Environmental Policy and the Economy:
Conflicts and Concordances

John E. Blodgett
Assistant Division Chief
Environment and Natural Resources Policy Division

January 10, 1995

95-147 ENR

SUMMARY

Previously the domain of local and State governments, environmental protection emerged as an explicit national value in the 1960s. Since then, the Federal government has increasingly mandated pollution controls on the private sector and on State and local governments.

In 1972, as the first substantial Federal requirements began to take effect, total capital outlays plus operating expenditures for pollution control amounted to about 1.5 percent of Gross Domestic Product (GDP). Currently, total pollution control expenditures are running at some 2 percent of GDP, a share that is projected to rise over the next two decades.

The impacts of economic policies on environmental quality, and of pollution control costs on the nation's economy and industrial competitiveness, have been controversial since the 1970s. Key issues are the effects of environmental protection requirements on economic growth, jobs, and competitiveness. Also, State and local governments have increasingly criticized "unfunded mandates"--environmental and other requirements that impose administrative and fiscal burdens without compensating financial support.

While few decry the joint goal of a clean environment and a robust economy, views diverge on what the two parts of this composite goal mean, how they can be concomitantly achieved, and what to do when they appear to collide. As the costs of pollution control have grown, increasing attention is being devoted to the questions, How much pollution control is enough? and How can environmental protection be achieved most efficiently?

In defining "How much pollution control is enough?" economic policy-makers focus on assessing the net social costs and benefits of requirements. A survey of literature is cited that indicates the "best-guess" estimate of benefits falls within the range of estimated costs. Environmental policymakers focus on assessing the environmental quality necessary to ensure the "sustainability" of human well-being. Efforts to ensure the efficiency of pollution control expenditures have focused on cost-benefit analysis of specific regulations, risk assessment, the adoption of economic mechanisms to achieve abatement, and providing more flexibility for decentralized decisionmaking.

Ultimately, the issue on which economic and environmental policymakers remain at loggerheads is whether meeting economic needs or environmental and health needs is the more fundamental way of serving and sustaining human well-being. Both are necessary conditions for human well-being--neither alone is sufficient. How then should society decide on apportioning priority and resources to each? From an economic perspective, policymakers focus on limiting costs of pollution control, without knowing for sure the level of environmental and health benefits that will be achieved. From an environmental perspective, policymakers focus on protecting basic environmental and health qualities, without knowing for sure how much they will cost to secure.

CONTENTS

INTRODUCTION
-- Environmental Quality Protection Mandates
-- Economic and Environmental Policymaking: Two Perspectives
POLLUTION CONTROL AND THE ECONOMY: HOW MUCH IS ENOUGH?
-- Costs
-- -- Cost Experience
-- -- Projected Costs
Pollution Control Costs and the Economy
-- -- Share of Gross Domestic Product
-- -- Effect on Economic Growth
-- -- Jobs and Environmental Regulation
-- -- Competitive Effects of Environmental Protection
-- Who Pays for Pollution Control Requirements?
-- -- Industry Costs
-- -- Federal Government Expenditures
-- -- State and Local Costs -- Unfunded Mandates
Deciding How Much Is Enough
-- -- Cost-Benefit Analysis
-- -- Regulatory Cap
-- -- Sustainability
POLLUTION CONTROL: HOW TO GET THE MOST BANG FOR THE BUCK
-- Cost-Benefit Analysis and Risk Assessment
-- Market-Based Incentives
-- Decentralizing Selected Environmental Decisions
-- Stewardship
TRENDS AND POLICY INITIATIVES
-- The Administration
-- Regulatory Reform
CONCLUSION
TABLE 1: Composition of Spending on Pollution Abatement and Control
TABLE 2: Total Expenditures/Total Annualized Costs for Pollution Control
TABLE 3: Total Costs of Pollution Control by Funding Source
TABLE 4: Pollution Abatement Costs and Expenditures for Selected Manufacturing Industries

Environmental Policy and the Economy: Conflicts and Concordances

INTRODUCTION

"Economic policies" are those designed to affect the production, distribution, and consumption of goods and services. "Environmental policies" are those designed to affect the quality of natural systems supporting and conditioning life. To oversimplify, economic policymaking concerns governmental decisions pertaining to the structure and functioning of the marketplace, with goals that include full employment and material well-being for all. Environmental policymaking encompasses governmental decisions affecting the quality of the environment and of human health, with goals ranging from intangible values associated with nature's aesthetics to healthful air and water and sustainable productivity of soils and renewable resources.

Economic and environmental policies inevitably overlap. Providing goods and services essential to life's sustenance (food, housing, transportation), acculturation (education, training), and enjoyment (entertainment, recreation) is central to economic policy. Exploiting natural resources--such as soil, water, forests, fossil fuels, and ore bodies--is basic to providing these goods; some resources are used consumptively, others can be reused or recycled. As population and standards of living rise, levels of exploitation also tend to rise. This economic activity, and human biological processes, in turn impact natural systems and produce wastes that can impair human health and the environment as well as the future availability of productive resources. Thus the interaction of economic and environmental policies can be synergistic or--often attracting the most attention--antagonistic. Policy conflicts are especially intense when efforts to foster economic well-being pose threats to health and environmental quality--and, conversely, when requirements to abate pollution impose costs on businesses that threaten their viability.

Economic and environmental policymakers engage in an ongoing debate on the relative priorities society should apportion to environmental protection as compared to economic growth and material well-being. The essence of this debate concerns the question, How much environmental protection is enough ?--or, How much environmental protection is needed ? A second ongoing debate concerns the best ways of achieving environmental goals. With a goal of some level of environmental protection, What is the most efficient way to abate pollution? Both these debates are frequently muddled because of differences in conceptualization, language, and methods that economic and environmental policy analysts and policymakers have traditionally used.

Environmental Quality Protection Mandates

Environmental protection emerged as an explicit national value in the 1960s. Previously the domain of local and State governments, pollution control became dominated by Federal requirements during the 1970s. The federalization of pollution control reflected a number of forces: (1) growing understanding of adverse health and environmental consequences of water and air pollutants and of commercially important substances such as chlorinated hydrocarbon pesticides; (2) growing recognition that these consequences transcended local boundaries and were occurring at regional and interstate scales, raising concerns about inconsistent standards, enforcement, and local equity with respect to economic impacts of pollution controls; and (3) national leadership that promoted Federal authority and technical and financial support as solutions to a host of social ills--poverty, crime, segregation, and pollution, among others. By 1980, some dozen major Federal statutes' laid out an interlocking set of largely regulatory mandates to protect the Nation's environment and public health by--

• - requiring Federal policymakers to consider the environmental consequences of their decisions;
• - funding environmental research and development, providing technical assistance and financial grants to States for environmental program management, and providing grants to cities for construction of sewage treatment facilities;
• - establishing national, technology-based standards limiting discharges from many sources, including mills and factories, electric generating facilities, sewage treatment facilities, and automobiles;
• - regulating or prohibiting both waste discharges and commercial products that adversely affect public health or the environment; and
• - creating a Federal-State partnership for issuing permits, setting local standards, and enforcing environmental protection requirements.

In the last few years, global requirements have added an international dimension to environmental protection. To protect the stratospheric ozone layer, an international agreement, the Montreal Protocol, requires signatories, including the U.S., to phase out the production of chlorofluorcarbons, used as heat transfer fluids in air conditioners and refrigerators, among other applications. Concern about global climate change is also stimulating international negotiations that could result in restrictions on emissions of one or more "greenhouse gases," including carbon dioxide.

The new environmental protection programs set in motion several changes affecting the Nation's production, distribution, and consumption of goods and services.

First, pollution abatement laws required affected businesses to redirect resources into pollution control and often increased production costs. Techniques for controlling discharges had to be designed, purchased, and installed. Permit applications, certification of compliance, monitoring, and other requirements added to operating costs.

Second, to anticipate and account for environmental consequences of business activities, managers, scientists, and engineers had to reconsider production processes and waste disposal practices; and they had to test chemicals and other products for toxicity and environmental impact. A new industry developed to provide pollution control technologies and environmental compliance support.

Third, environmental requirements affected markets, not only by increasing prices (e.g., catalytic converters to reduce auto emissions add some $200 to the price of a car) but also by direct regulatory controls (e.g., the prohibition on polychlorinated biphenyls, once widely used as insulating fluids in transformers) and by indirect means (e.g., through labeling). If added costs or regulatory standards vary locally or between nations, interstate or international competitiveness may be affected.

Economic and Environmental Policymaking: Two Perspectives

Few would decry the joint goal of a clean environment and a robust economy. But views diverge on what the two parts of this composite goal mean, how they can be concomitantly achieved, and what to do when they appear to collide. (2) Most economic policy derives from economic concepts that subsume pollution as a part of economic activity: "Environmental policy and policy analysis is, in effect, economic policy and policy analysis." (3) But most environmental policymaking historically derived from a juristic conception of pollution in which individuals have a "right" to a pollution-free environment: "the control of pollution is a political problem; the very definition of pollution hinges on politics...." (4) Each perspective normally gets adapted for practical and political feasibility; but the underlying conceptual differences remain a primary source of tension between those focused on economic policymaking and those focused on environmental policymaking. (5)

Environmental policy was originally dominated by the juristic view, as evidenced by the enactment of the "command-and control" regulatory structure for pollution control. Environmental policymaking over the past 20 years has reflected the tension between the two viewpoints, with the authorizing commit-tees of Congress continuing to emphasize the regulatory approach and providing only limited opportunities for use of economic mechanisms in pollution control statutes. In 1990 the economic approach finally emerged as a substantive part of pollution control in the acid rain provisions of the Clean Air Act Amendments.

The differences in these two views are manifest in debates on how economic well-being and environmental quality can be harmonized as objectives, as well as on how pollution is defined and can best be controlled as a pragmatic matters

From the perspective of economic thinking, the discharge of wastes to the environment is a natural accompaniment of economic activity--not a moral wrong. (7) Use of the environment's ability to absorb and render harmless wastes--its "assimilative capacity"--benefits society by holding down the costs of goods, thereby allowing more to be produced for a given investment. Adverse effects of pollution are "external costs," borne not by the producer but by others. Economically, there is presumed to be an optimal level of pollution, and an optimal level of pollution control; there is a point at which spending more on pollution control will diminish overall social welfare, because the society will forego other goods or services that it would value more. Comparing the costs of pollution control with the benefits of reduced pollution can indicate when damages (external costs) are excessive, and when pollution abatement (internalizing pollution costs) is warranted. (8)

At the conceptual root of juristic environmental policy thinking, a healthful environment is a "right" analogous to the constitutional right not to be deprived of life, liberty, or property, without due process of the law. The costs of pollution imposed on the individual and on natural systems are the critical issue, not net social welfare. To rationalize pollution damages as allowing reduced costs of products obscures inevitable inequities, since one segment of society may suffer the costs of pollution while another segment may enjoy the profit of production or the less expensive goods. (9) Believing that each person has a "right" to protection from pollution insults and wishing to avoid significant deterioration of pristine areas, environmental policymakers have usually favored nationally uniform controls on new facilities even if assimilative capacity is not used. (10) In this view, any damaging amount of pollution is not acceptable on ethical grounds; when pollution cannot be avoided, it should be limited to levels that do not affect human health or the sustainability of natural systems.

In short, the economic analyst starts with the presumption that policy choices are governed by the trade-offs implicit in spending for pollution control and that efficient expenditure will lead to the most health and environmental protection (although the level of protection cannot be guaranteed beforehand). The juristic analyst starts with the presumption that policy choices are governed by needs to protect health and the environment (the level of protection should be guaranteed even if costs cannot be).

With these differing points of conceptual departure, it is not surprising that economic policymakers and environmental policymakers take very different approaches to the questions of How much pollution control is enough? and What is the most efficient way to abate pollution?

POLLUTION CONTROL AND THE ECONOMY: HOW MUCH IS ENOUGH?

Most pollution control requirements impose costs on individuals, communities, businesses, and industries. At the microeconomic level, these costs may be insignificant, or they may be sufficient to change personal or corporate behavior and decisions, or they may be so overwhelming that they lead to firms being shut down. In the aggregate, these costs have macroeconomic implications as well. Generally, the more dramatic microeconomic effects draw the most attention, but the macroeconomic implications, while subtle, may ultimately prove equally or more important to policymaking.

In addition, beyond the direct costs of complying with regulations and beyond the sometimes abstract disputations about economic and environmental policies, there are numerous instances where economic and environmental policy conflicts play out with immediate, real consequences for local and regional economies. Los Angeles has been cited as an area where it may be impossible to meet established environmental goals for water supply and clean air without significant changes in some mix of population, business activity, technology, cost, and lifestyles. Similarly, the rural Northwest could exemplify how tensions play out where preservation of environmentally sensitive habitat (e.g., old growth forests and the spotted owl; enhanced river flows and preservation of wild salmon stocks) conflicts with natural resource use.

Another way of asking How much is enough? is How much is needed? This points toward the benefits side of the equation. The economic approach focuses on measuring effects and assigning monetary values to damages avoided by reducing pollution, while the juristic approach focuses on minimizing pollution in order to assure that each individual is protected from risk of harm. (12)

Robert Hahn of the American Enterprise Institute and John Hird of the University of Massachusetts recently reviewed and synthesized the literature on the relationship between Federal regulations and the economy. (13) They summarized methods of measuring the effects of regulatory policies and ventured a "best estimate" of gross and net costs and benefits of economic and social regulations, including environmental regulations. These estimates are presented below, page 25.

Costs

The costs of pollution control are typically calculated in two ways: (1) the sum of capital expenditures plus operating and maintenance (O&M) costs for a given year; and (2) annualized expenditures, in which capital equipment costs are calculated over the life of equipment (for which depreciation and interest costs must be accounted), plus O&M costs. The first reflects cash flow in a given year; the second represents the annual cost of the pollution control activity over its life.

Cost Experience

Bureaus of the Department of Commerce publish time-series data on pollution control costs. The Bureau of Census annual report Pollution Abatement Costs and Expenditures provides yearly data on industry capital expenditures and operating costs for air, water, and solid wastes. Methodologically, these data are based on a sample survey of industrial establishments. The data are available broken down by industry sector and by State. These Bureau of Census data on industry are combined with other survey data relating to government and personal expenditures in an analysis published annually in the Bureau of Economic Analysis (BEA) report Survey of Current Business. (14)

In 1990, EPA published a comprehensive analysis of the costs of environmental protection. (15) Using BEA data as its starting point, this report expanded the analysis by including additional regulatory costs, recalculating some costs, and supplementing data by drawing on additional sources. The data were analyzed in terms of both total annual expenditures and annualized (amortizing capital investment) costs.

The EPA figures include a number of pollution control costs not counted by BEA: water supply, pesticides regulation, nonpoint source water pollution control, and a portion of solid waste control. However, BEA's estimate of mobile source air pollution control is higher than EPA's. As a result, overall, EPA reports total pollution abatement and control costs higher than reported by BEA: for 1990, EPA's estimate of $108 billion is approximately 15 percent more than BEA's reported costs $91.5 billion. (16)

A critical analysis of data on U.S. pollution abatement and control expenditures is included in a report prepared by the Office of Technology Assessment (OTA). (17) It provides an excellent snapshot of recent pollution abatement and control spending (reproduced as table 1, p. 10) as well as indicating various ways of viewing U.S. environmental compliance costs.

Figure 1, using the cost estimates of EPA's report, provides one view of historical trends in pollution control costs. The trend lines through 1987 reflect actual expenditures as calculated by EPA. As can be seen, actual expenditures dipped in the early 1980s, and then began rising; the trend-line for costs as a percentage of national economic activity was relatively flat during the period.

Projected Costs

EPA's report on costs of pollution control is based on reported data through 1987 (with adjustments and supplements); costs for 1988 through 2000 are projections calculated by extrapolating trends of the pre-1988 data. In an effort to account for possible regulatory changes, the report projected two regulatory scenarios for 1990 through 2000, one based on regulations in effect in 1987 (the last year of actual data) and one based on additional regulatory efforts to meet sewage treatment needs and to achieve ozone abatement requirements. The latter, "full implementation" scenario, resulted in higher costs, and is probably more realistic with the enactment of the Clean Air Act Amendments of 1990 (P.L. 101-549), which added further environmental regulations. Figure 1 depicts total expenditures for the "full implementation" scenario.

The difficulty in projecting pollution control costs was particularly obvious during debates on the Clean Air Act Amendments of 1990. Estimates of the annual costs of the amendments during the first decade of the 21st Century ranged from some $25 billion (Administration estimate) to roughly $100 billion (industry-sponsored estimate). (18) This divergence reflected differences in the econometric models used to project costs; and in differing assumptions about the stringency of regulations, about the timing of their implementation, about technology, and about economic conditions such as future interest rates, as well as other variables.

TABLE 1. Composition of Spending on Pollution Abatement and Control
(1991, $ million)

a. Includes mobile source pollution control, private septic systems and sewer connections linking household plumbing to street sewers, and household payments for sewage treatment.

b. Includes government direct expenses, principally for investments and operation of municipal water treatment facilities, as well as costs of regulation and monitoring, and R&D.

c. Includes capital expenditures and annual operating costs, such as payments to government units for sewage services and waste collection and disposal. Excludes the cost of mobile source (automobile and truck) pollution control equipment.

d. Other sectors, such as construction, services, retail trade, etc., while perhaps not bearing large pollution control costs related to stationary source capital equipment, do bear costs through payments for sewage services and solid waste collection and disposal.

SOURCE: OTA, Industry, Technology, and the Environment: Competitive Challenges and Business Opportunities (1994), p. 190. Figures derived by OTA from data provided in Gary Rutledge and Mary Leonard, "Pollution Abatement and Control Expenditures, 1987-1991," Survey of Current Busi-ness (May 1993), 55-59; U.S. Bureau of the Census, Pollution Abatement Costs and Expenditures, 1991, MA200 (91)-1 (Washington, D.C.: U.S. Govt. Print. Off., 1993); and other unpublished data provided by Gary Rutledge.

Pollution Control Costs and the Economy

Share of Gross Domestic Product

Gross Domestic Product (GDP) (19) is the Nation's total domestic output of goods and services; it includes expenditures for controlling pollution. One way of asking, How much environmental protection is enough? is to assess the share of GDP that goes to environmental protection.

According to EPA's study, in 1972, as new Federal environmental protection requirements began to take effect, total capital expenditures plus operating expenditures for pollution control were $45 billion (1986$); this represented 1.5 percent of GDP (see figure 1). (20) Currently, based on EPA's projections--or on BEA's more recent actual data--total expenditures are running at approximately 2 percent of GDP. EPA's study projects that the pollution control share of GDP will rise during the rest of the decade--the steepness of the rise depending on how costs are calculated (actual expenditures or annualized expenditures). Changes in regulatory requirements could also affect the future trends.

Table 2 presents data from EPA's report for selected years for both methods of calculating costs of pollution control: (1) actual cash expenditures and (2) amortised (annualized) costs assuming 7 percent interest. Both approaches are valid, but result in different perspectives on the burden of environmental regulations The trend of GDP share rises much more sharply for amortized expenditures. Based on annual expenditures, the burden of environmental regulations rose from 1.5 percent of GDP in 1972 to 2 percent in 1990, an increase of 0.5 percent. Based on amortized expenditures, the burden has gone from 0.9 percent to 2.1 percent for the same period, an increase of 1.2 percent And the differing implications are further accentuated in the projections to the year 2000.

TABLE 2. Total Expenditures/Total Annualized Costs
for Pollution Control

Expenditures = sum of capital outlays and operating costs for the year.

Annualized costs = sum of operating costs for the year plus amortized capital costs which include depreciation associated with accumulated capital investment plus 7 percent interest.

Figures for EPA's "full implementation" projections; these include meeting sewage treatment needs and compliance with most ozone nonattainment requirements, but probably underestimate full costs of the Clean Air Act Amendments of 1990.

SOURCE: Environmental Protection Agency, Environmental Investments: The Cost of a Clean Environment, p. v and Tables 8-18 and 8-18A, 8-12 and 8-12A; Chapter 1 discusses terms and data sources, implementation projections, and depreciation schedules.

The BEA's estimates of pollution control costs, being somewhat less than EPA's, represent a slightly smaller share of GDP. BEA's survey data indicate that the pollution control cost share of GDP was 1.4 percent in 1972 and 1.7 percent in 1990. (These figures should be compared to EPA's annual expenditures, which is the way BEA presents its data, not to EPA's annualized estimates.)

Effect on Economic Growth

Most economic analyses indicate that pollution control costs have some negative, or contractionary, effect on measured output in the economy, at least in the short run, by raising prices and diverting capital and labor that might be used in producing more goods and services. How pollution control costs play out through the economy over time in terms of productivity, prices, and employment is poorly understood, however. The effects are commingled with many other variables. Engineering costs per se can be estimated with reasonable accuracy for the short term; but over the longer-run, they are affected by technological change and process improvement, which typically reduce costs. Attempts to model long-term macroeconomic impacts of pollution control costs yield widely varying estimates. (22)

Simulating the growth of the U.S. economy with and without environ-mental regulation, Dale Jorgenson and Peter Wilcoxen of Harvard concluded that environmental regulation has been an "important contributor" to slowing down growth of the economy; and that "pollution abatement has emerged as a major claimant on the resources of the U.S. economy." (23) According to their analysis, the "cost of environmental regulation is a long run reduction of 2.59 percent in the level of the U.S. gross national product." (24) That is, circa 1990, the U.S. economy is about two and one-half percent smaller for a given year than it would have been without the diversion of resources to pollution control. This figure is higher than most other estimates, which the authors attribute to earlier estimates having overlooked the effects of environmental regulations on investment.

However, Hahn and Hird review a number of drawbacks in these types of analyses, such as an assumption of perfect competition and a failure to account for the benefits of environmental improvement. Hahn and Hird conclude that "the application of general equilibrium models to regulatory problems is still in its infancy." (25)

But econometric efforts to measure the impact of environmental regulation represent only one component of much broader social and technical debates. While most economists view environmental regulations as a drag on the economy, some analysts go further, arguing that environmental regulations not only diminish economic growth, but also that in doing so actually diminish health and environmental protections. Since reduced economic circumstances are associated with poorer health, it is argued, slowing economic growth through imposition of pollution control costs can have the perverse consequences of diminishing environmental quality and of adversely affecting public health. (26)

This logic leads to the contention that it is the wealth generated by economic growth that leads to reduced pollution and enhanced environmental quality--much more so than regulation. In this view, economic growth is seen as the precondition for human well-being, through generating jobs for an increasing population and for resolving "class conflict by assuring the working class of a constant share of an ever-increasing economic pie." (27) As a result, analysts of this view focus on total costs in assessing regulatory impacts on the economy. (28) More mainstream economists net costs by subtracting benefits of pollution control and not counting transfer payments, the approach of Hahn and Hird, for example.

Most environmental policymakers subscribe to a contrary view--that environmental requirements not only protect human well-being, but also can promote economic growth. (29) In this view, environmental quality over the long term is seen as the precondition for economic activity because the sustaining of life ultimately depends on a healthful environment and sustainable use of natural resources. (30) Even in the short term, environmental protection can stimulate technology (31) and provide economic opportunity; and the environmental prospective provides a basis for addressing the distributional issue of how the needy of the planet can achieve well-being (often cast as a 'North-South' schism (32)).

Among those giving domestic impetus to this view are Herman Daly, formerly of the World Bank and now at the University of Maryland, who has critiqued traditional economic views of growth (33); Richard B. Norgaard at the University of California at Berkeley (34); a number of economic and policy analysts associated with the World Resources Institute, which has sponsored diverse publications on global environmental issues; and numerous others, including representatives of business interests (35) and political leaders such as Vice President Gore, who has asserted that "we must make the rescue of the environment the central organizing principle for civilization." (36)

This environmental viewpoint has multiple critics from mainstream economists and other professions; particularly vocal critics include Julian Simon and S. Fred Singer. (37) They contend that assertions about environmental degradation threatening life and about natural resources being depleted have so often proven wrong and over-dramatized that they merit a skeptical reception. They observe that life-spans are lengthening; and that the prices of basic resources, including oil, have actually been declining in real terms. Some declare that advanced economic development and high standards of material wealth are necessary preconditions for environmental protection and say that only the well-off can afford to worry about environmental amenities. Some argue that technology can solve environmental and resource problems without need for seriously constraining or modifying economic development and growth. And some argue that the long-term view provides little practical guidance for immediate policy decisions (see the discussion of "sustainability," below).

It is probably premature to judge whether the "sustainability" perspective is inherently flawed or the application of an approach that is still in its infancy.

Jobs and Environmental Regulation

Concern about the impact of environmental regulations on jobs has arisen in numerous contexts. At the macroeconomic level, if environmental regulations slow economic growth, there is concern that it concomitantly diminishes growth in job opportunities. At the microeconomic level, as manufacturing plants are required to invest in pollution controls to meet environmental quality standards, there is concern that some facilities may become unprofitable and close, throwing workers out of jobs. In terms of regional economies, when environmental requirements have constrained exploitation of natural resources, there is concern that such industries as ranching, lumbering, and mining will lose access to resources, also at the cost of jobs. (38) With respect to small businesses, which typically have limited financial and technical resources, there is fear that regulations will have a disproportionately adverse impact, diminishing entrepreneurial opportunity and costing jobs. (39)

Environmental requirements may also generate jobs, both through stimulating markets for pollution control products and services, (40) and through enhancing industries, most notably recreation, that benefit from high quality environmental conditions.

Much information on losses or gains of jobs because of environmental regulations is anecdotal. (41) Although there are notable examples of environmental requirements affecting particular manufacturing establishments or diminishing the availability of natural resources, in most cases plant closures or shifts in industry involve a complex web of causes that include regulatory requirements other than environmental ones (e.g., minimum wage, labor laws, etc.), obsolete equipment, management choices, domestic and international competition, depletion of resources, etc. Similarly, the causes and implications of job gains attributed to environmental regulations are problematic. Finally, pollution control requirements may lead to reallocation of labor and capital into less-polluting industries.

Economic and environmental analysts tend to bring differing approaches to the effort to sort out the role of environmental regulations in these typically complicated changes in economic circumstances. The contrasting views that environmental regulations impede economic growth and that they can stimulate the economy yield markedly different interpretations about job creation, as was clear in a point-counterpoint exchange sponsored by Resources for the Future. (42) In any event, assessing the net impact of environmental regulations engages not only academic debate, but the visibility and distress of workers losing jobs allegedly at least in part from environmental regulations ensure that this issue will remain publicly heated.

Competitive Effects of Environmental Protection

Before 1970, when State and local requirements dominated pollution control requirements, a major concern was that businesses would relocate from areas with strong pollution control standards to areas with weaker standards, thereby penalizing jurisdictions endeavoring to protect their public health and environmental quality. As a result of this concern, legislators adopted as a general principle of Federal environmental requirements that baseline environmental standards should be nationally uniform (States typically can impose standards more strict than Federal ones, but not less so). This formerly interstate issue now looms large on the international scene. Are U.S. environmental standards more stringent than those of other nations? If so, are U.S. products disadvantaged on world markets? Are factories and jobs being driven to other countries with less stringent standards?

Cross-national comparisons of environmental standards are difficult (43); but overall, considering differences in policies, techniques, problems, and enforcement, environmental stipulations appear to be increasingly comparable among industrialized nations. During the 1970s and early 1980s, studies of specific industries typically concluded that environmental standards had only modest influence on corporate decisions whether to site facilities in the U.S. or abroad. (44) Recent data on national expenditures on pollution control show the United States near the top in per capita environmental control expenditures, with other OECD nations not far behind. (45) But environmental expenditures of some major trading partners on the Pacific Rim (e.g., China, South Korea, Taiwan, and Mexico) fall far short, raising questions of competitive fairness. A February 1994 presentation at a seminar on environmental regulations and competitiveness reviewed over 100 studies and found no conclusive negative effect on competition resulting from environmental requirements. For a few studies that did find a statistically negative effect, it was small. (46)

Environmental issues proved more contentious than expected in the negotiations on the North American Free Trade Agreement (NAFTA) and on the General Agreement on Tariffs and Trade (GATT). (47) on NAFTA, because of concern that differential occupational health and safety and environmental requirements between Mexico and the United States could cost American jobs and reduce competitiveness of U.S. products, the Clinton Administration insisted on side agreements being negotiated. The environmental side agreement does not require Mexico or Canada to meet U.S. standards. But it does encourage the three governments to harmonize standards to the highest rather than the lowest common denominator; and it does sanction a government's failure to enforce effectively its own environmental standards, whatever they might be. This agreement is the first of its kind among trade agreements. On GATT, the Uruguay Round included discussions of environmental concerns in the final days of negotiations. Some adjustments in language were made, and the Preamble acknowledged environmental goals. However, the major substantive environmental issues were deferred to the future, and a committee on trade and the environment has been formed to deal with these issues.

The other side of the competitiveness coin is the idea that U.S. environmental requirements are stimulating "green technologies" that can be exported. Several congressional committees have held hearings on the topic, and on August 4, 1993, the House Committee on Merchant Marine and Fisheries reported a bill, H.R. 2112, the National Environmental Trade Development Act of 1993 (House Rept. 103-214, Part I) (48) The Office of Technology Assessment recently prepared for the Congress a series of three reports exploring American industry, pollution control, and competitiveness. (49)

Who Pays for Pollution Control Requirements?

The differing definitions and analyses of pollution control costs result in somewhat different breakdowns of who pays those costs. A specially tailored analysis by OTA, reproduced as table 1 on page 10, provides one breakdown of recent (1991) spending.

EPA's Environmental Investments: The Cost of a Clean Environment break out of funding sources for pollution control costs gives a somewhat different picture (table 3, page 20) from OTA's. According to EPA's figures, government accounts for nearly 40 percent of pollution control costs, while the private sector accounts for the rest. This analysis is particularly useful for depicting trends: over time, the one significant change in historic and projected shares of pollution control costs is the doubling from 4 to 8 percent of non-EPA Federal expenditures, while for other sources the share of total costs hold nearly constant or slightly decrease. As noted later, the increase in non-EPA Federal expenditures primarily reflects cleanup costs at military and nuclear facilities.

Industry Costs

Pollution control requirements fall most heavily on a few industries: pulp and paper, chemicals, primary metals, petroleum and coal products, and utilities owning coal-fired electric generating facilities. Table 4 indicates gross pollution control costs for selected manufacturing industries during 1991. These data are taken from an annual Department of Commerce publication, Pollution Abatement Costs and Expenditures, which includes data on pollution control capital expenditures, operating costs, expenditures by form of abatement (air, water, solid wastes), and expenditures by manufacturing industry by State. (50) As noted previously, in the discussion concerning "Jobs and Environmental Regulation," small businesses may face special difficulties in meeting regulatory requirements, (51) and most pollution control statutes contain special provisions for easing the burden of requirements on small businesses--for example, by providing technical assistance.

Federal Government Expenditures

Differing estimates of government's share of pollution control costs can be seen in tables 1 and 3. Looking at EPA's breakdown (table 3), much of the increase in the non-EPA Federal cost is for cleanup of Federal military bases and of nuclear facilities. An alteration is also occurring within EPA's expenditures, in terms both of the source of funds and of the destination of expenditures. In 1980, essentially all EPA appropriated funds derived from general revenues, and about 72 percent (or $3.4 billion) of its $4.7 billion budget was transferred to local governments as sewage treatment facility grants. In 1990, over 25 percent of EPA's $5.5 billion budget was derived from dedicated taxes on chemical feedstocks, petroleum, motor fuel, and a corporate income tax--with the funds dedicated to the Superfund and the Leaking Underground Storage Tank (LUST) cleanup programs. The share of EPA's budget going to sewage treatment grants had fallen to about 36 percent, or $2 billion. By 2000, Superfund expenditures are projected at $7 billion per year, while funding responsibility for sewage treatment is to have shifted to States.

TABLE 3. Total Costs of Pollution Control By Funding Source
(Present Implementation, annualized at 7%)
[million 1986 $]

SOURCE: Environmental Protection Agency, Environmental Investments: The Cost of a Clean Environment, Report of the Administrator of the EPA to the Congress of the U.S. [EPA-230-11-90-083] (Washington, D.C.: 1990), Table 8-12A. Assumes interest at 7 percent; for depreciation schedules, see p. 1-5.

TABLE 4. Pollution Abatement Costs and Expenditures for Selected Manufacturing Industries (1991)

SOURCE: U.S. Department of Commerce, Bureau of Census, Current Industrial Reports, Pollution Abatement Costs and Expenditures, 1991, MA200(91)-1, Table 1, pp. 12-13.

TAC = Capital expenditures and operating costs, including payments to governments for sewage treatment and waste pickup; excludes interest on capital and businesses of fewer than 20 employees.

State and Local Costs -- Unfunded Mandates

State and local governments have a long history of providing environmental services. (62) Many of these environmental services are subject to Federal regulations. Federal water quality standards for sewage treatment facility discharges, Federal drinking water standards, Federal requirements for plans to implement Clean Air Act standards, Resource Conservation and Recovery Act standards for landfills and incinerators, Superfund liabilities--all can impose operational costs and administrative requirements on States, counties, and municipalities. For some of these requirements, Federal technical and financial assistance is available; most notably, the Federal sewage treatment grants program has provided some $62 billion dollars over the last 20 years to municipalities (States and local governments added another $25 billion). But many requirements impose costs without assistance--even the sewage treatment grant program is now ending, replaced by a loan program. As can be seen from table 2, State and local expenditures are projected to continue rising through the year 2000 (although their share of expenditures for environmental protection is projected to remain about the same.)

Recently, complaints about the State and local costs of these Federal environmental mandates have sharply increased. (53) The overall price tag is speculative, but is believed to be in tens of billions of dollars per year. For new and renovated wastewater treatment facilities alone, $138 billion will be required over the next 20 years, according to EPA's most recent "needs survey" report to Congress. This prospect has galvanized associations of State and local governments to call for more assistance and more flexibility in setting priorities, fulfilling requirements, and meeting deadlines.

Deciding How Much Is Enough

Adding up the total national costs of pollution control and calculating their share of GDP or their effect on economic growth, jobs, or competitiveness do not, however, answer the question, How much is enough?

Looking at costs tends to lead to such questions as, Is two percent of GDP too much or too little to spend on environmental protection? What would a loss of, say, 0.1 percent in annual economic growth mean for the Nation's well-being? These are questions framed in economic terms, and economic policymakers traditionally focus on cost and benefit analysis to answer them: "It will never be possible to spend the same dollars on two things at once.... Spending money in pursuit of environmental goals has been and can be a very wise use of society's scarce resources. But there will always be a cost ...." (54) And, "In the economist's view of things, the balancing approach is desirable not only because it is a natural way to make decisions, but also because it brings out in the open the terms of trade, so to speak." (55)

Environmental policymakers might instead ask, Are ecosystems and the public health protected from damaging pollution? Are natural resources and natural systems being maintained so well-being can be sustained indefinitely? These are questions framed in physical and biological terms, and environmental policymakers have traditionally focused on environmental and health effects to answer them: "The funds to control pollution now can be made available if we want them to be. The key to unlocking the funds is for politicians ... to place a higher priority on pollution control.... Government must set sufficiently stringent standards to achieve the level of environmental quality which people want." (56)

Both economic and environmental policy analysts recognize there is a tradeoff. They differ in their approach: the economic analyst looks at the tradeoff in terms of economic opportunities foregone to protect the environment, while the environmental policy analyst looks at the tradeoff in terms of environmental and human health qualities diminished to protect economic activities.

Cost-Benefit Analysis

The conceptual methodology and application of cost-benefit analysis is relatively well-established, although its practical application remains problematic because of scientific uncertainties, data limitations, disagreements on techniques, and inadequate resources. (57) The crucial characteristic of cost-benefit analysis is that it provides one approach to answering the question How much is enough? "Enough" is when the marginal cost of more pollution abatement equals the marginal benefits of the environmental improvement. At this point, net social welfare is maximized; at this point, overall, society is "better off"' with the particular regimen of environmental protection investments.

But from the perspective of many environmental theorists and policymakers, cost-benefit analysis is not only impractical, but in fact irrelevant because it applies the wrong metric (dollars rather than health and environmental quality) and answers the wrong question (How much it costs rather than how well ecosystem integrity and each individual's rights to a healthful and pleasant environment are protected). (58)

A sprinkling of economic policy analysts and most environmental policy analysts contend that the measure of How much is enough? is what the political process decides, not the solution to the net social welfare equation. As stated by Edmund Muskie, "Environment is fundamentally a political question that requires voters to sort out their priorities." (59) In this view, economic metrics and the search for net social "efficiency" are irrelevant to basic environmental choices: "There is nothing in economics in general--or in hypothetical valuation in particular--that can address the optimal level of air or water quality, or of land devoted to parks and wilderness." (60) Only after those choices have been made can economic analysis be used to evaluate the implications of the decision. In this approach, the value judgments of the decisionmaker dictate the economic analysis; "the economist adopts the following position: 'given that your objectives are this, here is the best thing to do'." (61)

Importantly, many regulatory impact analyses omit the compensating benefits of pollution control (62) and fail to examine the distributions of costs and benefits. (63) There are formidable technical difficulties in quantifying benefits as well as disputed value choices. (64) Some benefits that do have positive impacts on national income (for example, gains in labor productivity from reduced pollution because the workforce is healthier and more contented) may not be separately identifiable as a benefit of pollution control. Such environmental values as enhanced visibility, preserved biological diversity, more attractive surroundings, or fewer episodes of coughing may not be captured by GDP. The extreme example of Eastern Europe demonstrates that cumulative environmental neglect can over time injure productivity and quality of life in dramatically costly ways.

Nevertheless, assessing costs and benefits has been and remains a primary methodology for trying to determine how much environmental regulation is appropriate. Hahn and Hird's recent review and synthesis of costs and benefits of regulation concluded that environmental regulation costs ranged from $55.7 to $77.6 billion, while benefits ranged from $16.5 to $135.8 billion, with a best-guess benefits estimate of $58.4 billion. (65)

Regulatory Cap

Another way of addressing the question of How much is enough? is to select some level of costs on political, social, economic, and/or environmental criteria; or on some historic level deemed acceptable; or indeed, it could be set arbitrarily. Then costs could be "capped" at this level. (66) Under a cap. regulators would have a strong incentive to minimize regulatory costs--to focus on the highest priority environmental problems and to encourage the most efficient methods of abating pollution. Under a cap, when and if new environmental protections were found to be appropriate and desirable, some other regulations would have to be rescinded or new efficiencies found, in order that total costs not exceed the cap. In effect, a cap specifies the total amount of costs that may be incurred, but leaves open the ultimate level of environmental protection that would be achieved. This is in contrast to defining the Nation's environmental objectives, such as protecting public health with a margin of safety (the criterion of the Clean Air Act), thus specifying the environmental protection outcome, but leaving open the ultimate level of costs that will be incurred.

Sustainability

The premise that economic activity and human well-being ultimately depend on clean air and water, productive soils, renewable resources (and limited exploitation of nonrenewables), and ecosystem integrity has led to efforts to define sustainability. From this perspective, the question, How much environ-mental protection is enough? becomes, How much is needed? The measure is whether economic activities are "sustainable" for the indefinite future on a planet of limited space, resources, and capacity to assimilate wastes. (67)

There have been sporadic attempts to define "quality of life" indices, (68) in effect to create an "ecometrics" that would parallel econometrics. The National Environmental Policy Act of 1969 (P.L. 91-190) made it the duty and function of the Council on Environmental Quality to gather and analyze "authoritative information" on the environment, and to report annually on the "state and condition of the environment" (subsections 204(2) and (7)). CEQ's annual reports (the 23rd and last covering 1992) regularly included various social, economic, resource, and health and environmental data; and the Council irregularly issued reports focused on environmental statistics. (69) But the Council never achieved systematic measures of environmental quality that could be used to define coherent goals for either environmental or economic policymaking. Congress has periodically proposed creating an "Environmental Statistics" Office, most recently in the 103rd Congress as part of legislation to elevate EPA to cabinet-level.

At present, key efforts to determine, How much environmental protection is needed? include various ways of measuring and promoting "sustainability." Particularly important areas of attention include:

• - natural resource accounting, in which the framework of the national economic accounts is being extended to include natural and environmental resources, with attention focused on treating those resources as capital, which would affect gross measures of national product, GNP or GDP (70);
• - ecosystem integrity, in which scientific understanding of ecosystems could be combined with social goals to support "ecosystem management" (71);
• - biodiversity, in which sustaining diversity of species and genetic materials becomes a measure of protection of environmental conditions (72);
• - social cost pricing, in which external costs of goods or services are incorporated in prices (e.g., incorporating environmental damage costs into discussions about electricity generation supply (73)); and
• - green design, in which potential environmental impacts of products are taken into account in the design of the product, not afterwards. (74)

"Sustainability" remains a fuzzy metric. In "Closing Remarks" to comments on their review article on benefit-cost analysis, Lave and Gruenspecht say: "We did not include the work of ... Herman Daly [in the review] because ... [it doesn't] help an EPA assistant administrator decide what ambient air quality standard to set or how important is the clean up of toxic waste dumps.... [He] need[s] to convince the public that an alternative framework is needed for evaluating environmental policy." (75) But the insight that operational definitions of pollution control goals might be determined by ascertaining levels of environmental conditions necessary to sustain global, long-term human and ecosystem well-being has opened fruitful areas of research and analysis. (76)

POLLUTION CONTROL: HOW TO GET THE MOST BANG FOR THE BUCK

Even when there might be agreement on desirable environmental protection goals and on the desire for efficient expenditures for pollution control, (77) economic and environmental policymakers tend to take different approaches to environmental protection. Economic policymakers naturally have looked toward economic tools such cost-benefit analysis and market mechanisms such as pollution taxes and tradable emissions allowances. (78) Environmental policymakers, on the other hand, have traditionally focused on national health-and technology-based standards to eliminate adverse effects and to minimize pollution. This distinction does not mean that regulators want pollution control funds to be spent inefficiently, only that the two policymaking positions start from different points that imply different priorities.

In establishing the basic frameworks of the environmental statutes in the 1960s and 1970s, the Members of the authorizing committees (79) overtly rejected the use of market mechanisms even as supplements to their fundamentally regulatory approach. (80) And, arguably, the regulatory approach worked quite well in controlling the sources and pollutants originally focused on: large sources of pollution--notably large industrial facilities, electric utilities, and municipal sewer discharges; similarly, the most important dispersed sources, including autos and agricultural pesticides, were regulated primarily at the point of manufacture. And the focus was on a relatively few pollutants--sediment, oxygen-demanding materials, oil and grease in water; particulates, nitrogen oxides, sulfur dioxide, ozone (smog), lead, and carbon monoxide in air.

But after the most easily controlled sources of these traditional pollutants abated discharges, and as the cost of further controls rose, the argument of economic policymakers that use of market mechanisms would achieve more efficient pollution reductions became increasingly forceful. In addition, tailoring regulations to deal with hundreds of toxic materials and multiple and dispersed sources, which increasingly became the focus of attention, proved difficult. With the costs and complexity of environmental programs growing, environmental policymakers also began to look for alternatives and for supplements to the regulatory approach.

Efforts to achieve greater efficiencies in pollution control--to get more bang for the buck--have been directing attention to several routes:

• - cost-benefit analysis and risk assessment techniques are methods not only for assessing net social benefits of environmental protection, but also can be used to direct pollution control investments at the most important problems and to choose the most effective regulation or pollution control mechanism to meet specific needs;
• - market-based mechanisms, primarily tradeable permits, have been adopted in selected instances in the belief that they would achieve pollution reductions more efficiently than regulations alone;
• - decentralizing decisions by revisiting Federal versus State and local environmental decisionmaking responsibilities might find more efficient and effective solutions for certain problems, particularly nonpoint source pollution and ecosystem deterioration; and
• - fostering environmental stewardshipthrough education, leadership example, and public participation can help create market demands for more environmentally benign production practices and products.

Cost-Benefit Analysis and Risk Assessment

While cost-benefit analysis can be used to assess the overall social welfare of environmental protection regulations, as noted earlier, its primary development and use has been in assessing individual environmental regulatory proposals. (81) Since the late 1970s, EPA in particular has sponsored research and studies of cost-benefit analysis and risk assessment techniques. Risk assessment has emerged as valuable not only in its own right as a tool for setting priorities and for analyzing regulatory standards, but also for its contribution to the assessment of cost-effectiveness (82) and of the potential benefits of regulations. (83)

Concerned about regulatory burdens on the Nation's economy, President Reagan in 1981 issued Executive Order (E.O.) 12291, which stipulated that individual proposed regulations should be evaluated to weigh the potential costs and benefits to society of the action, and, to the extent allowed by law, should be issued only if the benefits outweigh the costs. E.O. 12291 was implemented by requiring that Federal agencies prepare a Regulatory Impact Analysis (RIA) of major proposed regulations (having an impact of over $100 million). The RIA and the proposed rule were submitted to the Office of Management and Budget (OMB), which reviewed the regulation for consistency with Administration policy. President Bush also added a Council on Competitiveness, chaired by Vice President Quayle, to review selected regulatory initiatives for their impact on industry.

The Clinton Administration abolished the Council on Competitiveness during its first week in office; and rescinded E.O. 12291 in September, 1993, replacing it with E.O 12866, which establishes a revised set of requirements for cost-benefit and risk assessment analyses. (84) Like the earlier E.O., it requires each affected agency to conduct cost-benefit analyses for significant regulatory actions. But it differs in tone by focusing more attention on efficiency of regulation (rather than limitation of regulation) and for the first time, agencies are explicitly directed to evaluate "the degree and nature of risks" of substances or activities within their jurisdiction.

Along with the administrative efforts to adopt cost-benefit analysis and risk assessment, Congress too has considered using cost-benefit analysis and risk assessment as methods for informing or bounding environmental protection decisions. (85) During consideration of S. 171, a bill to elevate EPA to cabinet-level in the 103rd Congress, the Senate voted 95-3 to adopt a cost-benefit assessment amendment. The House subsequently voted to defeat the rule on a companion bill, H.R. 3425, primarily because of objections that it did not allow floor consideration of a similar cost-benefit amendment. The bill never did come to a vote before the House. However, a similar amendment was added to the U.S. Department of Agriculture reorganization bill (P.L. 103-354), requiring the USDA to conduct cost-benefit analysis and risk assessment in its rulemaking processes.

Many environmental policymakers remain concerned that statutory requirements for risk assessment and cost-benefit analysis are largely unnecessary or potentially pernicious. In the view of opponents of the cost-beneflt amendment to H.R. 3425, the proposal could tilt information toward critics of stringent regulatory decisions and could distort the primacy of EPA goals to protect health and the environment. (86) While proponents of the amendment requiring risk assessment and cost-benefit analyses believed that the resulting data, even if flawed, would usefully inform regulatory decisions, opponents feared that statutorily requiring EPA to conduct risk assessment and cost-benefit analyses could ultimately result in EPA being compelled to conform its decisions to those data, regardless of flaws.

Market-Based Incentives

Economic analysts have long supported the use of economic mechanisms to attain environmental goals. (87) Such mechanisms, they contend, promote efficiency in pollution control by providing firms the flexibility to make the best use of their information about production processes--the appropriateness of feedstocks and materials, the availability and costs of techniques for abatement, as well as the financial implications of alternatives. (88) From the juristic perspective, proposals for employing market mechanisms by which polluters could pay pollution taxes for discharges or buy and sell permits for discharges are suspect in that they could imply a social acceptance of pollution and would confer a "license" to pollute even though the end result in terms of total pollution reduction could theoretically be the same. (89)

Domestically, the market-based incentive that has achieved the most attention and use is based on establishing marketable or tradeable emissions allowances or permits. In these programs, under rules set up statutorily or administratively, permits (or allowances) for an amount of discharge (for example, one ton of sulfur oxides) are created. They may be allocated by historical emissions, by auction, or in other ways. Once allocated, firms can trade, sell, or bank the permits.

Mechanisms for trading pollution allowances or permits first developed in the mid-1970s to provide a program of offsets to allow new facilities to locate in highly polluted areas. Subsequently, this mechanism was used to allocate the phase-out of lead from gasoline in the early 1980s. Then, in the 1990 Clean Air Act Amendments (P.L. 101-549), tradeable pollution allowances became a central mechanism for reducing emissions contributing to acid precipitation as well as for phasing out chlorofluorocarbons affecting stratospheric ozone.

In the acid rain control program, a sulfur dioxide reduction goal was set by a political compromise emerging from technological feasibility, cost considerations, and estimates of what the ecosystem could tolerate--not by a cost-benefit assessment of acid rain control. But a market-based mechanism, tradeable allowances, was established to provide flexibility in how the reductions would be achieved by sources. That environmental policymakers adopted tradeable pollution allowances in the acid rain program of the Clean Air Act in 1990 has been widely viewed as legitimizing the use of market-based mechanisms in achieving environmental goals--and that environmental policymakers' traditional antipathy for these mechanisms has diminished.

A key ingredient to integrating environmental and economic policymaking is experts willing or able to bridge the two. The successful incorporation of the acid rain allowance system in the Clean Air Act Amendments of 1990 owed much to the initiative of an Environmental Defense Fund economist who convinced environmentalist lawyers that "emissions trading ... [can] simultaneously satisfy both environmental and business critics." (90)

Decentralizing Selected Environmental Decisions

Economic mechanisms for achieving pollution control tend to decentralize decisions. Rather than Congress or EPA regulators explicitly or implicitly dictating pollution abatement strategies, economic mechanisms are more likely to give plant managers and engineers freedom to find effective and efficient solutions. Similarly, decentralizing authority for certain governmental decisions may contribute to more efficient and effective pollution control. DeWitt John, of the National Academy of Public Administration, argues that nonpoint source pollution, pollution prevention programs, and ecosystem management "require new approaches to environmental governance. A fragmented system of uniform national rules is insufficient," he writes. "More useful are economic incentives, technical assistance, public education, and voluntary government programs, all tailored to local conditions." (91)

The development of Federal-State and local government relationships and authorities with respect to pollution control has a long and complicated history. (92) Under most pollution control statutes, the Federal Government sets standards, with implementation and enforcement largely delegated to the States. Because of the "unfunded mandates" issue, there is talk of giving State and local governments more discretion and flexibility in meeting Federal standards. The stringency and scope of drinking water standards is of particular concern, especially as they affect small systems. (The Safe Drinking Water Act requires EPA to set drinking water standards at levels feasible for large systems to achieve; these levels may pose insurmountable technical and economic obstacles for small systems.) Devolving authority to State and local governments so they could decide on priorities and levels of feasible pollution abatement would require changes to the governing Federal statutes. At present, this would seem most likely to arise on a case by case basis, during reauthorizations.

With respect to Federal lands management, there is a checkered history of Federal-State and local-private cooperation and confrontation. At present, "ecosystem management" has received attention as a way to get through resource dilemmas involving public and private resources93--though not without detractors and critics. One major thread driving this interest is the growing availability of scientific techniques to understand resource systems, rather than just individual components. The application of this knowledge allows managers to take into account a broader array of implications--including adverse environmental effects--of particular management decisions. Another major thread driving this interest is a sense of frustration among local parties that Federal decisionmaking too often fails to take into account local understanding and appreciation of resource conditions, values, and use-and-protection conflicts. Thus, "ecosystem management" is "as much a social and political process as it is a scientific concept." (94) Experiments with and sustained efforts at ecosystem management are showing promising results at both small scales (Applegate River, Oregon and California) and large scales (Everglades, southern Florida).

Stewardship

A number of legislative and administrative policies are designed to effect pollution abatement through the operation of consumer and corporate decisionmaker value choices. Many of these policies, which range from environmental education to product efficiency labeling, come into play through market processes, and in this they may parallel economic mechanisms, such as pollution taxes. But they differ in that they focus not on changing price signals, but on changing personal awareness and understanding of the environmental consequences of decisions. That is, a pollution tax assumes that the desired behavior (less pollution) will result from diminished consumption because of the increased cost, not because the potential purchaser knows (or necessarily cares) about the environmental effects of the pollution. In contrast, the stewardship approach focuses on the formation of motives and preferences of individuals and institutions, and on the provision of information so that they can make "environmentally informed" decisions. (95)

The Emergency Planning and Community Right-To-Know Act of 1986 (Title III of P.L. 99-499) requires industry to reveal publicly its discharges of wastes, which enhances the public's knowledge of the issue and has spurred firms to reduce discharges. A provision in the Clean Air Act Amendments of 1990 extends deadlines for control of toxic air pollutants for industrial sources that voluntarily reduce emissions earlier than required. EPA has developed a "pollution prevention" program and given it high visibility.

The combination of increasingly comprehensive and stringent regulations, liability for pollution, procurement policies, public pressure, and in some cases the profitability of recovering wastes formerly discharged as pollution is stimulating some industry spokesmen to rethink earlier assumptions concerning production wastes and natural assimilative capacity. In 1991, Robert Luft, Senior Vice President of Du Pont Chemicals, observed, "Our continued existence requires that we excelin safety and environmental performance.... Our goal must be zero-waste--to make something useful out of every molecule of raw material.... We must shift our mindset from 'meeting regulations' to 'meeting public expectations.'" (96) With this new mindset and following the "pollution prevention pays" dictum, many industry leaders have joined in voluntary programs to improve their environmental records. The "Responsible Care" program of the chemical industry is a notable example. (97)

Government policies to foster this new mindset include: environmental education, procurement policies, the generation and dissemination of relevant information, product labeling requirements, among others.

TRENDS AND POLICY INITIATIVES

Based on historical trends, as reflected in EPA's projections in Environmental Investments: The Cost of a Clean Environment, the share of the Nation's productive resources invested in environmental protection is likely to continue increasing well into the 21st century (see figure 1). In part, this reflects existing requirements that go into effect over the next two decades; in part it reflects environmental problems that remain, such as protection and cleanup of groundwater. And if voluntary efforts to reduce so-called greenhouse gases prove inadequate to achieve national and international objectives, the issue of costs will be even more difficult, given the Nation's level of fossil fuel use.

But recent events challenge these trends. The House Republican "Contract with America" (98) proposes rolling back the aggregate costs of regulations. The outcome of the 1994 election and events during the 103rd Congress suggest that regulatory reform proposals will be actively debated, and that the new Congress will be more receptive than in the past to proposals that regulators employ cost-benefit analysis and risk assessments in setting priorities and making decisions, that unfunded mandates be limited, and that "takings"--regulatory actions perceived to infringe on private property rights--be constrained or compensated. (99)

The Administration

The Clinton Administration's efforts to deal with tensions between economic and environmental policies tended to blur the institutional and conceptual distinctions between economic and environmental policymakers. President Clinton proposed to realign these relationships by creating a new Office of Environmental Policy in the White House, suggesting that CEQ be disbanded, and elevating EPA to the Cabinet. And in E.O. 12866, President Clinton revised but continued the executive dictate that significant regulatory actions be reviewed for their economic impacts and their significance in reducing risks.

But these efforts to better integrate environmental and economic policymaking remain incompletely realized. The elevation of EPA to Cabinet-level foundered on the issue of statutorily requiring it to conduct cost-benefit analyses of its regulations. CEQ, as a result, continues to exist in an attenuated state. And although E.O. 12866 in several ways is broader than E.O. 12291 which it replaced (for example in the requirement for risk assessments), draft legislation to implement the House Republican "Contract with America" would make E.O. 12291, not the later E.O. 12866, a statutory mandate.

To a greater extent than earlier administrations, the Clinton Administration is explicitly setting a goal of "working with the U.S. business and research communities to promote the development and deployment of new technologies that simultaneously prevent pollution, increase energy efficiency and the efficiency of the Nation's transportation infrastructure, and promote economic growth.'' (100) Examples of this initiative include a cooperative government-auto industry effort to develop electric automobiles, and the Administration's emphasis on voluntary efforts to meet goals for emissions of greenhouse gases in its "Climate Change Action Plan." (101)

As part of promoting the development of new technologies and controlling greenhouse gases, the Clinton Administration proposed substantial increases in funding for research, development, and demonstration of energy efficient technologies. For FY1995, the Department of Energy (DOE) requested $978 million for such activities, an increase of 42 percent over FY1994 appropriations. While Congress approved an increase (though less than requested), the change in party majority for the 104th Congress would suggest that this program is now likely to be cut. When DOE was requesting the increase for FY1995, the Republican Caucus of the House Budget Committee was proposing a 50-percent cut in this program, phased in over 5 years. (102)

The Clinton Administration has also been proactive in intervening in localized economic-environmental conflicts. For example, President Clinton convened a "Forest Conference" in Portland, Oregon in 1993 to explore issues and options related to Federal natural resources policy and economic impacts in the Pacific Northwest. 103 Other Administration efforts to mediate in situations where local conflicts have been attributed to economic-environmental tradeoffs include protection of the red cockaded woodpecker affected by logging, and South Florida water quality affected by agriculture. While the outcomes of these efforts remain uncertain, the activist role represents a new Federal posture.

In addition, the viewpoint that the sustainability of the earth's systems is a precondition for present and future economic well-being--a view central to Vice President Gore's book Earth in the Balance-- has engaged economic policymakers in the present Administration. President Clinton called for developing "green" GDP measures in his 1993 Earth Day speech, and the Economic Report of the President for 1994 states, "To better assess where interventions to improve the environment will benefit the economy, the Administration is ... engaged in efforts to define sustainable development....'' (104) At the Administration's request, the 103rd Congress appropriated funds that allows the Department of Commerce to begin defining and implementing "green accounting" to supplement traditional GDP accounts. (105)

Regulatory Reform

The Clinton Administration's new directions--its deliberate efforts to promote environmental stewardship, to foster public-private initiatives intended to serve both economic and environmental goals, and to mediate local economic-environmental conflicts--largely reflect its own predilections. The new Congress, and in particular the regulatory reform proposals in the House Republicans' "Contract with America," point toward a possible redirecting of environmental and economic policies.

When President Clinton repealed E.O. 12291 and substituted E.O. 12866, the underlying policy implication was a shift from constraining regulation toward making regulation more efficient and focused. The tenor of the "Contract with America"--in particular a proposed regulatory "cap" that shrinks and the statutory enactment of E.O. 12291--could be interpreted as a retrenchment of Federal regulatory activity. With the caveat that regulatory reform legislation that will actually be introduced and considered by House during the 104th Congress may differ from current drafts, the following proposals for reform appear in the "Contract with America":

• - Cost-benefit analysis/risk assessment: required of each Federal agency for each new regulation; "sound science" ensured through independent peer review panels.
• - Regulatory impact analysis: required of each Federal agency when drafting a major rule (one costing more than $1 million or affecting more than 100 persons); comprehensiveness of analysis ensured through a requirement for 23 specific pieces of information; would require Office of Management and Budget written approval for issuance of rules.
• - Regulatory flexibility and small business impact: provision for consideration of indirect impacts of rules; establishment of procedures for the Small Business Administration Chief Counsel for Advocacy to object to proposed rules.
• - Regulatory "cap": establishment of procedures analogous to the budget process for reducing and capping aggregate regulatory costs on the private sector at 6 percent of GDP; assignment of analyses for regulatory budget to the Office of Management and Budget and the Congressional Budget Office; requirement for agencies to prepare cost estimates for any new proposed regulations and rules having aggregate direct costs to the private sector of more than $10 million.
• - Paperwork reduction: for each agency, would require initiatives to reduce paperwork burden imposed upon the public by 5 percent per year; provisions for additional easing of paperwork burdens on small businesses.
• - Protection against Federal regulatory abuse: establishment of a "Citizen's Regulatory Bill of Rights"; protection for private sector whistleblowers identifying prohibited regulatory practices.
• - Private property: authority for private property owners to claim compensation when Federal regulatory actions would reduce private property values by more than 10 percent.
• - Federal mandate control: establishment of procedures analogous to the budget process for reducing and capping the aggregate costs of Federal mandates on State and local governments at 3 percent of GDP; assignment of analyses of mandated costs to the Office of Management and Budget and the Congressional Budget Office; requirement for agencies to prepare cost estimates for any new proposed regulations and rules having aggregate direct costs to State and local governments of more than $10 million.
• - Federal mandate accountability: requirements for determining and accounting for Federal mandates on States, local governments, or tribes, or on the private sector; establishment of procedures for considering mandate impacts resulting from any proposed legislation; assignment of primary responsibility of analysis to the Director of the Congressional Budget Office.

CONCLUSION

At this juncture, it is not clear whether environmental policy will unfold primarily as Federal regulatory reform or as Federal regulatory relief. Will the fundamental direction be to make regulations more efficient, more flexible, more prioritized? Or will the direction be to reduce the scope and stringency of Federal regulatory requirements? The two are not mutually exclusive, in that more efficient regulations may reduce the regulatory burden without compromising existing environmental goals. But it is equally possible to reduce regulatory costs by eliminating certain regulatory requirements or lessening the stringency of requirements. How policies are perceived will be greatly influenced by whether they are seen as efforts to achieve existing environmental goals at less cost, or as efforts to lower substantively the goals.

The integration of economic policy and environmental policy has been evolving. Where once command and control regulation and the use of market mechanisms to abate pollution were largely treated as independent alternatives, they are now increasingly viewed as having complementary roles. The use of market mechanisms to supplement the regulatory approach is achieving acceptance. Although contention continues about how to apply risk assessment and cost-benefit analyses in setting environmental protection priorities and in setting standards, the series of executive orders mandating such analyses together with recurring concerns of legislators suggests that the issue is less one of whether such analyses should help inform policy, than of how it is done. Finally, the intersection of economic policy and environmental policy continues to be the subject of discussion at all levels of government and in academia: in this respect, sustainabilityis not just a "buzzword," it encapsulates a fundamental debate.

Underlying this evolution has been growing agreement between mainstream economic analysts and policymakers and mainstream environmental analysts and policymakers on several premises:

• - that environmental and economic goals can be mutually compatible;
• - that market mechanisms can be incorporated in environmental protection programs without jeopardizing environmental values;
• - that environmental goals are a part of community values;
• - that current national economic accounts, aimed at measuring output and wealth, do not adequately reflect resource depletion and environmental degradation; and
• - that on a case by case basis, risk assessment and cost-benefit analysis can be useful for informing decisions.

Debate continues on several other premises:

• - whether economic growth is inherently self-defeating in the long run, through fouling and exhausting natural systems on which humankind ultimately depends (many environmental policymakers would say "yes" unequivocally; other policymakers are unpersuaded);
• - whether meeting environmental quality needs is a prerequisite for sustaining the planet and human well-being (again, environmental policymakers would generally say "yes" unreservedly, while others would condition the statement, suggesting that environmentalists often confuse needs and amenities, and often underestimate the resiliency of environmental systems to human impact as well as the substitutability of resources);
• - that science and technology can be expected to reverse environmental deterioration and to overcome resource depletion (many if not most environmental policymakers are doubtful, but some other policymakers are quite certain);
• - that a high standard of living and a growing economy are prerequisites for caring about environmental quality (some if not most economic policymakers say yes, while many if not most environmental policymakers would disagree, arguing that high Western standards of living cannot be globalized and that in the long-term material economic growth is unsustainable); and
• - that on a routine basis, risk assessment and cost-benefit analysis can usefully inform environmental policy decisions (while there is reasonable agreement that it can provide modest but useful intelligence for some decisions, there remains substantive disagreement on its routine application and its usefulness across disparate issues, especially those involving intangible values).

These agreements and continuing disagreements reflect a 25-year evolution in the theoretical and pragmatic understanding of environmental-economic issues. Many environmentalists have challenged economic dogma about economic growth, resource development, and environmental externalities. These challenges have engaged theorists and policymakers from both environmental and economic perspectives. Some convergences of views are manifest, despite the numerous continuing disagreements.

Today, there seem to be two underlying and potentially divergent forces in play:

(1) Continuing mutual efforts to develop and apply pragmatic accommodations--for example, honing when and how to apply risk assessment and cost-benefit analysis more regularly to environmental policy decisions, developing economic mechanisms for meeting environmental goals, exploring "green accounting" to address resource consumption Issues .

(2) Escalating rhetoric of divisiveness and perhaps a drawing apart on underlying premises, especially with respect to fundamental views about economic growth and resource development--most dramatically illustrated in the climate change issue. (74)

Putting aside rhetoric and cutting through knotted complexities, the fundamental issue on which economic and environmental policymakers remain at loggerheads is whether economic needs or environmental and health needs come first. It is a "chicken-and-egg" problem.

Should society set a limit on how much resources it will expend on environmental and health needs, in effect setting environmental and health protection goals at the level that can be bought for the share of resources allocated to pollution control? Or should society determine environmental and health protection needs, and allocate the resources necessary to meet those needs? In the first case, policymakers prescribe acceptable costs, without knowing for sure the level of environmental and health benefits that will be achieved. In the second case, policymakers define the level of environmental and health benefits needed, without knowing for sure how much they will cost to obtain.

In reality, meeting economic and environmental quality needs are both necessary conditions for human well-being--but neither alone is sufficient. How then does society decide on apportioning priority and resources to each? The answer varies depending on numerous ingredients, including: the level of certainty in projecting socio-economic trends (e.g., population, resource abundance/scarcities) and in anticipating outcomes of alternative policies; the degree of confidence in technological innovation; socio-cultural values (what constitutes "the good life"?); the scale (local, national, global); and the time-frame (a few years, a few centuries, millennia). With different mixes of these ingredients, different answers follow; and hence different policies can appear justified, even if they would conflict.

Endnotes

l. Martin R. Lee, et al., Summaries of Environmental Laws Administered by the Environmental Protection Agency, CRS Report 95-59 ENR.

2. See Philip Shabecoff, A Fierce Green Fire: The American Environmental Movement (New York: Hill and Wang, 1993); Steven Kelman, What Price Incentives? Economists and the Environment (Boston: Auburn House Publishing Co., 1981); Sheldon M. Novick, "Lawyers and Economists," The Environmental Forum (February 1986), pp. 37-38.

3. Haynes C. Goddard, "Environmental Policy as Economic Policy," Environmental Affairs, Vol. 2, no. 3 (Winter 1972), 630.

4. J. Clarence Davies III and Barbara S. Davies, The Politics of Pollution (Indianapolis: The Bobbs-Merrill Company, Inc., 1975), p. 4.

5. At the Federal level, policymakers who typically view pollution from the economic perspective have tended to be associated with the Council of Economic Advisors (CEA), the Department of Commerce, the Office of Management and Budget (OMB), and the (now abolished) Council on Competitiveness in the Administration; and with the appropriations committees and the Joint Economic Committee in Congress. Federal policymakers who typically view pollution more from the juristic perspective have tended to be associated with the Council on Environmental Quality (CEQ), which the Clinton Administration proposed to abolish (creating in lieu a White House Office on Environmental Policy directed by a Deputy Assistant to the President), and EPA in the Administration; and with key authorizing committees in Congress. (In the early 1970s the CEQ counterbalanced the CEA and actively represented environmental interests, proposing legislation and sponsoring research. Since 1980, however, the Council's staff, budget, and influence all diminished. Within EPA, the tension between the two perceptions has been reflected in the relative authorities of the of fine of General Counsel and the Office for Policy, Planning, and Evaluation--particularly with respect to the drafting of legislation. The legal perspective of the former was in ascendancy in the first half of the 1970s, the latter, with a much stronger economic orientation, since the early 1980s.)

6. For a spirited debate, see Mark Sagoff, "Environmental Economics: An Epitaph," and Raymond J. Kopp, "Environmental Economics: Not Dead But Thriving," in Resources (Resources for the Future, Spring 1993), pp. 2-12.

7. "The ethical view of pollution as intrinsically wrong leads to a long-run goal of zero pollution (and to the costly continuing interim requirement to do the best that existing technology will allow....) Seeing pollution as sinful also shores up the position that, as with freedom of speech, citizens have an inalienable right to be free of all environmental risks." Clifford Russell and Paul Portney, Resources (Resources for the Future, Fall/Summer 1985), 8

8. Cropper and Freeman, in Health Benefits of Air Pollution Control, pp. 223-227.

9. Warren J. Samuels, "Ecosystem Policy and the Problem of Power," Environmental Affairs, Vol. 2, no. 3 (Winter 1972), p. 594.

10. To illustrate the practical difference between economic and environmental views, consider the situation where there are two similar sources of pollution, one in a highly populated area (New York City) and another with only a few people living nearby (rural Wyoming). An economic analysis would suggest that the first source should be more stringently controlled than the second, since each dollar invested in abatement yields more benefits in terms of reduced adverse effects. A juristic analysis would suggest, however, that each individual potentially exposed has a "right" to equal protection, so each source should have to abate any discharge that imposes damages (with a margin of safety), even though the cost-effectiveness of a dollar invested in abatement in Wyoming will be much less than in New York.

11. See "California Cashes in on Cleaning Up," The Economist (16 November 1991), 79-80, 84.

12. Thomas O. McGarity, "Health Benefit Analysis for Air Pollution Control: An Overview," and Maureen Cropper and A. Myrick Freeman, III, "Estimating Individuals' Values for Health Benefits," in Health Benefits of Air Pollution Control: A Discussion, CRS Report 89-161 ENR, edited by John Blodgett Washington] 1989.

13. Robert W. Hahn and John A. Hird, "The Costs and Benefits of Regulation: Review and Synthesis," Yale Journal on Regulation, Vol.8, no. 233 (1990),253,256.

14. The most recent is Gary L. Rutledge and Christine R. Vogan, "Pollution Abatement and Control Expenditures, 1972-92" Survey of Current Business (May 1994),36-46.

15. Environmental Protection Agency, Environmental Investments: The Cost of a Clean Environment, Report of the Administrator of the EPA to the Congress of the U.S. [EPA-230-11-90-083] (Washington, D.C.: 1990).

EPA has announced a new report on the cost of environmental regulations that will update and expand upon the 1990 report. A draft is expected in 1996 or 1997 [Daily Environment Report (Dec. 14,1994), p. A-1].

16. This figure represents net costs, after subtracting savings from recovered energy and materials as a result of pollution control; see U.S. Congress, Office of Technology Assessment, Industry, Technology, and the Environment: Competitive Challenges and Business Opportunities, OTA-ITE-586 (Washington, D.C.: U.S. Government Printing Office, 1994), p. 186

17. Ibid, pp. 186-198.

18. For a summary of various estimates and a discussion of the differing assumptions underlying them, see E.H. Pechan & Associates, Clean Air Act Amendment Costs and Economic Effects: A Review of Published Studies (prepared for the National Clean Air Coalition, National Clean Air Fund, Washington, D.C.), reprinted in the Congressional Record, October 27, 1990, pp. S16963-S16969 [daily edition]. Most of the estimates used $ 1989.

19. Gross domestic product (GDP), the total goods and services produced by labor and property located in the U.S., has replaced gross national product (GNP), the total goods and services produced by labor and property owned by U.S. residents, as the standard government measure of the nation's economic activity. The changeover from GNP to GDP is recent enough that numerous analyses referred to in this report are based on GNP. However, GNP and GDP are not substantially different, so pollution control costs as percentages of GNP or GDP will be nearly identical.

20. EPA, Environmental Investments, Tables 8-18 and 8-18A, pp. 8-88 - 8-91. Most of EPA's report uses annualized costs: "the sum of operating costs and amortized capital costs, which include interest and depreciation associated with accumulated capital investment" [p. 1-4], Chapters 1 and 2 of EPA's report discuss data sources and nature of costs analyzed, respectively.

21. See OTA, Industry, Technology, and the Environment, pp. 188-189.

22. For a discussion of the macroeconomic impacts of environmental protection, see Congressional Budget Office, Assessing the Costs of Environmental Legislation, Staff Working Paper (May 1988), pp. 26-30. For a broad issues discussion, see "The Environment: The Politics of Prosperity," The Economist (Sept. 2, 1989).

23. Dale W. Jorgenson and Peter W. Wilcoxen, Environmental Regulation and U.S. Economic Growth, Discussion Paper 1458 (Cambridge, Mass.: Harvard Institute of Economic Research, October 1989), p. 2.

24. Ibid., p. 6.

25. Hahn and Hird, "The Costs and Benefits of Regulation," p. 245.

26. Daniel J. Mitchell, "The Deadly Impact of Federal Regulations," Journal of Regulation and Social Costs, Vol. 2 (June 1992) 45-52.

27. Frederick H. Buttel, "Economic Growth and the Welfare State: Implications for the Future of Environmentalism," Social Science Quarterly, Vol.58, no.4 (March 1978),698.

28. William G. Laffer, III, "How Regulation Is Destroying American Jobs," Backgrounder, The Heritage Foundation, No. 926 (1993).

29. There is a "deep ecology" school of thought that economic growth, industrial technology, and Western standards of living are inherently antagonistic to environmental quality and to the well-being of the peoples of the third world. For presentations of this viewpoint, see the journal The Ecologist. Some who see environmentalism as a threat to the U.S. economy and lifestyle associate domestic environmentalists generally with such "anti-growth" views.

30. World Commission on Environment and Development, Our Common Future [the 'Brundtland report'], (Oxford: Oxford University Press, 1987); United Nations Conference on Environment and Development, Agenda 21: The United Nations Programme of Action From Rio (New York: United Nations Department of Public Information, 1992). See also, Timothy Weiskel, "The Ecological Lessons of the Past: An Anthropology of Environmental Decline," The Ecologist, Vol. 19, no. 3 (1989), 99.

31. During the late 1960s and 1970s, when the basic Federal environmental pollution control statutes were being enacted, there were debates on the potential conflict between economic growth and environmental protection. Proponents of environmental regulations recognized that stringent requirements held the potential for constraining growth of certain industries (e.g., coal-fired utilities and automobiles). Generally, however, these proponents expected that the regulations would "force technology" (e.g., automobile emission controls) or encourage other, cleaner, industries (e.g., nuclear power for coal), thus allowing economic growth to continue.

32. Patti L. Petesch, North-South Environmental Strategies, Costs, and Bargains (Washington, D.C.: Overseas Development Council, 1992).

33. Herman E. Daly, For the Common Good: Redirecting the Economy toward Community, the Environment, and a Sustainable Future (Boston: Beacon Press, 1994).

34. "Interview: Richard B. Norgaard," Options (September 1992), pp. 14-16.

35. Stephan Schmidheiny, Changing Course: A Global Business Perspective on Development and the Environment (Cambridge, Mass.: The MIT Press, 1992).

36. Al Gore, Earth in the Balance: Ecology and the Human Spirit (Boston: Houghton Mifflin Co., 1992), p. 269.

37. The critical views often appear in publications of the American Enterprise Institute, the Heritage Foundation, and the Cato Institute. See Julian L. Simon, The Resourceful Earth (New York: B. Blackwell, 1984); S. Fred Singer, "The Attack on Science and Technology in Democracies," The World and I, Vol.8, no.2 (February 1993), 589-697; and also, Dixie Lee Ray, Environmental Overkill: Whatever Happened to Common Sense (Washington, D.C.: Regency, Gateway, 1993).

38. See, for example, "Jobs vs. Environment," CQ Researcher, Vol. 2, no. 18 (May 15, 1992), 409-432.

39. See, for example, Lowell Gallaway and Gary M. Anderson, "The Impact of Recent Federal Regulations on Small Business Job Creation," Journal of Regulation and Social Cost, Vol. 2 (March 1993), 30-38.

40. For an overview of the industry, see Larry Parker, et al, The Pollution Control Industry: An Emerging Economic Presence, CRS Report 93-811 ENR (Sept. 13, 1993); and "Environmental Technologies and Services," in U.S. Department of Commerce, U.S. Industrial Outlook 1994. Despite significant definitional and data problems, it is estimated that the pollution control industry involves revenues exceeding $100 billion annually, and is expected to grow. This industry entails a substantial amount of economic activity across several sectors of the economy, including construction, manufacturing, heavy equipment, chemicals, instrumentation, and engineering and consulting.

For the view that pollution control jobs nonetheless represent unproductive diversions of resources, see William G. Laffer, III, "How Regulation Is Destroying American Jobs," Backgrounder, The Heritage Foundation, No. 926 (1993), p. 12.

41. See Roger H. Bezdek, "Jobs and Economy: What's the Bottom Line?" Environment, Vol. 35, no. 7 (September 1993), 8-9.

42. David Gardiner and Paul R. Portney, "Does Environmental Policy Conflict with Economic Growth?" Resources, no. 115 (Resources for the Future, Spring 1994), 19-23. See also Roger H. Bezdek, "Jobs and the Economy, What's the Bottom Line?" Environment, Vol. 35, no. 7 (September 1993), 7-11, 25-32.

43. See Congressional Research Service, Air Quality Management in Selected Countries,A Report prepared by Maria Grimes for U.S. Congress, Senate, Committee on Environment and Public Works (97th Congress, 1st session), Committee Print (Washington, D.C.: U.S. Govt. Print. Off., 1981), pp. 1-31.

44. See Congressional Research Service, The Status of Environmental Economics: The 1984 Update, A report prepared by Joseph P. Biniek for U.S. Congress, Senate, Committee on Environment and Public Works (98th Congress, 2nd session) Committee Print, S. Prt. 98-248 (Washington, D.C.: U.S. Govt. Print. Off., 1984), pp. 58-62.

45. Organization for Economic Coordination and Development, Pollution Control and Abatement Expenditures in OECD Countries (A Statistical Compendium), Environmental Monographs No. 38 (OECD, Nov. 1990), Tables 2 and 3, pp. 40-41; EPA, Environmental Investments: The Cost of a Clean Environment, pp. 9-3, 9-21.

46. Adam B. Jaffe and Paul R. Portney, "Environmental Regulation and Competitiveness: A Review of the Evidence," Resources for the Future Seminar Series (February 2, 1994).

47. Congressional Research Service, NAFTA: Environmental Issues, CRS Issue Brief IB93049, by Mary Tiemann; Congressional Research Service, Environmental Regulation and the GATT, CRS Report 91-285 A, by Jeanne Grimmett (1991).

48. See ibid., p. 51; also, Office of Planning and Evaluation, EPA, International Trade in Environmental Protection Equipment: An Assessment of Existing Data (1993) [EPA 230-R-93-006]; for a critical economic analysis, see Wallace E. Oates, et al., Environmental Regulation and International Competitiveness: Thinking about the Porter Hypothesis (Resources for the Future, Discussion Paper 94-02 Washington, D.C., 1993).

49. OTA, Trade and Environment: Conflicts and Opportunities, OTA-BP-ITE-94 (1992); Development Assistance, Export Promotion, and Environmental Technology, OTA-BP-ITE-107 (1993); and Industry, Technology, and the Environment: Competitive Challenges and Business Opportunities, OTA-ITE-586 (1994).

50. U.S. Department of Commerce, Bureau of Census, Current Industrial Reports, Pollution Abatement Costs and Expenditures, 1991 [MA200(91)-1] (Washington, D.C.: U.S. Govt. Print. Off., 1993).

51. See, for example, Jonathan H. Adler, "Taken to the Cleaners: A Case Study of the Overregulation of American Small Business," Policy Analysis, no. 200 (Dec. 22, 1993).

52. Claudia Copeland, et al, Municipal Environmental Services, CRS Report 93-228 ENR.

53. Martin R. Lee, Environmental Protection and the Unfunded Mandates Debate, CRS Report 94-739 ENR.

54. Paul Portney, "Does Environmental Policy Conflict with Economic Growth?" Resources (Resources for the Future, no. 115, Spring 1994), 23.

55. Paul Portney, "Evolution of Federal Regulation," in Paul Portney, ed., Public Policies for Environmental Protection (Washington, D.C. Resources for the Future, 1990),p. 15.

56. J Clarence Davies III, The Politics of Pollution,pp. 3, 4.

57. David Swartzman, et al., eds. Cost-Benefit Analysis and Environmental Regulations: Politics, Ethics, and Methods, (Washington, D.C.: The Conservation Foundation, 1982); Robert W. Hahn and John A. Hird, "The Costs and Benefits of Regulation: Review and Synthesis," Yale Journal on Regulation, Vol. 8, no. 233 (1990), 233-280.

58. See, for example, Eugene C. Hargrove, Foundations of Environmental Ethics (Englewood Cliffs, N.J.: Prentice Hall, 1989), pp.206-215.

59. Edmund Muskie, Remarks before the Environmental Law Institute, reprinted in the Congressional Record (December 9, 1987), p. S17563 [daily edition].

60. Arild Vatn and Daniel W. Bromley, "Choices with Prices without Apologies," J. of Environmental Economics and Management, Vol. 26, no. 2 (March 1994),145.

61. Daniel W. Bromley, "The Ideology of Efficiency: Searching for a Theory of Policy Analysis," J. of Environmental Economics and Management, Vol. 19, no. 1 (July 1990), 103.

62. For example, in its 1985 Regulatory Impact Analysis of nitrogen dioxide ambient air quality standards, EPA concluded it could not credibly estimate health benefits of alternative standards with the time and resource constraints available to it. On drinking water, an EPA official recently commented: "I would be extremely interested in knowing what the benefit of our regulations has been. But, as much as I hate to say this, our financial resources are too limited for us to conduct a comprehensive study. At the most I think we could do a retrospective cost analysis." Janet Auerbach, chief, Regulation Management Branch, Drinking Water Standards Division, in John E. Cromwell III, "Regulatory Compliance Costs," J. of Am. Water Works Assn. (Nov. 1994), 94.

63. Alan Schnaiberg, et al., eds., Distributional Conflicts in Environmental-Resource Policy(New York: St. Martin's Press, 1986); Linda-Jo Schierow, Environmental Equity, CRS Report 92-646 ENR. For the economic view, consider the following: "Ideally, air quality standards would be set to maximize net social benefits. However, the Clean Air Act appears to be more concerned with distributional issues than with economic efficiency." Robert Anderson and Bart Ostro, "Benefits Analysis and Air Quality Standards," Natural Resources J. (July 1983), 565.

64. John Blodgett, Health Benefits of Air Pollution Control: A Discussion, CRS Report 89-161 ENR, especially pp. 10-24; Paul Portney, "Does Environmental Policy Conflict with Economic Growth?" Resources (Resources for the Future, no.115, Spring 1994), 23.

65. Hahn and Hird, "The Costs and Benefits of Regulation," 253, 256.

66. The House Republican "Contract with America" (discussed later), would cap aggregate Federal regulatory costs at 5 percent of GDP.

67. World Commission on Environment and Development, Our Common Future (Oxford: Oxford University Press, 1987).

68. For example, Herbert Inhaber, Environmental Indices (New York: John Wiley & Sons, 1976).

69. CEQ, Environmental Trends (Washington, D.C.: U.S. Govt. Print. Off., 1981).

70. See U.S. Congress, Joint Economic Committee, Making the Environment Count, Hearings (102nd Congress, 1st session) S. Hearing 102-419 (Washington, D.C.: U.S. Govt. Print. Off., 1991) "Integrated Economic and Environmental Satellite Accounts," Survey of Current Business (April 1994), 33-49; Peter Bartelmus, Environment, Growth and Development: The Concepts and Strategies of Sustainability (New York: Routledge, 1994) .

71. R. Edward Grumbine, "What Is Ecosystem Management?" Conservation Biology, Vol. 8, no. 1 (March 1994), 27-38.

72. Ibid., pp. 31-32.

73. See Richard L. Ottinger, et al., Pace University Center for Environmental Legal Studies, Environmental Costs of Electricity (New York: Oceana Publications, Inc., 1990).

74. U.S. Congress, Office of Technology Assessment, Green Products by Design: Choices for a Cleaner Environment, OTA-E-541 (Washington, D.C.: U.S. Govt. Print. Off., 1992); Gregory A. Keoleian and Dan Menerey, "Sustainable Development by Design: Review of Life Cycle Design and Related Approaches," Air and Waste, Vol. 44 (May 1994), 645-668.

75. J. Air Waste Management Association (October 1991), p. 1333.

76. Michael A. Toman and Pierre Crosson, Economics and "Sustainability:" Balancing Tradeoffs and Imperatives (Resources for the Future, ENR-91-05, January 1991); Choosing a Sustainable Future, The Report of the National Commission on the Environment (Washington, D.C.: Island Press, 1993); Ron Hicks, "Improved Decisionmaking for Sustainability," Journal of Soil and Water Conservation,Vol. 48, no. 3 (May-June 1993), 157.

77. Vernon R. Rice, "Regulating Reasonably," The Environmental Forum (May-June 1994), 16-23.

78. Lester Lave and Howard Gruenspecht, "Increasing the Efficiency and Effectiveness of Environmental Decisions: Benefit-Cost Analysis and Effluent Fees," J. Air Waste Management Assoc.,Vol. 41, no. 5 (May 1991), 680-692. See also comments and closing remarks in the same journal's issue of October 1991, especially pages 1332-1333.

79. Predominately, the Senate Committee on Environment and Public Works and the House Committees on Transportation and Infrastructure and on Commerce. [The House Committees were formerly called Public Works and Transportation, and Energy and Commerce.]

80. Kelman, What Price Incentives? chapter 3; N. Hanley, et al., "Why Is More Notice Not Taken of Economists' Prescriptions for the Control of Pollution?" Environment and Planning A,22 (Nov. 1990), 1421-1439. Notably, Senator Proxmire, who proposed an amendment to the Federal Water Pollution Control Act Amendments of 1972 to add a market mechanism (effluent charges) to supplement the regulatory structure, was on both the Joint Economic Committee and on the Appropriations Committee subcommittee with jurisdiction over EPA. Members of the authorizing committee argued against the amendment, which was rejected on a voice vote.
The Federal Insecticide, Fungicide, and Rodenticide Act and the Toxic Substances Control Act, however, are exceptions, in that they mandate regulations based on costs and benefits. This appears to result from their regulating commodities, rather than wastes.

81. EPA, EPA's Use of Benefit-Cost Analysis: 1981-1986, EPA-230-05-87-028 (Washington, D.C.: 1987); V. Kerry Smith, ed., Environmental Policy Under Reagan's Executive Order: The Role of Benefit-Cost Analysis (Chapel Hill: University of North Carolina Press, 1984); Paul Portney, Public Policies for Environmental Protection, chapter 8; and Lester Lave and Howard Gruenspecht, "Increasing the Efficiency and Effectiveness of Environmental Decisions: Benefit-Cost Analysis and Effluent Fees," J. Air Waste Management Association, Vol. 41, no. 5 (May 1991), 681-693.

82. John F. Morrall III, "A Review of the Record," Regulation (November/December 1986), 25-34.

83. For background on risk assessment and environmental policy, see Linda-Jo Schierow, Risk Analysis and Cost-Benefit Analysis of Environmental Regulations, CRS Report 94-961 ENR.

84. Ibid.

85. See John Blodgett, Environmental Reauthorizations and Regulatory Reform: Recent Developments, CRS Report 95-3 ENR.

86. Most analysts believe that estimates of costs can be generated more completely and more readily than estimates of benefits. See Health Benefits of Air Pollution Control: A Discussion, CRS Report 89-161 ENR. For a discussion of the effects of requiring economic assessments in an environmental information program, see David S. Cohen, "Subtle Effects: Requiring Economic Assessments in the Environmental Choice Programmed Alternatives, Vol. 20, no. 4 (1994), 22-27.

87. See Market-Based Environmental Management: Issues in Implementation, CRS Report 94-213 ENR; EPA, Economic Incentives: Options for Environmental Protection (21P-2001) (1991); EPA, The United States Experience with Economic Incentives to Control Environmental Pollution, 230-R-92-001 (1992); and Robert Stavins and Thomas Grumbly, "The Greening of the Market: Making the Polluter Pay," in Will Marshall and Martin Schram, eds., Mandate for Change (New York: Berkley Books, 1993), chap. 9.

88. Paul Portney, ed., Public Policies for Environmental Protection(Washington, D.C. Resources for the Future, 1990), chapter 1.

89. In promoting emission allowances as a way of improving the efficiency of environmental regulation, the President's 1992 economic report felt obliged to explicitly reject the idea that they represent a "license to pollute." Economic Report of the President (Washington: U.S. Govt. Print. Off., 1992), p. 184.

90. Joe DiLeo, "The Ecological Economist," The Environmental Forum (March/ April 1993), pp. 12-16.

9l. DeWitt John, "Civic Environmentalism," Issues in Science and Technology (Summer 1994), 32.

92. Frank P. Grad, "Intergovernmental Aspects of Environmental Controls," in Environmental Control: Priorities, Policies, and the Law, Frank P. Grad, et al, eds. (New York: Columbia University Press, 1971), 47-216; U.S. Congress, Senate, Committee on Environment and Public Works, Federal-State Relations in Transition: Implications for Environmental Policy, Serial No. 97-7, (97th Congress, 2d session), a Report prepared by the Congressional Research Service (Washington, D.C.: U.S. Govt. Print. Off., 1982).

93. R. Edward Grumbine, "What Is Ecosystem Management?" Conservation Biology, Vol. 8, no. 1 (March 1994), 27-38.

94. V. Alaric Sample, Building Partnerships for Ecosystem Management on Forest and Range Lands in Mixed Ownership (Workshop Synthesis, Yale School of Forestry and Environmental Studies (October 1993), p. 4.

95. See Larry Parker and John Blodgett, Climate Change: Three Policy Perspectives, CRS Report 94-816 ENR, especially pp. 17-25; David S. Cohen, "Subtle Effects: Requiring Economic Assessments in the Environmental Choice Programmed Alternatives, Vol. 20, no. 4 (1994), 22-27.

96. Robert v.d. Luft, "Protecting the Environment: It's Good Business," Remarks, at the National Petroleum Refiners Association International Conference, San Antonio, Texas (26 March 1991), p. 9. See also, "34 Years of Environmental Strategy," Chemicalweek (24 August 1994),27.

97. See "Responsible Care: Delivering on Commitments," Chemicalweek (17 June 1992), special issue; "Responsible Care: Communicating Care," Chemicalweek (9 December 1992); Anne Thayer, "Pollution Reduction," Chemical and Engineering News (16 November 1992),22-52; "[Responsible Care] 10 Years after Bhopal," Chemicalweek (7 December 1994); and "ISO 9000," Chemicalweek (9 November 1994).

98. The "Contract with America" commits a Republican-led House in the 104th Congress to consider 10 bills, which include regulatory reform provisions, during the first 100 days. House Republican Conference, Legislative Digest (September 27, 1994); "House GOP Offers Description of Bills To Enact 'Contract'," Congressional Quarterly (November 19, 1994), 3377-3378.

99. John Blodgett, Environmental Reauthorizations and Regulatory Reform: Recent Developments, CRS Report 95-3 ENR; Margaret Kritz, "The Conquered Coalition," National Journal (December 3, 1994), 2824-2829.

100. Economic Report of the President, 1994, p. 199.

101. William J. Clinton and Albert Gore, Jr., The Climate Change Action Plan (October 1993). See especially pages 1-2, "The Climate Change Action Plan will continue to break new ground in the relationship between the government and the private sector--fostering cooperative approaches and a forward looking agenda, rather than relying exclusively on command-and-control mandates .... These partnerships reflect the mutual responsibility of both the private sector and the government to improve environmental performance while enhancing economic growth and job creation."

102. DOE, FY 1995 Congressional Budget Request (1994), Vol.4, p.237; House Budget Committee, Republican Caucus, The Republican Budget Initiative, For Fiscal Year 1994 (March 3, 1994), p. 34.

103. Adela Backiel, The Forest Conference: A Fact Sheet, CRS Report 93-387 ENR (April 7, 1993).

104. Economic Report of the President, Transmitted to the Congress February 1994 (103rd Congress, 2nd session; H. Doc. 103-178), p. 181; the President's Earth Day remarks are at pp. 188-189).

105. "Integrated Economic and Environmental Satellite Accounts," Survey of Current Business (April 1994), 33-49.

74. See Larry Parker and John Blodgett, Climate Change: Three Perspectives, CRS Report 94-816 ENR, especially p. 22.