This question was the first sentence from last Sunday’s NY Times article A Debate Arises on Job Creation and Environment. It’s particularly timely as environmentalists and conservatives/business interests have been battling ferociously over issues like the Keystone XL pipeline, ozone regulations, and the very existence of the EPA. Environmental proponents contend these regulations protect health, business productivity, and a sustainable environment for future growth. Their opponents contend these rules impose onerous business expenses and can lead to lost jobs and even the closure of facilities.
But who’s right? Apparently, no one knows! It’s striking to me that many government regulations are issued, but not followed-up on. From the NY Times article,
“Regulations are put on the books and largely stay there unexamined,” said Michael Greenstone, an economist at the Massachusetts Institute of Technology. “This is part of the reason that these debates about regulations have a Groundhog’s Day quality to them.”
Are the regulations having their intended effect? Are there unintended consequences, and if so, how costly are they? Can the rules be improved?
During my time working as a Fellow at the National Academy of Sciences, I came across a number of ostensibly “boring” studies of how several Department of Energy research programs were progressing. Dull reading perhaps, but perpetual assessment and refinement of policy should be an absolute requirement of sound government.
In that spirit, I want to summarize the benefits and costs of environmental regulations presented in this article and others alongside some evidence to support those positions.
ARGUMENTS AGAINST REGULATION
- Too expensive to implement in a depressed economy
- High cost of clean-up can cause factories to close or relocate abroad
- Can lead to a loss of jobs
ARGUMENTS IN FAVOR OF REGULATION
- Numerous health benefits including reduced infant mortality and instances of autism, better health of children and the elderly, increased life spans, reductions in the number of hospitalizations, and other health benefits
- Increase housing prices (e.g. lack of regulation makes living next to coal plants more hazardous than living next to nuclear plants)
- Improve quality of life by maintaining a pristine environment with breathable air and clean ecosystems
- Complying with regulations requires new job-creating projects and technologies that become less expensive over time as the the clean-tech sectors mature
- Rules set far in advance can guide new investments; e.g. when choosing new technology, businesses will choose the greener one even if the initial cost is slightly greater
- Preferable in down economies to invest in upgrades rather than sit on cash
But good golly there’s a lot of tit-for-tat. Environmentalists claim that regulation is often the scapegoat for poor economic performance caused by other factors, such as low demand, poor tax and labor policies, and inadequate communication and transportation infrastructure. They argue the costs of regulation are almost always exaggerated.
For example, the electric utility industry warned that amendments to the EPA’s Clean Air Act would cost $7.5 billion and tens of thousands of jobs but studies have shown the cost of the program to be closer to $1 billion and even suggested the law was a modest net creator of jobs by spurring new clean compliance technologies. And while the cement industry projected 13,000 lost jobs and plant closures because of stricter sulfur dioxide and nitrogen dioxide standards, EPA analysis claims the truth lies somewhere between 600 jobs lost and 1300 gained.
Even if the regulations are net beneficial, is implementing them now (i.e. in a down economy) the right thing to do? Business leaders argue that regardless of whichever and whenever regulations are enacted, there must be stability and predictability. They cannot be a “moving target.”
Some business leaders at least appear willing to strike a fair balance. Spencer Weitman, president of the National Cement Company of Alabama has stated, “we agree that we need to protect the environment and we need regulations in place to make sure that we all do it right. That’s not the argument that we’re coming up with. We do need regulations that are achievable and that make sense.” The CEO of Caesars Entertainment has agreed to go green even if it means taking a slight economic loss.
What seems lost in this discussion, as always, is climate change, which I personally believe is the greatest existential crisis than humanity has ever faced (with the possible exception of nuclear proliferation). Its long-term impacts on heat waves, agricultural yields, water availability, ecosystem vitality and sustainability, health, energy demand, transportation infrastructure, losses due to extreme weather, rising sea levels, forced migrations, violent conflict, etc. that will be forced irreversibly on future generations for hundreds to thousands of years decisively tilt the scales towards regulation. Which regulations, however, may yet require deeper assessment.