Are air quality regulations worth it?

WASHINGTON—Speaking to coal miners in Pennsylvania recently, Scott Pruitt, the new administrator of the US Environmental Protection Agency (EPA), asserted in public remarks that in the past, “we had to choose between the environment and job growth, this administration says the opposite.” In a new blog posted today by Resources for the Future (RFF), author and RFF Fellow Daniel Sullivan responds: “As any economist will eagerly tell you, there’s no such thing as a free lunch. Environmental regulations will always have costs. The real question is whether the benefits we receive as a society are worth the costs.”

In the post, Air Quality Regulations Always Have Costs—Are They Worth It?, Sullivan points out that the question of benefits versus costs is neither philosophical nor ideological—rather, it is simply empirical. Data on individuals’ market behaviors provide the measure of how society values a given regulation.

Taking up a real-life example from a study he conducted on the California electricity crisis of 2000, Sullivan notes that home prices in the Los Angeles–Long Beach metro area rose significantly—with all other factors held constant—after the state committed to steps to address high levels of two common, health-threatening air pollutants: nitrogen oxides (NOx) and ground-level ozone (a key component of smog). The resulting jump in housing values in affected neighborhoods was collectively worth at least $524 million per year to local residents. The cost of reduction, by contrast, was roughly $38 million per year. Sullivan notes that such large benefits are not unique to Los Angeles and discusses some other large studies.

He concludes: “The answer to the original question, ‘Are air quality regulations worth it?’, is an unambiguous ‘yes.’” But he also notes, “Are the costs painful to those who bear them? Absolutely, especially in industries [like coal] that have been ravaged by larger market trends. … Environmental policy should be designed efficiently to minimize its costs. But ignoring its intended purpose—and the larger market forces at work— in order to subordinate the common good of society to the interests of a select few is a disservice to the stewardship entrusted to the EPA and Administrator Pruitt.”

Read the full post: Air Quality Regulations Always Have Costs—Are They Worth It?