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The Environment VS The Economy

If you've ever turned on the news and watched politicians debate climate change, you've probably heard the following argument: Environmental regulations hurt the economy. Politicians often argue that the economic havoc caused by the extreme financial toll of these regulations would cause more damage than any benefits the laws might promise to bring forth. They say:

  • "It's too expensive."

  • "It reduces economic growth."

  • "It hurts international competitiveness."

  • "It gets rid of jobs."

But is this really true? Do environmental regulation laws actually hurt our economy?

Turns out, no.

In fact, environmental regulation laws seem to do the exact opposite. Environmental regulations actually strengthen our economy. Let's break it down a bit.

Myth #1: It's too expensive.

This is probably the most common argument made against environment protection initiatives. And it's an easy one to throw around. Pull out a piece of paper with a big number on it and say "This is how much it's going to cost us!", and people's jaws are probably going to hit the floor. In the US, for example, the Environmental Protection Agency (EPA) has an annual budget of roughly $8.14 billion. "Cheese and rice!" you might say. And you'd be right. After all, you could buy almost one billion six hundred twenty-eight million Starbucks coffees with that amount of money.

But showing that figure without context is akin to saying you graduated first in your class without disclosing how many other students were there. When you look at the rest of the federal budget, this number takes on a whole new meaning.

In fact, in the United States, the EPA only makes up 0.21% of the annual federal budget. (Compare that to the 14% of the budget that goes to Defense.) So for every $1 spent on the environment, the United states is spending almost $70 on the military. Trying to argue we should save money by cutting from the EPA is like trying to argue you're gonna budget your personal expenses by only going to Starbucks twenty-nine of the 30 days of the month. The effect of saving that 5$ is just not enough to make a statistically significant difference. And add to that the fact that what little is spent, brings back a fiscal benefit of 10x what we spend. For every 1$ we spend to clean the air, we’re saving 10$ that we aren’t spending on things like medical care for pollution-related illness. So the money we spend on the environment actually saves us from having to spend money in other sectors. I'm no mathematician, but I call that a net win.

Myths #2 and #3: It reduces economic growth. It hurts international competitiveness.

Environmental regulations actually boost our economic growth by investing in industries of the future. Part of the goal of environmental legislation is to encourage the transition to and investment in environmentally-safe industries. By encouraging businesses to transition to clean energy sources, we actually secure our position in the future global market. Industries like petroleum, coal, and natural gas are slowly becoming redundant in a world that quickly moves away from a dependency on fossil fuels. If we want to remain competitive internationally, we need to shift our focus to the emerging industries that will stand the test of time, like solar, wind, etc. Think of these regulations as an investment in our future financial success.

Myth #4: It gets rid of jobs.

This is probably the most common argument used and is , understandably, the most emotionally potent one for many people. We can talk about federal budgets and industry projections until we're blue in the face, but when you're looking down the barrel of unemployment, those facts and figures mean little to you.

But let's actually look a bit into this. It turns out that this argument is a lot more nuanced than many politicians would have us believe. Because it turns out that, statistically, environmental regulations have actually added jobs to the workforce. One study on the effects of clean air regulations in Los Angeles actually found that these regulations increased labor demand as firms needed to hire people to help deal with the regulations. And since all firms in the region were affected by the same regulations, they were able to still compete with each other financially.

Another well-known study by economists Richard Morgenstern and Anna Belova looked at census data between 1979-1991 to determine whether regulations on some air-polluting industries destroyed jobs. They found that over this 30 year time period in industries like petroleum, plastics, pulp and paper, and iron and steel, there were actually net job increases, and no significant job losses as a result of the regulation.

Now, this doesn't deny the fact that there are some job losses. As fossil fuel-reliant industries face stricter regulations or become phased out by clean-energy alternatives, jobs sometimes shift from one part of the country to the other. But the answer to this isn't in preventing these regulations. Because hitching our wagon to dying industries is also a surefire way to lose jobs. The answer is in creating training programs to help workers transition into jobs in the emerging market. So instead of politicians fighting against the inevitable, they should create and fight for worker's programs that help their communities adapt and thrive in these new industries.

In Conclusion

There is significant statistical evidence that environmental regulations don't harm our economy like many politicians believe. Regulations have historically been shown to boost our economy, give us a net positive financial results, and provide more jobs than it takes away. The conversation around the environment and economy is important to have, but let's make sure we have all the facts when we do. Instead of fighting against regulations that ultimately benefit the economy, let's find ways to better transition our workers, nations, and industries into a clean green future.

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