Like all of the substances discussed in the case studies of this book, formaldehyde is ubiquitous in the scope of its applications. However, a distinguishing feature of formaldehyde, apart from possible environmental and third-party exposure during production processes (by way of air and water pollution), is that few third-party effects appear to be associated with use of products containing formaldehyde. Rather, potential consumer exposure is limited to formaldehyde off-gases from formaldehyde-containing products (for example, furniture, cabinets, textiles, cleansers) in the home or workplace.
Two of our regulatory approaches are similar to approaches discussed in chapter 2, "Chlorinated Solvents": a combination of an excise tax on sales of formaldehyde to internalize third-party effects, and labeling to inform users about the potential for exposure in the home or workplace. In addition, we consider the setting of standards on off-gases from some products. We also consider the more complicated relationships governing market responses to labeling and standards when product liability insurance is available to producers or when product liability legislation applies to them.
The chapter begins with a review of the sources and uses of formaldehyde and a discussion of its adverse health and environmental effects. Next it traces the life cycle of formaldehyde from production through use, and then briefly reviews existing formaldehyde regulation.
As in the chapter on chlorinated solvents, these life-cycle and regulatory reviews set the stage for identifying regulatory incentives to reduce potential harmful exposures. We identify key features of formaldehyde production and use that have implications for selecting an appropriate regulatory mechanism, and then discuss candidate incentive-based approaches to regulating formaldehyde. To complement the discussion, we also review reasons why other approaches are less desirable. A concluding section summarizes the discussion.