4/27/98

KUFM/KGPR

T. M. Power

Do American Environmental Controls Just Shift Pollution Overseas?

One criticism of efforts within this country to reduce the environmental impact of our economic activities is an environmental objection, at least on the surface. That is that environmental controls simply raise the cost of production in the US and drives that production and the accompanying environmental destruction overseas where environmental laws are likely to be much less strict and the resulting environmental damage all the greater. In essence we do not reduce environmental damage; we simply shift and amplify it. Not hardly a positive environmental outcome!

Although this argument has been primarily voiced by industrial interests who have tried to wrap their fight against any tightening of environmental standards in environmental cloth, some environmentalists have begun making the same point. The environmentalists argue that it is only reductions in consumption that can reduce environmental impacts. Anything else simply shifts the inevitable environmental impact of our high levels of consumption somewhere else.

Although there is a surface plausibility to these arguments against strengthening environmental standards, those arguments ignore several important economic realities.

First, it is not exactly clear what is meant by reducing our consumption. Most of the times that we reduce our use of something it is not because we have agreed to go without. Usually the reduction is tied to the substitution of one resource or good or technology for another. When we stopped using horses as extensively as we once did, it was not because we gave up seeking to be as mobile. We substituted automobiles for the horses. When we reduced our burning of wood and coal for home heating, it was not because we accepted colder houses. We substituted oil, natural gas, and electricity for coal and wood. We currently are discussing other substitutions: fiber optics for copper wire, electric cars for gasoline engines, etc. It is always possible that our reduced consumption of one thing is tied to increased use of something else. What we need to do in order to be able to tell if the environment came off better or worse is to do a net environmental analysis of the shift. That focuses us back on the environmental impact of our activities rather than on whether, in some sense, we have reduced our consumption. We need to be reducing the environmental impacts associated with our living on the earth rather than simply trying to get people to live poorer. To reduce impacts, we have to focus on those impacts and the control of them, exactly what industry is seeking to stymie.

It is also important to realize that raising environmental standards does tend to reduce consumption. To the extent that raising environmental standards costs something, implementing those tougher standards will raise the price that consumers have to pay for the product. The net impact of the tougher environmental standard will be to incorporate into the price of the product more of the environmental costs. Those higher and more accurate prices will encourage more responsible, and lower, consumption. Even if production is shifted to another location, that location is likely to be, overall, a higher cost location, otherwise production would have already located there. Again, costs will rise and consumption will be rationally discouraged because the price now better reflects the environmental resources used up in production.

Some economic analysts are also challenging the suggestion that there are pollution havens to which American producers are fleeing. Most of the countries of the world are increasingly sensitive to becoming the environmental dump for wealthy countries. Even those countries who in the past feared they could not demand anything of foreign investors are beginning to impose environmental controls on new facilities. There is little empirical evidence that it is lower environmental standards that are leading firms to relocate overseas. Just as important, if the US is not willing to impose reasonable environmental standards on its own producers, there is little hope that we can get poorer countries to do so. That is, if we want to be in a moral or political position to encourage other countries of the world to act to protect the earth’s environment, we cannot be backsliding in our own enforcement. In that sense, a prerequisite for raising environmental standards worldwide is raising our own first.

In general, the environmental argument against enforcing tough environmental standards in this country is exactly what it sounds like: a cynical manipulation of environmental concerns by polluters in hopes of confusing the public into letting industry have their way and continue with business as usual.