50 years of US environmental policy

The US environmental movement has deep historical roots: for example, Yellowstone National Park was created by an act of Congress and signed into law by President Ulysses S. Grant in 1872. However, the modern era of US environmental policy is usually dated by a wave of federal laws passed in the early 1970s. Joseph S. Shapiro offers a discussion on “Pollution Trends and US Environmental Policy: Lessons from the Past Half a Century.” (Review of economics and environmental policy, Winter 2022, 16:1, p. 42-61).

The main story is the success story of the policy: that is, the number of major environmental pollutants has been drastically reduced, and environmental policy is an important reason for this reduction. Shapiro describes some trends in environmental pollutants as follows:

Indeed, data show that environmental concentrations of some air pollutants have declined dramatically over recent decades. Between 1980 and 2019, concentrations of carbon monoxide, lead and sulfur dioxide decreased by more than 80 percent; there has been a similar decline in particulate matter, but ground-level ozone concentrations have declined by only a third… The most common indicators of surface water pollution have declined substantially since the 1970s. For example, between 1972 and 2014, faecal coliforms (a measure of bacteria associated with human and animal waste) declined by about two-thirds. Total suspended solids (a measure of total suspended solids in water), which reflects a wide range of pollutants, has declined by about a third over the same period… Toxic Release Inventory (TRI) data show sustained and significant reductions in emissions of many types of toxic water pollution , air and earth.

Environmental data is admittedly imperfect, but the overall picture seems clear. The main exception to this pattern of plummeting pollution is carbon emissions, which have instead experienced a smaller and more recent decline. Shapiro writes:

This data shows a steady rise in US CO2 emissions through 2008, followed by a gradual decline through 2021 (US EPA 2021d). The decline that occurred immediately after 2008 was likely due to the Great Recession. However, the continued decline was most likely due to the fall in U.S. natural gas prices caused by hydraulic fracturing, which led to the replacement of coal with natural gas in power generation.

Here is the figure mentioned by Shapiro frome U.S. Environmental Protection Agency on Carbon Emissions. Overall, the figure shows how US carbon emissions peaked around 2008 and have declined since then. The figure also shows that while public discussions on carbon emissions often focus on transportation (red) and power generation (blue), these two sectors account for only about half of US carbon emissions.

There are a number of possible reasons for the decline in US pollution that have nothing to do with environmental regulations. For example, a long-term shift in the US economy from agriculture and manufacturing to services is generally less polluting. Perhaps some US imports create pollution abroad but reduce US pollution. It is possible that a general increase in productivity—fewer resources needed for production—would reduce pollution in some sectors, regardless of pollution rules. However, as Shapiro points out, when looking at specific sources of pollution, such as the US manufacturing sector or passenger cars, “the data seems to support the hypothesis that environmental policy has been the dominant driver of pollution reduction.” I would add that the construction of wastewater treatment plants and wastewater treatment regulations have also had a big impact on surface water treatment.

Was the reduction in pollution worth it? Economists have sought to classify and monetize the costs and benefits of environmental regulations. As you might expect, research can be conflicting. In particular, the costs of complying with an environmental rule may be relatively clear-cut, and the benefits may include issues such as assessing human health or assessing changes in property prices (say, will houses next to a cleaned river cost more as a result), or the value of improved recreation, or even attempts to gauge people’s preference for environmental cleanliness.

However, Shapiro sums up the recent study as follows:[O]A recent review shows that for all [federal] regulations analyzed between 1992 and 2017, the ratio of total estimated benefits to total estimated costs was 12.4 for air pollution, 4.8 for drinking water, 3.0 for greenhouse gases, and 0.8 for surface water policy” . The area with the weakest support is related to surface water policy. The problem here is that while improved drinking water is good for human health, the benefits of cleaner rivers and lakes are usually based on estimates of changes in property and recreational values.

These are averages over a range of rules, so it remains likely that some rules have much larger payoffs than others. But when assessing the scope of regulation as a whole, when the benefits are a multiple of the costs, this is a good sign. Indeed, this suggests that tightening a number of environmental regulations, especially with regard to air quality, will bring additional benefits.