Environmental Protection: Is It Bad for the Economy? A Non-technical Summary of the Literature (1999)
Paper Number: EE-0422
Document Date: 07/10/1999
Author(s): Environmental Law Institute: Arnold, Frank S.
Subject Area(s): Economic Analysis, Economic Impacts, Cost Effectiveness Analysis, Competitiveness
Keywords: Economic Analysis, Economic Impacts, Cost Effectiveness Analysis, Competitiveness
Environmental regulation in the United States stands accused of causing a broad array of undesirable economic consequences. It is said that environmental regulation is too expensive, reduces economic growth, hurts international competitiveness, and causes widespread layoffs and plant closures. Sometimes, it is said, it even forces businesses to flee to more accommodating countries. The view that environmental regulation seriously harms the U.S. economy is so firmly established that it has become the centerpiece in the series of attempts over the last few years to roll back the very rules that have produced such dramatic improvements in environmental quality.
This article, prepared in the late 1990s, reviews the evidence that can be brought to bear to verify or refute these accusations. In all cases, these assertions do not stand up to a careful examination of the facts. First, we do indeed spend a considerable amount on environmental protection, but not as much as we do on health care and national defense – activities that may be of similar significance to many people. Second, we spend about the same amount in terms of GDP as do other nations at similar levels of development. Third, we gain enormous benefits from pollution control, so the issue is not really the cost of environmental protection, but the net benefits we receive. Finally, there is no evidence that U.S. environmental regulation causes large-scale plant closures and job losses, that it impairs our international competitiveness, or that it encourages companies to flee to nations with more lax environmental protection requirements..
This paper is part of the Environmental Economics Research Inventory.