How Economics May Reshape Green Policy ; Regulation of the Environment Benefits the Economy, Says a White House Report

Article excerpt

Even though "economy" and "ecology" come from the same Greek root - "oikos," or "house" - reconciling the marketplace and nature has never been easy.

One measures things in dollars and cents. The other sees the world more intangibly, sometimes ineffably.

For this reason, it's always been an uphill fight for environmentalists arguing to protect the landscape, save an obscure species from extinction, or clean up the air and water. Opponents are quick to rebut with bottom-line statistics about jobs lost and productivity harmed.

It came as a surprise, therefore, when the White House Office of Management and Budget (OMB) recently declared that environmental regulations are good for the economy.

Looking at a variety of areas - education, energy, housing, health, labor, but mostly the environment - the Bush administration's budget office reported to Congress that "the estimated total annual quantified benefits of these rules range from $146 billion to $230 billion, while the estimated total annual quantified costs range from $36 billion to $42 billion."

Of these totals, according to OMB, the yearly benefits of environmental regulations range from $121 billion to $193 billion, the costs from $37 billion to $43 billion. In other words, benefits of things like government-mandated clearer air and cleaner water outweigh costs by as much as 5 to 1.

U Turn on the environment?

The trend in recent years - especially with the current administration - has been to cut regulations where possible, or loosen them when outright elimination was politically impractical. Among other things, it has wanted to make it easier for older power plants, refineries, and other industrial facilities to be upgraded without reducing the pollution they emit.

John Graham, head of regulatory affairs at the White House Office of Management and Budget (OMB) and a Bush appointee, once told the conservative Heritage Foundation that "environmental regulation should be depicted as an incredible intervention in the operation of society."

But another trend in judging national wealth (more advanced in Japan and Europe) has been to take into account some of those intangibles - "quality of life indicators" is one popular phrase - when judging the true worth of the more traditional "gross domestic product."

This movement hasn't advanced that far in the United States. But the quantifiable value of things like clean air and water are becoming part of economic calculations, especially among those analysts who call themselves "ecological economists. …