Saving Energy, Growing Jobs: The Relationship Between Environmental Protection and Economic Growth
The following article has been adapted from the book Saving Energy, Growing Jobs by David B. Goldstein. Mr. Goldstein is a MacArthur Fellow and the Energy Program Director for the Natural Resources Defense Council. He will be the keynote speaker at the 2007 Northeast Business Leaders for Energy Efficiency dinner celebration which is part of the 2007 Northeast Energy Efficiency Summit. (see related article).
No one, it’s safe to say, is actually for pollution as a matter of public policy. Clean air, safe drinking water, and food free from poison are recognized universally as beneficial.
Why then have environmental policies been so consistently opposed by business interests? Regarding virtually all of the major environmental controversies of the last several decades, anti-environmental advocates have raised two main objections: one, that creating a cleaner environment requires unacceptable compromises in our economic well-being, and two, that environmental regulations place unreasonable restrictions on human freedom.
Saving Energy, Growing Jobs demonstrates how such concerns are ill founded while offering substantial evidence that well-designed policies for environmental protection enhance economic development, create greater employment, and provide more democratic ground rules for the economy.
After 1970, when the environmental movement in America began to take strong advocacy positions, opponents argued that there was a fundamental tradeoff between economic prosperity and the environment. The more we protected the environment, they maintained, the more economic sacrifices we would have to make. They suggested that economic theory required that protecting the environment would:
- Hurt business. Environmental laws are claimed to restrict business’s choices, raising costs and cutting profits and growth. This is the most frequently heard argument against environmental protection.
- Hurt consumers, particularly poor people. If environmental laws increase the costs of basic necessities, the argument goes, this will affect the poor disproportionately.
- Compromise freedom and limit property rights. Opponents of environmental protection sometimes argue that environmental policies limit market choice or restrict property rights.
In Saving Energy, Growing Jobs I take a closer look at economic theory and show how it actually supports the opposite conclusions, that environmental protection:
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Overcomes systematic failures of real markets, promotes innovation, and leads to increased profits.
- Increases productivity by encouraging new technologies.
- Enhances competition by breaking up noncompetitive relationships between a few industry-leading companies.
- Reduces costs to businesses and consumers.
Over the last few years both political parties have been increasingly supportive of environmental protection, at least in their broadest platforms; and officially, they both maintain that we can have economic growth and environmental protection at the same time. A visit to their web sites shows, however, that they make these assertions without reference to fact or experience.
So what are the facts with respect to the impact of environmental policy on economic growth? While surprisingly little research has actually been done, increased evidence based on almost forty years of experience in strong environmental protection policy in the United States and globally supports the assertion that carefully designed environmental protection policy actually promotes economic growth. A few examples of environmental regulations where the results are easy to quantify have had unexpectedly large economic benefits—amounting to trillions of dollars, just in energy-efficient refrigerators, air conditioners, heating and lighting, and clean air regulations.
In Saving Energy, Growing Jobs I show how well-designed environmental policies—regulations as well as incentives—can both spur innovation and overcome failures of the marketplace. Such regulations can break apart cozy, anti-competitive relationships between large corporations, and promote broader and deeper competition, leading to more effective use of market forces. They can also enhance personal freedom and democracy by eliminating or revising private-sector regulations that limit economic choice.
Failures of the market are more widespread and systematic than people generally understand, and the influence of intrusive private-sector regulations, often written by a few large corporations, whom I call “economic incumbents,” is larger than they realize. Freeing markets and promoting competition through environmental policies can have surprisingly beneficial effects.
Additionally, more competitive market structures that result from environmental protection policies can promote economic growth by encouraging innovative thought, product development, and changes in industrial processes to make them more productive, more profitable, and cleaner. Improving productive processes yields more jobs, and the activity of improving products and processes produces higher-paying jobs. More transparent market rules and regulations protect our freedoms by reducing the ability of a limited number of companies with strong economic power to limit the choices for everyone else.
If the success of environmentalism leads to greater growth, why would anyone be opposed? Saving Energy, Growing Jobs explores how the politics of environmental policy are affecting the debate more than real economic interests. It also shows how the power of a relatively few large and well-established corporations, the economic incumbents, have for many years have governed the terms of the argument and set the political agenda for business in general
It’s no surprise that economic incumbents might lobby against policies that change the status quo. What is a surprise is that the rest of the business community—and political leaders who support economic growth and competition—would join them.
Yet such political alliances are almost universal. Corporations that fear the consequences of a particular environmental policy will lobby vigorously to protect the status quo, while those businesses that would benefit remain silent, or worse, speak out in support of the self-perceived losers.
Such an observation raises troubling questions about how our political and economic system truly works. How do corporate leaders decide about environmental issues, both those that affect their companies directly and those that affect them indirectly? How do the business and environmental communities affect the structure of markets and competition in the United States? What are the motivations for these communities’ positions?
This article has been adapted from Saving Energy, Growing Jobs by David B. Goldstein (Bay Tree Publishing). Further information is available at http://www.baytreepublish.com/save-energy-fr.html
