The Costs and Benefits of Environmental Regulation

The Costs and Benefits of Environmental Regulation

Imad A. Moosa and Vikash Ramiah

The Costs and Benefits of Environmental Regulation presents a thorough investigation into environmental regulation, its economic and financial effects and the associated costs and benefits. A variety of issues, pertaining to regulation in general and environmental regulation in particular, are examined. These issues include the theories of regulation and how it is viewed in terms of the free market doctrine, forms of regulation, command-and-control regulation as opposed to market-based regulation and the cost–benefit analysis of environmental regulation.

Chapter 9: The macroeconomic effects of environmental regulation: employment, trade and competitiveness

Imad A. Moosa and Vikash Ramiah

Subjects: economics and finance, environmental economics, environment, environmental economics, environmental governance and regulation, politics and public policy, environmental governance and regulation


Environmental regulation is typically blamed for macroeconomic mishaps. For example, Crandall (1981) argues that ‘it has become increasingly fashionable to attribute a myriad of our economic and social difficulties to excessive government regulation’. Specifically, regulation is blamed for soaring inflation, lagging GDP growth, declining productivity growth, the decline in the value of the dollar, and even general reductions in the animal spirits of entrepreneurs. These claims are invariably politically motivated and supported by no more than circumstantial evidence, which rests on the coincidence of the advent of environmental regulation and the stagflation of the 1970s. Pollution control legislation in the US began in earnest in 1965, when amendments to the Clean Air Act set national standards for motor vehicle emissions for the first time. The incidence of regulation intensified in the 1970s with the passage of the National Environmental Policy Act and amendments to the Clean Air Act. In 1972 the Clean Water Act was passed, and revisions to this act and the Clean Air Act were adopted in 1977. The consequence of this legislation was a massive and sudden shift of resources towards pollution control. As a result, spending on pollution control (which was insignificant in 1967) grew rapidly during the period 1968–78. Much of this increase was required to bring existing facilities into compliance with regulation.

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