Accepting a fixed trade-off between environmental regulation and competitiveness unnecessarily raises costs and slows down environmental progress. Studies finding high environmental compliance costs have traditionally focused on static cost impacts, ignoring any offsetting productivity benefits from innovation. They typically overestimated compliance costs, neglected innovation offsets, and disregarded the affected industry's initial competitiveness. Rather than simply adding to cost, properly crafted environmental standards can trigger innovation offsets, allowing companies to improve their resource productivity. Shifting the debate from pollution control to pollution prevention was a step forward. It is now necessary to make the next step and focus on resource productivity.

Toward a New Conception of the Environment-Competitiveness Relationship

Energy efficiency and consumption — the rebound effect — a survey

This survey assesses evidence on the linkage between environmental regulation and competitiveness, and finds little support for the conventional wisdom that environmental regulations have large adverse effects on competitiveness. Studies examining the effects of environmental regulations on net exports, overall trade flows, and plant-location decisions have produced estimates that are small, statistically insignificant, or not robust. We also find no systematic evidence supporting the revisionist hypothesis that environmental regulations stimulate innovation and improved competitiveness. Overall, the evidence suggests that the truth regarding the relationship between environmental protection and international competitiveness lies in between the extremes of the current debate.

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Environmental Regulation and the Competitiveness of U.S. Manufacturing: What Does the Evidence Tell Us?

Environmental Economics: A Survey

MS ff ichael Porter and Claas van der Linde have written a paper that is interesting and, to us at least, somewhat astonishing. It is a defense of environmental regulation-indeed, an invitation to more stringent regulation-that makes essentially no reference to the social benefits of such regulation. This approach contrasts starkly with the methods that economists and other policy analysts have traditionally used when assessing environmental or other regulatory programs. The traditional approach consists of comparing the beneficial effects of regulation with the costs that must be borne to secure these benefits. For environmental regulation, the social benefits include the reductions in morbidity or premature mortality that can accompany cleaner air, the enhanced recreational opportunities that can result from water-quality improvements, the increased land values that might attend the cleanup of a hazardous waste site, the enhanced vitality of aquatic ecosystems that might follow reductions in agricultural pesticide use or any of the other potentially significant benefits associated with tighter standards. From this benefit-cost approach emerges the standard tradeoff discussed in virtually every economics textbook. Porter and van der Linde deny the validity of this approach to the analysis of environmental regulation, claiming it to be an artifact of what they see as a "static mindset." In their view, economists have failed to appreciate the capacity of

https://pubs.aeaweb.org/doi/pdfplus/10.1257/jep.9.4.119

Tightening Environmental Standards: The Benefit-Cost or the No-Cost Paradigm?

The use of cost-benefit analysis by federal regulatory agencies has expanded greatly in scope and sophistication. Unfortunately, agencies continue to employ private cost rather than social cost to evaluate environmental quality regulations. Furthermore, general equilibrium impacts and intertemporal effects of regulations are typically not included in the evaluation. In this paper we estimate the social cost of environmental quality regulations mandated by the Clean Air and Clean Water acts. We construct an econometric general equilibrium model of the United States to demonstrate that social cost estimates diverge sharply from private cost estimates. We also demonstrate that general equilibrium impacts are significant and pervasive and that intertemporal effects of the regulations, heretofore ignored, are significant.

Social Cost of Environmental Quality Regulations: A General Equilibrium Analysis

Testing for separable functional structure using temporary equilibrium models

Earlier attempts at reconciling disparate substitution elasticity estimates examined differences in separability hypotheses, data bases, and estimation techniques, as well as methods employed to construct capital service prices. Although these studies showed that differences in elasticity estimates between two or three studies may be attributable to the aforementioned features of the econometric models, they have been unable to demonstrate this link statistically and establish the existence of systematic relationships between features of the econometric models and the perception of production technologies generated by those models. Using sectoral data covering the entire production side of the U.S. economy, we estimate 34 production models for alternative definitions of the capital service price. We employ substitution elasticities calculated from these models as dependent variables in the statistical search for systematic relationships between features of the econometric models and perceptions of the sec...

Systematic Effects of Capital Service Price Definition on Perceptions of Input Substitution

The crucial role of raw materials in the economic well-being of society has been recognized by economists since the days of Malthus. The oil embargoes and energy price escalation of the 1970s have heightened awareness of the exhaustibility of vital natural resources and led to concern regarding the stability of natural resource markets. In an effort to protect U. S. industry from rapid natural resource price escalation and supply disruptions in both peacetime and wartime, Congress passed the National Materials and Minerals Policy, Research and Development Act of 1980. The Act requires the Administration to submit to Congress a detailed plan for the management of minerals and materials within the federal government. Unfortunately, the Administration's plan has come under criticism from the U.S. General Accounting Office (1982). The GAO report in part states that:

https://www.jstor.org/stable/pdfplus/3145709

A Factor Demand Model for Strategic Nonfuel Minerals in the Primary Metals Sector

Applying a neoclassical-econometric model of production activity, the authors analyze US industrial demand for mineral inputs in response to the General Accounting Office's vulnerability index, which ranks minerals on the criterion of economic importance to the US economy. They simulate various supply disruptions to see how the model substitutes available inputs and then reduces output as materials balance constraints become binding. Focusing on titanium, vanadium, cobalt, columbrium, and cadmium, the model suggests that the potential vulnerability of the US economy to severe mineral supply disruptions is high, but that substitution has a strong mitigating effect when disruptions do not exceed 35% of current consumption levels. This implies that the index of mineral importance grows as the severity of disruptions increases and that the magnitude of potential US vulnerability is discontinuous. 32 references, 1 figure, 4 tables.

Michael Hazilla

Papers

Social Cost of Environmental Quality Regulations: A General Equilibrium Analysis

Testing for separable functional structure using temporary equilibrium models

Systematic Effects of Capital Service Price Definition on Perceptions of Input Substitution

A Factor Demand Model for Strategic Nonfuel Minerals in the Primary Metals Sector

Assessing US vulnerability to raw-material supply disruptions: an application to nonfuel minerals