Before the big jobs speech, President Obama made an important decision about the economy and public health. About 10 days ago he reversed himself and his own EPA to stop a regulation that would've reduced smog-causing pollution. The U.S. Chamber of Commerce and the Republican Congressional leadership quickly declared this a major victory for "job creators" and business in general.
It's anything but.
I'll give a major concession on this argument and put aside for the moment the danger of ignoring solid science and what it tells about public health (which is that, in the words of NRDC Director Frances Beinecke, "strong smog standards would have saved up to 4,300 lives and avoid as many as 2,200 heart attacks every year... [and] made breathing easier for the 24 million Americans living with asthma... ").
OK, let's imagine those health benefits don't matter. Even from a business perspective these laws make sense and it's ridiculous to keep them weaker than they should be.
Choosing weaker environmental regulations actually makes our country less competitive and shows amazingly little faith in our business community to innovate.
Just because something may be difficult doesn't mean it will be expensive as well. For decades now, every major environmental regulation has met significant resistance from the industries most affected. That should be expected, but let's deal in reality, not hyperbole.
This time, industry opponents say it will cost enormous sums of money to comply with a regulation that moves the standard from 75 parts per billion to 60 to 70 ppb. We've heard this argument before. The claims of economic destruction, outrageous costs, and lost jobs are almost always seriously overblown.
Every now and then, a business leader admits the falseness of these "Chicken Little" cries. Former BP CEO John Browne once told Fortune, "Every time there's a new piece of regulation, we say it's the end of our industry... [we have] an appalling track record in this regard."
The most famous example, though, is the battle over the Clean Air Act Amendments of 1990, ultimately signed into law by the first President Bush. This law established the first major "cap and trade" system; it didn't restrict carbon dioxide as current iterations propose, but mandated reductions in acid-rain-causing sulfur dioxide. At the time, industry claimed compliance would cost up to $1,500 per ton of SO2 reduced. For the next decade, the industry never spent more than $200 per ton, and usually far less, as Dan Esty and I discussed in Green to Gold (see p. 75). So business was off on cost estimates by a factor of 10.
But it gets better every time. Friday's laughable assertion from Representative Eric Cantor that changing the smog standard would cost the economy $1 trillion and millions of jobs makes the acid rain cost claims seem quaint.
Granted, the fiscal logic for stricter pollution standards doesn't seem as clear as the cost-saving potential of energy efficiency standards such as those for light bulbs and cars. (Of course politicos are fighting those as well, even though the fact that they truly drive innovation and save everyone money has already been demonstrated repeatedly). But this seeming lack of economic logic applies if you only consider one side of the ledger, the cost to companies most affected. But on the other side we have public health savings, which are estimated at $37 billion per year, and the benefits to other industries.
What about the companies and entrepreneurs that create cleaner ways of operating or provide the pollution-reducing technologies? Those are real jobs too, aren't they? And our companies will be more competitive globally as every country struggles with pollution. Or just consider the productivity benefits to all companies of having their asthmatic employees breathe easier.
But here's what really galls me: saying that stricter pollution standards will cost enormous sums of money shows a staggering disregard for our capacity to innovate.
If American business is the engine of growth that our politicians make it out to be, why can't we find new ways to do things that save money, cut pollution, and make our companies more competitive. When given constraints, the tough and smart get going and innovate (and, by the way, the new standard wouldn't go into effect until 2013, giving us some time).
I have faith in our businesses.
Why don't our industry and political leaders?
(This post first appeared at Harvard Business Online.)
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Al Gore: Obama's EPA: Confronting Disappointment
Likewise, with alternative energy sources, do these also not require manufacturing, or corporations to develop, promote and/or install them? Why MUST going green be "anti-business" when business can be made out of going green itself?
But haven't you noticed? It's NOT. It may be the engine of global growth, but it is not currently the engine of domestic growth. We have no growth, for a host of reasons that include regulatory burden.
Perhaps if we address all the other reasons companies are offshoring we can bring manufacturing back home, and THEN improve our standards to an even greater degree. Or maybe you haven't seen the poverty numbers from the latest census.
Mindless pollution and extraction simply don't work.
http://www.heritage.org/Research/Reports/2011/03/Coming-Clean-on-Regulatory-Costs-and-Benefits
"EPA’s claim that the CAA Amendments of 1990 will save 230,000 lives and generate $2 trillion in economic benefits in 2020 is rife with 'significant' and 'major uncertainties,' according to the authors of the report."
"Innovation Costs too much NOW, so it doesn't matter what it's long term benefits are."
This is doing EXACTLY what the article argues. It is allowing industry to just continue doing what it has been doing. Industry NEEDS to innovate in order to stay productive and competitive. If a corporation complains that they would have to spend too much money to do so, then that company's only problem, other than spewing false logic, is that it has become unsustainable in size.
In this country, we have allowed for major mergers and acquisitions, all without actually forcing these now oversized companies that they need to innovate THE WHOLE company, just like all these smaller companies would have, if they had remained small.
If anyone wonders why we can't seem to recover from a large recession, they should look no further THAN industry. Even if all foreclosed homes were suddenly off the market, we would still have companies that are too large to innovate, and too cash greedy to spend any of their hoards of liquidity to actually do so. They claim that unless the government laxes standards, we can't compete. Well that's because you allowed yourself to become too large to compete under the standards that were previously not a problem.
Good grie! I can't believe he said this when we outsource manufacturing to China.
Over the past 50 years the US cleaned up its act substantially.
Low labor cost in China is often cited as reason for outsourcing. Not the whole story ...
No pollution controls in China is a major reason for their cheap cost of production.
In effect, we're rewarding China for producing pollution. It's free trade policy.
This is a very interesting report on the effects of regulation and small business. Environmental regulations affect small business the most.
Protecting the Environment should be a priority, however we should not wreck business to make it happen. We already have very strong Environmental regulations.
One other note, I find it amusing that the author states,
"saying that stricter pollution standards will cost enormous sums of money shows a staggering disregard for our capacity to innovate."
Meanwhile Obama is blaming job loss on the invention of ATM's and self check-in stations at airports. I guess Obama fails to see our capacity to innovate as well.
Ironic that if we want to protect the environment, we spend 50 years cleaning up water and air in the US, then send jobs to China where manufacturing is dirty, polluting, not green, etc., etc. If we cared about both US workers and the environment, we'd bring manufacturing back to the US.
Generally it's the poorest neighborhoods that are closest to factory, or industrial facilities.
Working under the old "Golden Rule" principle...........(the OLD one.....Do unto others, as you would have others do unto you), possibly the best solution to the problem of pollution is to require those that own, and/or manage factory or industrial facilities to live immediately downwind from them.
Maybe then we'll see, just how "harmless" the cumulative effects of pollution really is, when it effects them, and their families personally, and not just "those people"...............
It was not as big a concession of you to concede the health benefits as you might think, if you don't mind if I quote you again, ""strong smog standards would have saved up to 4,300 lives and avoid as many as 2,200 heart attacks every year... [and] made breathing easier for the 24 million Americans living with asthma... ")."
Let me explain between 1970-2005 we have reduced per the EPA air pollution 53% while increasing energy consumption 48%. The chart is near the end of this N.C. State report:
http://www.stat.ncsu.edu/people/hunt/cms/st495/lec/lecture02.pdf
And asthma has grown about 4% per year since 1980 per the CDC:
http://www.cdc.gov/nchs/data/ad/ad381.pdf
As for environmental controls creating jobs and putting more money into the economy - that worked in the 80's & 90's. Today a multinational corporation looks at the added expense of operating in the U.S. say we whether move to a fast developing nation where we don't have these problems.
You working behind the desk of you eco-consultant firm may not have noticed but since the 90's we have lost over 30% of our manufacturing jobs. So those old cliches don't work in unrestricted free trade times.
Something to think about.
There is less and less freedom in this country every day.
But that's besides the point.
Freedom is important -- we all like it. But there are other freedoms than the narrow ability to have as much pollution as you'd like or to buy the least efficient bulb you can. Going down the green path creates far more freedom. In this particular case, how about freedom for asthma sufferers to breathe easier. Or freedom from chronic health problems and the bills that go along with them.
Or in the larger green agenda, how about freedom from foreign oil? Or freedom to save a ton of money by using that better, energy-efficient bulb (by the way, MUCH more mercury ends up in the environment and in our fish from burning coal, not from light bulbs, which, by using less energy, create LESS mercury).
And those lighter cars still have plenty of other standards and regulations that "force" manufacturers to have seat belts and air bags -- do you want freedom from those regulations also?
Nobody wants excessive regulations, but when you dig into the specific ones on the books, a lot of people seem to like having safer food, cars, clothes, or medicines.
It's a balancing act, and just crying 'freedom' doesn't help the discussion much...
I agree that American ingenuity and competitiveness usually drives market participants to find lower cost solutions to environmental compliance; that has been the record of American industry. What isn't mentioned is there is always going to be a point of diminishing/negative returns in seeking Environmental Nirvanna. We seem to be very close to that point in some areas (SOx, NOx) and beyond that in others (wind and solar power). I would respect the Green movement more if they incorporated some of this into their approach rather than simply striving for a "Zero Emissions World at Any Cost" approach.
Yes, Browne had serious flaws, but his point was about the industry as a whole and its record of lamenting regulations...and it's still a good point no matter who's saying it.
Also, I don't think there is a single major environmental group that strives for "Zero Emissions at Any cost." They're much more practical than you give them credit for. And in this case, the reduction is from 70+ ppm to 60-70ppm, hardly "zero." The other point though is that quite often shooting for zero forces leapfrog innovation and companies find it's cheaper to go an entirely different route (to zero) than pursue the diminishing returns, which you rightly point out is a problem. The zero solution may not apply well in this case -- smog is a modern society challenge, not a single industry or process you can address with one major tech fix.
Andrew
There are plenty of business people who have shared goals with the Green movement.. No one wants to destroy the earth and most people that I know are serious about using our resources more wisely, particularly in regards to reducing our reliance on crude oil produced from countries unfriendly to us. We can do accomplish a lot by focusing on what we agree on first.