Opponents of environmental protection argue that we ‘can’t afford’ to safeguard our health and that of the planet we live and depend on. The latest example involves the EPA’s proposed regulation of existing coal-fired power plants, which a member of Congress (from a coal-producing state) recently claimed would result in “electricity rate increases, reduced electrical reliability and other harmful effects.”
It seems so logical that regulation would increase costs that few people question the idea. But history shows that it’s often not true. For one thing, it’s wrong to focus narrowly on the purchase price of automobiles, electricity, or whatever is being regulated. Pollution has real costs in terms of damage to the environment and to human health. (Because of this, polluting is a way of shifting costs onto others). For example, the Clean Air coalition estimated that fine particle pollution from existing coal plants caused nearly 13,200 deaths in 2010, plus 9,700 hospitalizations and more than 20,000 heart attacks, with a total monetized value for these adverse health impacts exceeding $100 billion per year. (I should add that these numbers used to be much higher but have been reduced by successful regulation of coal plants.)
But even if we focus exclusively on purchase prices, regulation can have surprisingly positive impacts. Refrigerators provide an interesting example. The graph below, based on one shown by California Energy Commissioner Art Rosenfeld, shows that after California and the federal government began to regulate refrigerator energy use in the 1970s, refrigerator prices stopped climbing and began a steady decline, eventually falling by nearly two-thirds. Energy consumption also fell, by about the same percentage, and all the while refrigerators continued to get larger.
How can this be? I suspect that by the 1970s refrigerator designs had become out-of-date, but manufacturers had no incentive to change them because the products were profitable. The requirement to reduce energy consumption stimulated innovation, and refrigerators became much more efficient, much cheaper, and larger, all at the same time. Manufacturers could have made this happen sooner, but needed a nudge to do it.
The lessons to draw from this is that it’s wrong to assume that market forces always produce optimal results, and wrong to underestimate the power of innovation. What happened in the case of refrigerators will probably happen again and again as we move to address climate change by reducing greenhouse gas emissions. Instead of worrying about whether we can afford to address climate change, the real question is how can we afford not to?