EWES -Environmental Policy and Economic Impact (Lesson)

Environmental Policy and Economic Impact

How do we Achieve a Goal? Environmental Policy

How does a society achieve an environmental goal, such as preservation and use of a resource or reduction of a pollutant? Any society has several methods to achieve such goals. Means to implement a society's policies are known among economists as policy instruments. These include moral suasion (i.e. persuading people by talk, publicity, and social pressure); direct controls, which include regulations; market processes, which affect the price of goods and include taxation of various kinds, subsidies, licenses, and deposits; and government investments, which include research and education. Society also has administrative mechanisms to ensure that the policy instruments are chosen actually function.

 

 

 

The Economic Importance of the Environment

In the mid-1990s, the United States spent about $115 billion a year, about 2% of the nation's gross national product, to deal with pollution. The defense budget was only two and a half times larger. Present costs are closer to $170 billion, including amounts spent by consumers, corporations, and the government. This total is much greater than the $6 billion budget of the Environmental Protection Agency (EPA).

Though costly, cleaning our environment has economic benefits. Populations subject to high levels of certain pollutants (people in inner cities, for example) have lower average life expectancies and higher incidences of certain diseases. Particulate air pollution in U.S. cities contributes to 60,000 deaths annually, and 2% to 9% of total mortality in cities is associated with particulate air pollution. By the year 2010, amendments to the Clean Air Act passed by Congress in 1990 would prevent 23,000 premature deaths in the United States, 1.7 million asthma attacks, and more than 60,000 hospital admissions due to respiratory problems. The value of the benefits from these amendments is estimated to be $110 billion in 2010, while the costs are estimated to be $27 billion. And these are from amendments alone.

Environmental decision-making often involves the analysis of tangible and intangible factors. A mudslide that results from altering the slope of the land is an example of a tangible factor; the beauty of the slope before the mudslide and its ugliness afterward is an example of an intangible factor. Of the two, the intangibles are obviously more difficult to deal with because they are hard to measure and value economically. One task of environmental economics is to develop methods for evaluating intangibles that provide good guidelines, are easy to understand, and are quantitatively credible. Not an easy goal!

 

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