Environmental Policy since Earth Day I: What Do We Know about the Benefits and Costs?

By Freeman, A. Myrick, III | Agricultural and Resource Economics Review, April 2002 | Go to article overview

Environmental Policy since Earth Day I: What Do We Know about the Benefits and Costs?


Freeman, A. Myrick, III, Agricultural and Resource Economics Review


Data on costs and benefits of the major environmental laws passed during the 1970s are reviewed. The winners in terms of benefit-cost analysis include: getting lead out of gasoline, controlling particulate air pollution, reducing the concentration of lead in drinking water, and the cleanup of hazardous waste sites with the lowest cost per cancer case avoided under Superfund The losers include: mobile source air pollution control, water pollution control, and many of the regulations and cleanup decisions taken under the Federal Insecticide, Fungicide, and Rodenticide Act, the Toxic Substances Control Act, the Safe Drinking Water Act, and Superfund.

Key Words: benefit-cost analysis, benefits, costs, environmental policy

Earth Day I (April 22, 1970) is an appropriate starting point for an examination of the economic benefits and costs that have been realized through U.S. environmental policy. While there were federal laws on the books dealing with air and water pollution prior to that date, those laws placed primary responsibility for the implementation and enforcement of pollution control requirements on the states. By 1970, they had not accomplished very much.

The first Earth Day reflected a major increase in public awareness of and concern about environmental problems. It was followed in relatively quick succession by: the passage of the Clean Air Act of 1970; the formation of the Environmental Protection Agency (EPA) in December 1970; and the passage of the Federal Water Pollution Control Act of 1972, now known as the Clean Water Act. In these two acts, much more stringent pollution control objectives were established, and responsibility for setting and enforcing pollution control requirements was shifted largely to the federal government.1

The next 10 years saw the enactment of the Safe Drinking Water Act (1974), the Toxic Substances Control Act (1976), the Resource Conservation and Recovery Act (1976), the Comprehensive Environmental Response, Compensation, and Liability Act (known as Superfund) (1980), and major amendments to the Federal Insecticide, Fungicide, and Rodenticide Act (1972).

Broadly speaking, the goals of environmental policy can be based either on a balancing of benefits and costs (economic efficiency) or on some other goal, such as safety, protection of human health, protection of ecosystems, or the achievement of technically feasible levels of emissions control. With the first two major environmental laws of the early 1970s-the Clean Air Act and the Federal Water Pollution Control Act-Congress explicitly rejected the economic approach to goal setting. With regard to clean air, it emphasized protecting human health. With regard to clean water, it emphasized achieving fishable and swimmable water quality.

However, concern for economic efficiency has not been entirely absent in Congressional environmental policy. More recently, Congress has written implicit or explicit economic efficiency criteria into three major environmental laws: the Toxic Substances Control Act of 1976, the Federal Insecticide, Fungicide, and Rodenticide Act of 1976, and the Safe Drinking Water Act Amendments of 1996. Moreover, as a result of a series of executive orders by presidents of both parties stretching back to the Nixon administration, there has been an expanding set of requirements for federal agencies to perform economic assessments of all major proposed regulations, including an assessment of their benefits and costs (Smith, 1984; Morgenstern, 1997; Hahn, 1996,1998,2000). These assessments are commonly referred to as "regulatory impact assessments."

In this paper, I review the available information on trends in the major indicators of performance of the clean air and water laws over the past three decades and what can be said about the roles of these laws in explaining these trends. My main focus is on what these improvements are worth to people (their benefits) and what they have cost.

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