Environmental protection Over the past two decades this business has grown into a giant industry
By Alvin A. Cook, JI: To many people, a clean and healthy environment, although desirable in the abstract, is nevertheless a luxury. They argue that although a high level of environmental quality is desirable, pursuing this goal can damage the economy. We must therefore always be on guard against spending too much on wasteful environmental programs-wasteful because they destroy jobs, bankrupt businesses, decrease productivity, and produce a host of other real or imagined woes. The latest manifestation of this phenomenon is the heated debate over acid rain. It is no longer credible to deny that the problem exists; rather, it is more fashionable for those opposed to dealing realistically with the problem to maintain that the costs of acid rain cleanup are too high. Again the litany of lost jobs, impoverished communities, and devastated industries is brought out, dusted off, and given a new face. Supporters of environmental programs are almost invariably forced to defend the programs as necessary evils. Such arguments provide little solace to unemployed workers or bankrupt businesses who have been told that they are the ones who must pay the price of clean air and water. Over the past two decades, protecting the environment has grown into a major sales-generating, profit-making, job-creating industry, largely unnoticed by the general public. Indeed, it has evolved into a driving force in the economy: In 1985 expenditures for pollution abatement and control (PABCO) totaled $70 billion. If PABCO were a controlled corporation, it would rank near the top of the Fortune 500.
We at Management Information Services recently analyzed the economic effects of an important element of this new industry: In 1985, $8.5 billion in private business capital was invested in environmental protection. We found that these investments resulted in total sales in the United States of $19 billion, that they generated business profits of $2.6 billion, and that they provided jobs for 167,000 persons. In view of the fact that business investments account for less than 15% of total 1985 PABCO spending, these data show the important role that environmental protection plays in the economy. Many companies, whether they realize it or not, owe their profits-and in some cases their existence-to PABCO investments. Many workers would be unemployed were it not for these investments. So much for the contention that protecting the environment destroys industries and costs jobs. It may be asked whether investments in environmental protection are unproductive. Wouldn’t spending lots of money on anything-for example, building pyramids in the desert-stimulate industry and create jobs? Investments in environmental protection, however, are not at all like building pyramids. They produce a healthier, safer, cleaner, and more livable environment. Environmental protection is an exemplary public good and, according to the Harris pollsters, this issue has consistently enjoyed wider and stronger public support than virtually any other over the past quarter century. Investments in plant and equipment that produce this strongly desired public good are as productive as those that produce the automobiles, television sets, golf balls, or defense systems that we are willing to pay for privately or through taxes.
0013-936X/86/092O-0553$01.50/00 1986 American Chemical Society
Don’t environmental standards penalize certain states and regions at the expense of others? Sometimes, yes. This point has been so overused, however, that almost any state or region suffering economic hardship places some of the blame on unreasonable environmental laws. However, we have found that in every case industries in states that are negatively affected by environmental legislation are benefiting substantially from the sales, profits, and jobs created by PABCO investments. With respect to acid rain, therefore, the industries and regions creating acid rain pollution will in many cases help provide solutions to the problem. It is time that this argument is heard in the debate over the economic effects of environmental legislation. According to our initial estimates, even a small-scale program of acid rain abatement will create 115,000jobs and generate $1.5 billion in corporate profits. It is significant that many of these benefits will flow directly to states such as Pennsylvania, Michigan, and Illinois, where only the costs and disadvantages of acid rain legislation are readily apparent now. We must recognize that funds spent on pollution abatement and control programs are not wasted. Investments in environmental protection contribute as much to the well-being of the nation as does money spent on other goods competing for scarce private and public funds. Alvin A. Cook, J r , is an economist with Management Information Services (Washington, D.C.). He has a Ph.D. in economics from the University of Washington in Seattle. Cook has been a consultant to EPA and the Department of Energy on environmental studies. Environ. Sci. Technol., Vol. 20, No. 6, 1986 553
