Do the environmental regulations that protect our planet and provide clean air, water and wildlife habitat cost more than the benefits derived? Do these same rules enhance employment or increase job losses? These issues are debated extensively and the answers given often depend on the politics of the responder.
The Politics of Environmental Regulation
In December 2011, when the Environmental Protection Agency (EPA) issued a final rule restricting power plant emissions, plant owners and coal companies complained that 1.4 million jobs would be lost, while proponents of the rule said 1.4 million jobs would be created! This would be accomplished by building renewable energy sources and upgrading environmental safeguards in existing power plants.
Another example of increased political influence on the process of establishing environmental regulations is a recent study that sampled news articles on the subject. The term "job-killing regulations" was used four times in 2007 -- but in 2011 those words were used 706 times.
This April 2012 study, from the Institute for Policy Integrity of New York University Law School, was intended to measure job losses and gains relative to environmental protection. One important conclusion was that although the effect on jobs is a major factor, any rule should best be measured primarily by its overall impact on its costs and benefits. This should also included what happens to workers who lose their jobs. Do they get reemployed? In green jobs? If so, how quickly? At what wage? What are the long term unemployment consequences?
Two comprehensive yet non-partisan articles on the issue can be found at the Environmental Literacy Council and San Diego State University. Even if a study is accurate and calculated without bias, does it take into account all the "externalities"?
Understanding the Externalities of Environmental Protection
To paraphrase the writings of Dr. U. Sankar, externalities resulting from regulations are unintended external effects -- and these can be positive or negative. A favorable result is when a firm's invention not only benefits the firm but also increases "society's pool of technological knowledge" for the good of all of us. A negative outcome is when an action produces harmful effects on others, an example of which is a factory that discharges its untreated, polluting effluents in a river. Downstream consumers of the river water bear costs in the form of illness and/or water purification costs.
Finally, can voluntary or self-regulation be effective? To answer this question, think of yourself as the CEO of the company discharging toxins into that river because you use outdated and highly polluting equipment. Your earnings have been mediocre and you are under heavy pressure by your board to show gains in the next quarter.
Implementing mandatory regulations would require you to make large capital expenditures but significantly reduce those emissions. If they are voluntary, would you install the equipment?
The response should be self-evident -- you wouldn't. Can we over-regulate? Of course, but using blanket statements like "jobkilling regulations" isn't helpful. We should be able to regulate wisely, with exacting, comprehensive cost-benefit analyses that consider job losses -- as well as job gains -- and their direct, immediate consequences as well as all their externalities.
This article was authored by Chicago-area conservationist Donnie Dann and appears here by permission.