Why Environmental Regulation is Good for the Economy

November 08, 2016
Climate change is happening and cannot be ignored—most of the world’s scientists agree. The increasing temperatures, sea levels, and carbon dioxide emissions are a concern and cannot be dismissed. The U.S. government agrees, and has passed many environmental regulation laws to curb these effects. Though these laws protect the environment, they have an impact on businesses and the economy.

By Hannah Li

Donald Trump does not believe in man-made climate change. He described it in an interview as “a very, very expensive form of tax. A lot of people are making a lot of money” [1]. In tweets, he has repeatedly called it nonexistent and a hoax and stated that it was “created by and for the Chinese in order to make U.S. manufacturing non-competitive” [1]. Though he later clarified that his comment about the Chinese creating climate change was a joke, his stance on the matter is very clear and set. 

The Republicans have called into question many of the Environmental Protection Agency’s (EPA) regulations, and some have even gone as far as rallying to repeal the agency entirely. Trump has described the EPA as being a waste of money because “they aren’t doing their job, they are making it impossible for our country to compete” [2]. He went further to say that they are “going around causing damage as opposed to saving damage”, leading to “a tremendous amounts of money, tremendous fraud, tremendous abuse”[2]. His rhetoric towards climate change and the EPA isn’t based on facts, and his threats against the EPA and ignorance of climate change are concerning. As the potential President of the United States, he has the power to carry them out, and existing support from Republicans in Congress would help further his agenda.

But does environmental regulation actually hurt the economy? There are compliance costs that businesses have to bear that can lead to higher prices, as well as job loss costs. In the first fifteen years after the implementation of the Clean Air Act in, about half a million jobs moved from counties with plants that were out of compliance to neighboring counties where the plants met the standards [3]. These job losses, however, have been insignificant on a macroeconomic level compared to the overall number of jobs lost, suggesting that environmental regulation encourages job mobility within countries. In fact, environmental regulation actually creates jobs by requiring prevention efforts and pollution clean up. An EPA-mandated clean up of the Chesapeake Bay is “anticipated to create 35 times as many jobs as the proposed construction of the Keystone XL pipeline”, and “jobs in the coal industry actually increased by 10 percent after the EPA cracked down on mountaintop-removal mining in 2009” [4]. An independent, nonpartisan analysis by the Economic Policy Institute (EPI) found that net job gains from the Mercury and Air Toxics Standards (MATS), which was proposed by the EPA, would reach 117,000 to 135,000 in 2015 [4].

The economic, technological, and health benefits of environmental regulation greatly outweigh the costs. The costs of environmental regulation do not significantly change overall productivity, or GDP. A rule of thumb for comparing the two says “a 10% change in the oil price is associated with a 0.2% change in GDP” [5]. If green taxes, which are taxes on services or products that are not environmentally friendly, increase oil prices by only a few cents, then the impact on GDP would be minimal. The desire to comply with green rules and avoid paying green taxes would also encourage businesses to invest in innovations and efficiencies in green technology more than they would have otherwise, helping economies shift towards greener practices. Most importantly, environmental regulation saves the economy billions by preventing the negative health effects associated with pollution. Air and water pollution cause many illnesses, such as respiratory diseases, cancers, heart attacks, infections, poisonings, etc., that require billions in health care costs each year to treat. The estimated health benefits from the Clean Air Act are “two orders of magnitude greater than the employment costs of the policy” [6]. In monetary terms, the EPA has produced as much as $640 billion in benefits and only $45 billion in costs on the economy over the last decade [4]. However, monetary benefit cannot compare to health benefits: healthier and more productive citizens who are living longer. These citizens can go to work and contribute to society instead of receiving treatment for preventable illnesses caused by pollution. As for the environment as a whole, fewer species will go extinct from climate change and there would be fewer natural disasters, which also costs billions of dollars to clean up.

The United States has made great strides towards being more environmentally friendly, so it would be devastating if Trump were to repeal environmental regulation or eliminate the EPA. Continuing to emit similar, or greater amounts, of pollution for the next four years would mean foggier skies, air that would be harder to breathe, increased human illnesses, contaminated water and food, and extinction of more and more species. Trump might not believe in climate change, but he is a businessman who would capitalize on a plan that saves or earns money. If science can’t convince him to support environmental regulation, then maybe economic gain will.

 

  [1] B. Dennis, “Trump: ‘I’m not a big believer in man-made climate change.’”, Washington Post, 2016. [Online]. Available: https://www.washingtonpost.com/news/energy-environment/wp/2016/03/22/this-is-the-only-type-of-climate-change-donald-trump-believes-in/.

 

  [2] O. Milman, “Republican candidates’ calls to scrap EPA met with skepticism by experts”, the Guardian, 2016. [Online]. Available: https://www.theguardian.com/environment/2016/feb/26/republican-candidates-donald-trump-eliminate-epa-law-experts.

 

  [3] N. Swan, “How Do Environmental Regulations Affect the Economy? Experts Describe a Nuanced Picture”, AAAS - The World’s Largest General Scientific Society, 2013. [Online]. Available: http://www.aaas.org/news/how-do-environmental-regulations-affect-economy-experts-describe-nuanced-picture.

 

  [4] J. Spross, “New Study: The Economic Benefits of EPA Regulations Massively Outweigh The Costs”, ThinkProgress, 2013. [Online]. Available: http://thinkprogress.org/climate/2013/05/03/1955891/new-omb-study-the-economic-benefits-of-epa-regulations-massively-outweigh-the-costs/.

 

  [5] “Green tape”, The Economist, 2015. [Online]. Available: http://www.economist.com/news/finance-and-economics/21637411-environmental-regulations-may-not-cost-much-governments-and-businesses.

 

  [6] A. Dechezleprêtre and M. Sato, “The impacts of environmental regulations on competitiveness”, London School Of Economics, 2014. [Online]. Available: http://www.lse.ac.uk/GranthamInstitute/wp-content/uploads/2014/11/Impacts_of_Environmental_Regulations.pdf.

PENN WHARTON PPI
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