "smoke and mirrors." The incentives of those diffuselyaffected by regulations to remain ill-informed create ampleopportunities for symbolic politics. Governments can claimcredit for protecting the environment while at same time avoidingblame from regulated interests either by offering subsidies tocover the costs of regulation, or by simply neglecting to enforceregulations after exalting their stringency. There isconsiderable evidence that governments do both. Hartle for onehas argued that in practice, most regulated interests have been16 E. Donald Elliott, Bruce A. Ackerman, John C. Millian,"Toward a Theory of Statutory Evolution: The Federalization ofEnvironmental Law," Journal of Law, Economics, and Organization,1 (1985):^313-340.17 See, for instance, D.P. Emond, "Environmental Law andPolicy: A Retrospective Examination of the Canadian Experience,"in Ivan Bernier, Andr6e Lajoie, eds., Consumer Protection, Environmental Law, and Corporate Power, (Toronto: University ofToronto Press, 1985), 134.33"gummed rather than bitten" by ostensibly strict regulations."The question remains, however, whether subsidies and weakenforcement reflect conscious strategies adopted by governmentsat the outset, or merely after-the-fact responses to persistentpolitical opposition. The latter is more plausible, particularlywith respect to the strategy of nonenforcement. If weakenforcement were planned from the outset, governments eitherwould have to bear the brunt of industry wrath anyway until thelaxity of enforcement became apparent, or alternatively, riskletting regulated interests in on the plan from the start. Evenif there were sufficient trust between government and business tokeep such a conspiracy quiet -- a very big "if" -- it is far fromobvious that regulated industries would welcome the prospect ofbeing "gummed" even if not "bitten." Despite receivingreassurances from the current government, regulated industrieswould be expected to fear that once legislation or regulationswere in place, a future government might be more inclined toenforce them.The most compelling explanation for environmental policy isthat public opinion occasionally overcomes the obstacles tocollective action, thus transforming politicians' incentives.Although the odds are weighted against public attention toenvironmental issues, a rare combination of effective politicalentrepreneurship and unusual events that capture the media'sI8 ^Public Policy Decision Making, 17; also, Donald N.Dewees, Evaluation of Policies for Regulating Environmental Pollution, (Ottawa: Economic Council of Canada, 1980), 24.34attention can cause even those diffusely affected to sit up andtake notice, and that leads electorally-minded politicians to dothe same. Although poorly informed, the beneficiaries ofenvironmental regulation nonetheless substantially outnumber thevictims. Thus, relatively small changes in levels of publicawareness can quite dramatically transform the balance ofpolitical costs and benefits. 19Farber has argued that:[P]olitics alternates between normal periods, in whichpublic attention to an issue is weak, and extraordinaryperiods, in which the issue has high salience for thepublic. In those extraordinary periods when broad segmentsof the public are intensely involved with an issue,legislators find themselves in the spotlight, and theirpositions shift closer to those of the public at large."To date, there have been two such waves when the NorthAmerican public turned its attention to the environment, thefirst around 1970 and the second around 1990. However, given thediffuseness of the benefits of environmental protection, suchhigh levels of salience are difficult to sustain. It is not19 A simple model offered by Peltzman is illustrative. (SamPeltzman, "Towards a More General Theory of Regulation," Journal of Law and Economics, 19 (1976): 211-241.) He posited thatpoliticians would seek to maximize political support, M, suchthatM = abs[(n x f) - (N - n) x h],^wheren = number of voters in the regulated group;f = probability that regulated interests will oppose;N = total number of voters;h = probability that diffuse beneficiaries will support.Because n is small, f normally will be much larger than h,reflecting the logic of collective action. However, since (N -n) is much larger than n, M would be very sensitive to changes inh.20 Farber, "Politics and Procedure," 66.35sufficient for members of the public merely to prefer a cleanerenvironment; they must also be familiar with government policiesand willing to weigh the government's performance onenvironmental issues heavily at election-time. Whatever theorigins of these unusual periods of public interest (a complexquestion that will not be examined here), the logic of collectiveaction suggests that they will be shortlived and relatively rare.In fact, like its predecessor in 1970, the most recent green wavecrested with the onset of economic problems, as public attentionreturned to "bread and butter" issues like unemployment andinflation, 21 a trend consistent with Peltzman's argument that"[r]egulation will tend to be more heavily weighted toward'producer protection' in depressions and toward 'consumerprotection' in expansions. "22In summary, one would expect that most of the time, whenenvironmental issues do not capture public attention, governmentswill decline to impose environmental regulations. However,during periods of high salience of environmental problems, theyare more likely to respond to public opinion by passing new lawsand regulations. It is during those periods that symbolicstatutes might be expected to emerge, since regulated industrieswould be more willing to accept the risk of future enforcementwhen the alternatives seem worse. However, during normal periods21 Hugh Winsor, "Canadians have turned a lighter shade ofgreen," Globe and Mail, April 24 1991, A6.22 Peltzman, "Towards a More General Theory of Regulation,"227.36of public inattention, symbolic statutes represent an unnecessaryrisk for government and industry alike.Evolving Federal and Provincial Roles in Environmental ProtectionThe preceding section was concerned exclusively withgovernments' own policy objectives in light of theirrelationships with their own constituents. This sectionconsiders how those objectives affect federal and provincialgovernments' attitudes toward their constitutional jurisdiction,and thus shape the division of federal and provincialresponsibilities that emerges in the environmental field. Justas some policies are more politically appealing than others, somefields of jurisdiction are worth fighting for, while others arewillingly vacated. It is argued that the distribution of costsand benefits inherent in different policies can help to explainthe inclination of governments to exercise, enlarge, defend, orsurrender their constitutional resources.Policy vs. JurisdictionBefore going further, it is important to distinguish betweenpolicy and jurisdiction. Constitutional jurisdiction can bedefined as the capacity to make policy. It does not compel agovernment to take any particular course of action, or for thatmatter, to take any action at all. In general, one would expectgovernments to value jurisdiction that allows them to pursuepolitically attractive policies, and to disregard jurisdictionassociated with electoral blame.However, one cannot assume that government attitudes about37particular policies translate directly into attitudes towardjurisdiction for several reasons. First, constitutionaljurisdiction normally is very broad and does not imply particularpolicy objectives. The constitution confers two main types ofjurisdiction, authority over subjects (such as fisheries oreducation), and authority to exercise certain governinginstruments (such as taxation). 23 Since the subject headings arebroad and the instruments authorized for a wide variety ofpurposes, governments can employ the same field of jurisdictionto pursue very different policies. Thus, governments may valuetheir jurisdiction for a variety of, indeed for conflicting,purposes.Second, there may be "spillovers" between constitutionalresponsibilities. Whether or not a government has jurisdictionover one policy field may be relevant to its decision to seek orexercise jurisdiction in another area. For instance, Banting hasargued that the provinces were willing to agree to a formalconstitutional amendment to concede authority over welfareprograms to the federal government, because they did not haveadequate powers of taxation to deliver the programs themselves. 24For both of these reasons, it is critical to consider the23 Peter Leslie, Federal state, national economy, (Toronto:University of Toronto Press, 1987), 59. In addition, Leslie hasidentified two other types of jurisdiction: authority to pursueparticular objectives (e.g., "Peace, Order, and GoodGovernment"), and authority over matters concerning a particularclientele (e.g., "Indians").24 Keith Banting. The Welfare State and Canadian Federalism,(Kingston: McGill-Queen's University Press, 1987), Chapter 4.38political context in which governments evaluate theirjurisdiction.Finally, policies can be changed much more easily thanjurisdiction, reassignment of which requires formalconstitutional amendment. For that reason, governments would beexpected to take a longer term view regarding their jurisdictionthan their particular policy objectives. It is one thing toneglect a field of jurisdiction that currently holds no appeal,but quite another to surrender it permanently. As a result,governments are likely to be behave in a more risk averse mannerwhen they are engaged in questions of constitutional design thanwhen they are merely designing particular policies. 25It is thus important to distinguish between governments'positions concerning constitutional reform and theirjurisdictional claims within the existing constitutionalframework. Breton has labelled these two activitiesconstitutional decisionmaking and "in period" decisionmaking. 26Although the permanence of constitutions might lead governmentsto be especially protective of their jurisdiction duringconstitutional discussions, "in period" they would be expected tovalue jurisdiction that enables them to pursue politicallyappealing policies, and to neglect or informally concede25 George Tsebelis, Nested Games: Rational Choice inComparative Politics, (Berkeley: University of California Press,1990), 98.26 See Albert Breton, Centralization, Decentralization andIntergovernmental Competition, (Kingston: Institute ofIntergovernmental Relations, 1990), 7.39jurisdiction associated with politically unappealing policies.Evolving Roles in Environmental Protection As already noted, the salience of environmental issuesbriefly peaked in the late 1960s and again in the late 1980s.During these exceptional periods of public opinion, both levelsof government would be expected to adopt expansive views of theirenvironmental jurisdiction, and to exercise their availableauthority more vigorously. However, the distribution of costsand benefits of environmental protection leads one to expect thatmost of the time, when the public is not attentive toenvironmental issues, governments would not aggressively pursuepolicies to protect the environment. Since neither federal norprovincial jurisdiction would be employed to the fullest extent,environmental problems may well fall through the cracks in thefederal system.However, as suggested above, constitutional jurisdiction canbe extremely broad. Many of the heads of power that providegovernments with authority to protect the environment alsoprovide authority to exploit natural resources and thus topromote economic growth or diversification. Either level ofgovernment could value jurisdiction over the environment more asa basis to exploit rather than protect natural resources.In that regard, however, the provinces are more likely to beprotective of environmental jurisdiction since, as will bediscussed in the following chapter, their authority to protectthe environment is intimately tied to their ownership and control40of natural resources. Historically, provincial governments haverelied heavily on Crown resources to pursue economic development,and as an important source of provincial revenues. Thus, theprovinces might be expected to take a broader view of theirenvironmental jurisdiction, even during periods of publicinattentiveness. If so, their intent would be to defend theirauthority to direct and profit from the exploitation of naturalresources, rather than to conserve and protect them.In contrast, federal authority over the environment isindirect, and less closely tied to exploitation of naturalresources. Thus, the federal government normally would beexpected to take a narrow view of its own jurisdiction, and togladly concede the field to the provinces. Thus, trends inpublic interest in environmental issues can be expected toprovoke shifts in the respective roles of the federal andprovincial governments. Although federal involvement is morelikely to emerge during periods of high salience, the balance offederal and provincial roles is likely to shift back toward theprovinces during periods of public apathy.Implications for Federal-Provincial Relations Federal and provincial governments' attitudes toward theirjurisdiction have important implications for their attitudestoward each other. One would expect very differentintergovernmental relations when both levels of government valuetheir jurisdiction than when one or both is content to leave afield vacant. Federal and provincial governments may compete for41opportunities to win friends, but they seldom compete for thehonour of making enemies.The preceding sections have argued that if a particularpolicy offers concentrated benefits, federal and provincialgovernments alike would be expected to take a broader view oftheir jurisdiction, and to exercise their authority to thefullest extent. Since both levels of government are more likelyto be active in a politically attractive policy field, there isgreater potential for intergovernmental competition. Thus,during unusual periods of high salience of environmental issues,federal and provincial governments might be compelled to enterinto competition to impress voters with their "green"credentials. However, at the same time, politically appealingpolicies are more likely to provoke each level of government toseek to enlarge its own jurisdiction, and to defend its ownjurisdiction against incursions by the other level. Thus,elevated public interest in environmental issues could alsoprovoke wasteful federal-provincial "turf wars." Moreover,intergovernmental cooperation would be particularly difficult tosustain during periods of elevated environmental concern, sincegovernments responding to a demanding and dissatisfied publichave strong incentives to attribute past failures to each other.During such periods, alliances between one level of governmentand the opposition parties at the other level are more likely to42emerge than alliances between federal and provincialgovernments. flDuring normal periods when the public is inattentive toenvironmental issues, however, environmental protection offersonly the promise of net electoral blame. The federal governmentwould be expected to take a narrow view of its environmentaljurisdiction, while provincial governments would be inclined tofortify their jurisdiction for purposes of natural resourceexploitation. Since federal-provincial competition forjurisdiction thus would be improbable, intergovernmentalrelations concerning the environment should be relativelycooperative. However, the incentive faced by both levels ofgovernment to deflect demands for environmental protection toeach other does create the potential for occasional interludes ofintergovernmental finger-pointing even during periods of lowsalience of environmental issues. It is noteworthy, though, thatbecause federal and provincial governments do not directly opposeeach other in seeking reelection, it may be possible for them to"circle the wagons" to resist politically unappealing demandscollectively. 2827 For instance, Cairns has noted a degree of convergencebetween governments and opposition parties at the other levelduring intergovernmental conflict over constitutional reform.See "The Politics of Constitutional Renewal in Canada," in KeithBanting and Richard Simeon, eds., The Politics of Constitutional Change in Industrial Nations, (London: MacMillan Press, 1985),120-1.28 The analogy is from R. Kent Weaver, "The Politics of BlameAvoidance," Journal of Public Policy 6 (1976): 371-398.43Policymaking Amid Provincial Interdependence The fact that governments choose to exercise certain powersand to neglect others based on their political calculus ofelectoral costs and benefits is not an artifact of federalism.Unitary governments face similar choices. However, theparticular choices made by governments in a federal state canhave an impact on the character of the federal state, as thebalance of federal and provincial roles evolves in response totheir selective assertions of jurisdiction. In terms of theliterature on state-society interactions, the discussion thus farhas considered the impact of societal forces on the federalstate.Federal and provincial politicians devise their policieswithin the context of a federal system, however, whichfacilitates some responses and constrains others. This sectionexamines the impact of federalism on provincial policymaking,using game theory as a heuristic device to explore theimplications of provincial interdependence, while the followingsection will examine the impact of federalism on federalpolicymaking.A critical implication of federalism from a provincialgovernment's perspective is that typically there will be severalprovinces seeking to achieve similar environmental objectives atthe same time. In devising environmental policies, provincialgovernments may be interdependent in several ways. First,physical spillovers of pollutants between jurisdictions create a44situation in which a downwind or downstream province is dependenton its neighbour to mitigate environmental impacts. However, theneighbour has few incentives to impose costs on pollutingindustries within its borders, and indeed has considerableincentives to take advantage of a situation in which itsconstituents do not incur the full cost of their actions. 29In light of the size of Canadian provinces, manyenvironmental problems are effectively contained withinprovincial borders. However, even in the absence of spillovers,provinces nonetheless may be interdependent in their efforts topursue environmental protection. As noted in Chapter 1, votersmay look to the example set by other jurisdictions in evaluatingthe performance of their own government. This creates thepotential for competitive credit claiming, with provincialgovernments vying to show their constituents that they are doinga better job of protecting the environment than their neighbours.Perhaps more significant, and more disturbing, however, is thepotential for interprovincial competition for investment, whichcould deter provinces from regulating polluting firms.In his seminal work on fiscal federalism, Oates argued thatsubnational jurisdictions are limited in their ability to pursueredistributive policies such as progressive taxation and welfarebenefits, because they are constrained by the mobility of29 For an analysis of strategic behaviour by citizens andgovernments in the face of spillovers, see Susan Rose-Ackerman,"Does Federalism Matter? Political Choice in a FederalRepublic," Journal of Political Economy, 89 (1981): 152-165.45individual citizens." Wealthy citizens will tend to migrateaway from jurisdictions with high taxes, while the poor willmigrate toward those offering generous welfare benefits. As aresult, individual provinces or municipalities will be driven toimpose lower taxes and to offer fewer welfare benefits than theircitizens really want. To overcome this dilemma, Oatesrecommended federal taxation with conditional transfers to theprovinces.Following Oates' example, the economic literature onfederalism has been preoccupied almost exclusively with thetaxation and spending functions, with relatively little attentionto regulation. 31 However, just as provincial governments may belimited by citizen mobility in their efforts to redistributewealth, provinces may be constrained by the threat of capitalmobility in their efforts to enact regulations that impose costson industry. To the extent that individual provinces compete toattract new investment and to retain existing employers, they30 ^E. Oates, Fiscal Federalism, (New York: HarcourtBrace Javanovich, 1972).31 Although Breton and Scott chided earlier authors forfailing to distinguish between regulation and spending functions,they failed to explore the implications of federalism forregulation in any depth themselves. (Albert Breton, AnthonyScott, The Economic Constitution of Federal States, (Toronto:University of Toronto Press, 1978).) In a later article, Scottacknowledged the problem of "unseemly competition" for investmentamong provinces, but failed to address the question of whichlevel of government should be assigned responsibility forregulation, offering instead the solution of market-basedregulatory approaches to strengthen the hand of either level ofgovernment vis-a-vis regulated industries. (Anthony Scott,"Regulation and the Location of Jurisdictional Powers: TheFishery," Osgoode Hall Law Journal 20 (1982): 780-805.)46face incentives to offer weaker environmental standards thanneighbouring jurisdictions.Game theory offers an analytic framework to explore theimplications of provincial interdependence. Two idealized"games" -- prisoners' dilemma and assurance -- will be analyzedbefore turning to a discussion of real world considerations notincorporated by those simplified models.Interprovincial competition for investment shares manyfeatures of the widely-studied "prisoners' dilemma" game, inwhich two prisoners' failure to maintain silence in the face oftheir captors' offer of leniency for "squealing" on each otherultimately results in a stringent prison sentence for both.Analogously, one can envision a "regulators' dilemma" in whichindividual jurisdictions are tempted by the promise of the newjobs that will be created if they can offer a more attractiveinvestment climate than neighbouring jurisdictions, and thus theyare willing to forego tighter environmental standards or even torelax their existing standards. However, because all provincesoffer the same concessions to business, not only do they fail toattract jobs at each others' expense, but they would all end uppaying the cost of their gambit in terms of environmentaldegradation.The foregoing game can be depicted schematically as follows.Consider a universe comprised of two identical jurisdictions, Aand B, and a fixed amount of investment capital. If thegovernments of A and B adopt similar environmental regulations,47they will receive comparable environmental benefits withoutdisturbing the existing balance of jobs in each jurisdiction -- a"payoff" of 1 hypothetical unit each. However, if only Aregulates (or does so more stringently than B), B can "steal"jobs from A. If jobs are prized more highly than environmentalprotection -- a plausible assumption given the concentrated costsand diffuse benefits of environmental regulation -- B gains 2units and A loses 1 (A's loss is somewhat offset by environmentalimprovements). If neither regulates, the status quo prevails,and both gain 0 units."Regulators' Dilemma"Jurisdiction ARegulate^Don't RegulateRegulate^(1,1) (-1,2)BDon't Regulate^(2,-1)^(0,0)In this scenario, whether or not one jurisdiction regulates,it is always in the other's interest not to regulate. If Aregulates, B will choose not to regulate in order to lureinvestment away from A, while if A does not regulate, B willstill decline to regulate to ensure that its own industry is notplaced at a disadvantage relative to competitors in A.Paradoxically, the equilibrium result, in which neitherregulates, is less desirable for both jurisdictions than had bothregulated with equal stringency. In the worst case, this dynamiccould degenerate to a "race to the bottom," in which individualprovinces compete for industry by offering progressively weaker48regulatory standards. 32By changing the order of the "payoffs" associated withdifferent outcomes, one can envision a less pessimistic scenariothan the regulators' dilemma. In the assurance game, depictedbelow, the ideal outcome for both jurisdictions is one in whichboth regulate."Assurance"Jurisdiction ARegulate^Don't RegulateRegulate^(2,2) (-1,1)BDon't Regulate^(1,-1)^(0,0)While in the regulators' dilemma scenario, eitherjurisdiction would choose not to regulate, whether or not itsneighbour chose to regulate, in the assurance game, eachjurisdiction's preferred strategy depends on what the otherjurisdiction is expected to do. If jurisdiction A anticipatesthat B will regulate, it is in its interest to regulate as well.However, if jurisdiction B is expected not to regulate, A wouldbe better off if it also declined to regulate. Although bothstand to gain the most from a cooperative solution, each isreluctant to "go it alone" without assurance that the other willdo the same. To the extent that both jurisdictions are risk32 James A. Brander, "Economic Policy Formation in a FederalState: A Game Theoretic Approach," in R. Simeon, ed.,Intergovernmental Relations, (Toronto: University of TorontoPress, 1985); Eli M. Noam, "Government Regulation of Business ina Federal State: Allocation of Power under Deregulation,"Osgoode Hall Law Journal, 20 (1982): 762-779.49averse (or misunderstand each other's incentives), the suboptimaloutcome in which neither government regulates could stillprevail. It is noteworthy, however, that the challenge inovercoming this outcome is less formidable than in theregulators' dilemma game. Jurisdictions A and B need onlyovercome the obstacles to coordination since, unlike theregulators' dilemma scenario, neither has an incentive to takeadvantage of the other by pursuing an outcome in which only theother jurisdiction regulates.Of course, the "lessons" of these idealized games areembedded in the assumptions. The order and magnitude of thepayoffs associated with different outcomes reflect importantassumptions about how politicians weigh the political costs andbenefits of environmental regulation. In both games, it wasassumed that provincial politicians perceive that to regulateunilaterally, and thus place local industry at a disadvantagerelative to competitors in other jurisdictions, is worse than notto regulate at all. In other words, it was assumed that thepotential for lost or foregone jobs outweighs the politicalbenefits of environmental regulation.Many have argued that in fact there is no tradeoff betweenjobs and the environment." In the long term, if the environmentdeteriorates, the economy will suffer as well. Even in the short" See, for instance, National Task Force on Environment andEconomy, Report of the National Task Force on Environment andEconomy, (Toronto: Canadian Council of Ministers of theEnvironment, 1987).50term, the number of jobs created in the pollution controlindustry may well outnumber those lost in polluting industries.It is asserted here that even if both of those statements aretrue, it is doubtful that politicians would respond accordingly.The electoral cycle is decidedly short term relative to theultimate costs of environmental degradation. Although certainforms of economic development and environmental protection maywell be compatible in the long term, in the short term,politicians must be willing to impose very significant costs tomake the transition from environmentally unsustainable tosustainable economic activity. Moreover, the political costs ofthe loss of existing jobs are likely to greatly outweigh thepolitical benefits of hypothetical jobs, even though they may begreater in number. An analysis of provincial environmentalbudgets by Brown and Siddiq, which revealed a strong negativecorrelation between provincial government spending onenvironmental protection and provincial unemployment ratesprovides compelling evidence that politicians do in fact perceivevery real tradeoffs between jobs and environmental protection. mHowever, just as cycles in public opinion are expected toaffect federal-provincial dynamics, so could they transforminterprovincial dynamics. Increased public concern for theenvironment effectively increases the "payoff" of environmental34 M. Paul Brown, Fazley Siddiq, "The Dimensions ofProvincial Environmental Protection Spending," presented at theAnnual Meeting of the Canadian Political Science Association,June 2 1991, 20.51protection relative to job protection strategies. As thepolitical benefits of environmental regulation increase, theinterprovincial game could be transformed from one of regulators'dilemma to assurance, and ultimately, to one where bothgovernments would be inclined to regulate regardless of eachothers' actions. At the limit, interprovincial competition toissue more stringent environmental standards might emerge duringexceptional periods of pronounced public i