The
Clean Air Act's incredible
economic
benefits
Times were great in the
1990s real estate market: If
you got in right before the
market took off, and cashed
out just before it crashed,
you could have made a whopping
75 percent return on your
money. But ... it was all
paper; chances are high the
house wasn't 75 percent nicer.
And, for most people, returns
were lower than 75 percent,
some punishingly negative. It
all depended on when you
bought and sold.
But what if you found out
you could get a guaranteed
real return over 2,400 percent
in one year? And that returns
only increased over time and
were "bubble proof"? You'd say
"there must be a catch," and
you'd be right. There are two.
First, you can't buy this
investment from Wall Street.
Second, you have to rely on
the good will and decency of
your representative -- and
these days, that is not
reliable.
What's the product? The
Clean Air Act.
A new report released
yesterday by the Environmental
Protection Agency (EPA) finds
benefits of the 1990
amendments to the Clean Air
Act (CAA) exceeding costs by a
ratio of 26 to 1 in 2010, and
30 to 1 in 2020. And the
report just looks at health
and environmental benefits. As
I detail further below,
evidence strongly suggests we
can expect substantial
improvements in economic
performance as well.
Yet, in a full-on attack
against the EPA, opponents of
clean air and public health in
Congress are trying to
sabotage the CAA and prevent
the EPA from doing its job
(click here, here, here, and
here). It is worse than
irresponsible: It is
negligent.
First let's start with the
end goal, protecting the
public.
The extensively
peer-reviewed report (click
here, here, and here)
documents the following health
and environmental benefits
from the 1990 amendments:
* In 2010 alone, we gained
approximately $1.3 trillion in
public health and
environmental benefits, for a
cost of only $50 billion.
That's a value worth more than
9 percent of GDP, for a cost
of only 0.4 percent of GDP.
For comparison, we spent
approximately 5 percent of our
GDP on the defense budget in
2010.
* The ratio of benefits to
costs in 2010 is more than 26
to 1.
* In 2020, we will have a
staggering gain of
approximately $2 trillion in
benefits, at a cost of $65
billion. That's a value worth
more than 14 percent of
today's GDP, for an
expenditure of only 0.46
percent. The ratio of benefits
to cost is more than 30 to
1.
The table below shows the
EPA's estimates for the
associated health benefits in
2010 and 2020, as well as
cumulative figures estimated
by NRDC. Following that is a
figure from the EPA's report
showing how benefits relative
to costs increase over
time.
(Click here for a summary
of past benefits).
<IMG:lnk>Clean Air
Act benefits
Economic growth and
jobs:
In addition to the health
and environmental gains
estimated in the report, we
can also expect significant
improvements in jobs, economic
output, and competitiveness.
Earlier this month, the EPA
provided the exhaustive review
of the evidence to Congress,
summarized below:
1. Job growth and increased
economic output:
Because environmental
protection is more
labor-intensive than the rest
of the economy, environmental
regulation on average
generates net increases in
jobs. Some highlights:
* <IMG>Clean Air Act
costs vs. benefitsLooking at
four of the most heavily
regulated industries (pulp and
paper, refining, iron and
steel, and plastic), Richard
Morgenstern et al. (2002,
Journal of Environmental
Economics and Management)
estimated a net increase in
employment of 1.5 jobs per $1
million in environmental
spending over alternative
expenditures.
* Roger Bezdek et al.
(2008, Journal of
Environmental Management) also
found a net employment gain
from environmental spending,
noting that "environmental
protection has grown rapidly
to become a major
sales-generating, job-creating
industry -- $300 billion per
year and 5 million [direct
and indirect] jobs in
2003." These jobs are shared
widely across many states, and
often located in the same
highly industrialized regions
where unemployment is
particularly high. Jobs
created span a wide spectrum
of wage earners: factory
workers, engineers, computer
analysts, accountants, clerks,
ecologists, truck drivers,
consultants, and many
more.
* By 2008, the U.S.
environmental technologies
industry was supporting 1.7
million direct jobs (2010,
Environmental Business
Journal). Air pollution
control equipment alone
generated revenues of more
than $18 billion in 2007 (U.S.
Department of Commerce).
* Data from the
International Brotherhood of
Boilermakers indicates that
the number of boilermakers in
the U.S. increased by 6,700 --
or 35 percent -- as a result
of the CAA.
* The Institute for Clean
Air Companies estimated that
complying with just one
standard created approximately
200,000 person-year jobs in
the past seven years (about
29,000 full time jobs each
year on average).
* These results reported by
EPA are consistent with many
studies on clean energy and
climate legislation (click
here, here, here, and
here).
2. Innovation and a more
productive workforce:
The environmental
technology sector is very
real, and growing. According
to the heads of the European
Environmental Agencies in
2005, the annual world market
for environmental goods and
services will surpass $700
billion by 2010, making it
comparable to the aerospace
and pharmaceutical industries.
And thanks to our strong
environmental laws, the U.S is
well-positioned in this
market, exporting more to
other countries than it
imports, and generating more
economic output overall:
According to the Department
of Commerce:
[T]he U.S. is
regarded as a world leader in
many environmental technology
categories including:
engineering, design,
construction, consulting
services; ... stationary and
mobile air pollution
monitoring and control
equipment; ... and information
systems/software for
environmental management
analysis.
Environmental technology
exports have grown
dramatically from less than
$10 billion in 1990 to about
$44 billion in 2008, and the
U.S. share of foreign
environmental technology
markets has been increasing
(Department of Commerce
International Trade
Administration). In 2008, the
U.S. had a net trade surplus
of $11 billion in
environmental technologies,
helping the U.S. balance of
trade.
A series of studies led by
Dale Jorgensen at Harvard
University found that
implementing the CAA actually
increased the size of the
economy (contrary to industry
predictions). Even after
accounting for capital being
diverted away from other uses,
improved health and a more
productive workforce increased
net economic output. Reduced
pollution led to fewer lost
work, school, and restricted
activity days, fewer
fatalities, fewer hospital
visits and other medical
expenses, and avoided
expenditures on education
needed to address diminished
IQ levels caused by
neurotoxins. The research
concluded that by 2010, GDP
was approximately 1.5 percent
higher than it would otherwise
have been since 1970, and this
excludes all of the
environmental benefits (e.g.
ecological preservation) not
accounted for in GDP
estimates.
Forces hostile to the EPA
and the public health it is
entrusted to protect argue for
cutting its budget and
regulatory authority in the
name of fiscal responsibility.
But a deeper look at the
numbers tells us exactly the
opposite: Doing so would be
negligent, unethical, and
fiscally unsound. Health and
environmental benefits alone
exceed costs by orders of
magnitude. On top of these are
real gains in economic
performance. Contrary to what
clean air opponents want us to
believe, strengthening and
protecting the CAA is good for
people and the economy. It
creates jobs, increases the
health and productivity of the
workforce, increases the U.S.
balance of trade, and helps
preserve the environment.
Rather than attacking the EPA
for doing its job, we should
be improving and protecting
it. It's an investment with
unparalleled
returns.
