How the Laws That Earth Day Inspired Have Benefited Us All

In reality, even industry often ends up benefiting, after initially opposing regulations to avoid short-term costs and disruption. Laws requiring a deposit on returnable cans, for instance, have enabled manufacturers to produce finished products at significantly lower cost: Using recycled aluminum consumes less than 10 percent of the energy needed to produce virgin aluminum with bauxite ore from a mine, according to an industry estimate. Likewise, industry at first fiercely opposed “toxic release inventory” rules, which require companies to report the toxics they emit. But under regulatory pressure, companies developed better monitoring and control measures to prevent billions of tons of costly raw material — and profits — from being lost up the smokestack. Conversely, manufacturers who managed to avoid regulation by concealing the risk of PFAS (used in Teflon) and related pollutants now face huge cleanup and liability costs, a story detailed in the new book The Triumph of Doubt by David Michaels. Barron’s recently reported that four such companies, DuPont and 3M among them, have lagged in the stock market because of potential liability representing almost a quarter of their total worth.

Pushing regulatory rollbacks without regard for benefits has been Trump administration policy from the start. In an executive order in January 2017, Trump ordered agencies to identify two regulations to repeal for every one being proposed and limited the total increase in cost to “no more than zero.” In fact, that order used the word “cost” 18 times, and “benefit” only once — and that was to assert that the order did not create any. Since then, the administration has rolled back, or is in the process of rolling back, 95 environmental regulations.

A 2019 analysis from New York University put the cost of one such rollback, of the Obama-era Clean Power Plant rules aimed at limiting climate emissions, at an additional 1,630 premature deaths and 48,000 lost working days per year. Another attempted rollback — allowing rebuilt truck engines with emissions 40 to 55 times above current standards — would have caused 41,000 premature deaths per decade, according to the Journal of the American Medical Association. That rollback ultimately failed, with Volvo and other truck manufacturers pointing out that, environmental benefits aside, the existing regulation creates new manufacturing jobs.

Emphasizing regulatory costs was originally a Republican idea — though with benefits included. An executive order by President Ronald Reagan in February 1981 centralized cost-benefit analysis in the White House and blocked any economically significant regulation “unless the potential benefits to society… outweigh the potential costs to society.” The intent, The New York Times reported, was to “stem the tide of unnecessary and excessive regulations that [administration officials and business executives] say have been a severe and growing burden to the nation’s economy.”

“It’s only in recent years that we see this backlash against cost-benefit analysis by many of the organizations who supported it originally,” says Jack Lienke, of New York University’s Institute for Policy Integrity. “And that’s because, as we’ve gotten more sophisticated about quantifying benefits, it’s become very clear that most of these environmental regulations are hugely net-beneficial for society. If we don’t put these regulations in place, we as a society are leaving money on the table.”

The move to discredit benefits began as a result of the Clean Air Act Amendments of 1990 targeting acid rain emissions from coal-burning power plants, mostly located in the Midwest. As usual, industry predicted a regulatory apocalypse, with the Business Roundtable estimating that cutting these emissions of sulfur dioxide and nitrogen oxides would cost $104 billion a year, and one utility foreseeing “the potential economic destruction of the Midwest economy.”

In fact, the cost came in far lower than anyone expected — just $500 million to $2 billion a year, by current estimates. But the real surprise was that the benefits were so large, between $59-$116 billion a year. Moreover, these benefits had far less to do with reduced acid rain than with unpredicted corollary effects on human health from reducing air pollution. At the time, the paradigm was that “like politics, all pollution is local,” says Joseph Goffman, executive director of Harvard’s Environmental and Energy Law Program, who helped write the original legislation as an attorney for the Environmental Defense Fund. The soot and other pollution that made a difference for human health was thought to come from nearby sources.

But as the new law went into effect, it was “a major discovery” that “what you and I breathe… is determined every bit as much by pollutants that are transported over long distances from remote sources.” Pollutants from Midwest power plants were drifting with the wind, not just causing acid rain for forests and water bodies, but also sickness and death for residents across the Northeastern states. According to the current EPA estimate, the health benefits from regulating that pollution include 2.4 million fewer cases of aggravated asthma, 200,000 fewer heart attacks, 5.4 million fewer lost school days, 17 million fewer lost workdays, and 237,000 fewer premature deaths — every year. Benefits have exceeded costs by a ratio of 30 to one, adding up to a total economic gain through 2020 of $2 trillion.

In response, the Trump administration has tried multiple tactics to skew cost-benefit calculations back in favor of deregulation. Caitlin McCoy, also an attorney in the Environmental and Energy Law Program, lists a few such tactics:

• The administration has stopped counting corollary benefits, focusing instead only on benefits from reducing the pollutant directly targeted by a regulation — and not other pollutants reduced at the same time. The proposed repeal of the Mercury and Air Toxics Standards (or MATS) for power plants, for instance, disregards the incidental reduction in small particle (or PM2.5) pollution — and thus subtracts most of the 11,000 premature deaths and 540,000 missed workdays MATS is thought to prevent annually. Utilities, on the other hand, have acknowledged the benefits of the regulation, with Exelon Corp. recently calling repeal “unnecessary, unreasonable, and universally opposed by the power generation sector.”
• When regulations lead to benefits beyond the minimum set by the U.S. National Ambient Air Quality Standards, the administration no longer counts those benefits.
• To justify rolling back climate change regulations, the administration has stopped counting potential worldwide benefits (at $42 a ton) and focused exclusively on benefits for the United States (at $7 a ton), ignoring the reality that climate change is a global phenomenon.
• Where climate change regulations have led to energy efficiency savings (for instance, when a utility switches from coal to gas), the Obama administration classified that as a reduction on the cost side of the balance sheet. But to make these regulations appear more costly, the Trump administration subtracted a lot of other benefits, and then moved savings from increased energy efficiency over to the benefits side of the equation. “We’re talking about cooking the books here,” says McCoy.
• And of course, the administration has repeatedly sidelined scientists and pushed rules that would severely limit reliance on major scientific studies to assess and reduce risks to human health.

Economists have for the most part rolled their eyes at the administration’s convoluted and sometimes wildly improbable maneuvers to make regulatory benefits vanish. (At one point, to justify rolling back the Obama-era car fuel efficiency standards, the administration magically converted an estimated $88-billion benefit into a $230 billion cost.)

Companies and their investors, meanwhile, have increasingly come to acknowledge that environmental regulations can yield bottom-line benefits. Even if some continue to predict the apocalypse, what they really want are rational, carefully thought-out regulations. They want to know the rules of the game so they can plan long-term investments. They want to play on a level field, and not compete with cheaper products from companies that don’t meet the same pollution and worker safety standards. They want regulations that help them become more competitive in the global marketplace. They want to be able to assure the public that they work to high environmental standards.

Smart companies, says Daniel Esty, of the Yale School of Forestry & Environmental Studies, learn to use regulatory change to think about new ways of doing business. “They can use that opportunity to drive innovation, and to produce breakthroughs in cost control or product design, that will give them a chance to be more profitable, or to get greater market share.” He saw it firsthand, he says, working in 1990 as a senior official in the Environmental Protection Agency. He and EPA Administrator William K. Reilly were in London negotiating amendments to the Montreal Protocol to phase out chlorofluorocarbons (CFCs), the refrigerants implicated in the depletion of Earth’s protective ozone layer.

“And, literally, our delegation instructions were not to agree to a full phaseout until we got a call from the White House,” he recalls. Esty picked up when that call came in. The voice on the other end said, “The CEO of DuPont was in the office today and says, you know, ‘no problem.’ Let’s go with a full phaseout.” DuPont then had a $500 million business in CFCs. But in the face of intense pressure for regulation, someone at the company did some calculations and realized that DuPont could become an even larger player in the market for a CFC substitute.

“It was the most clear and extreme example of a company coming to understand its business would be better with a regulatory framework,” says Esty.

The full phaseout went forward, and today, 30 years later, the ozone hole over Antarctica has begun to close and the predicted catastrophic effects of ozone depletion have been avoided.