Meeting regulations costs less than expected

[Guest guest]

Meeting regulations costs less than expected

 

Tuesday, October 29, 2002

By David Suzuki

 

 

 

Here's a prediction. After the federal government ratifies the Kyoto Protocol

— and Prime Minister Chrétien has promised a vote on it by the end of the

year — there will be a lot of noise.

Alberta will try to find a way out, and some of the less-innovative oil

companies will stir up a tremendous fuss.

 

But over time the noise will fade into the background as companies and provinces

quietly meet and exceed their Kyoto targets at far lower costs than anticipated.

Then they will quit their anti-Kyoto public relations campaigns and start new

campaigns about how they are leading the way to a cleaner planet or otherwise

saving the world.

 

This scenario has happened before — many times. In fact, the history of

environmental regulations tells us that the true costs of protecting the

environment are never as high as industries claim they will be. From asbestos to

benzene to CFCs and sulphur dioxide, industry claims of economic disaster have

not come true.

 

A study a few years back by the Economic Policy Institute of Washington, D.C.,

found that in almost every single case they looked at, the costs of complying

with environmental regulations were far lower than industry — and even

governments — claimed they would be. For example, electric utilities in the

United States claimed that it would cost $4 billion to $5 billion per year to

meet the 1990 Clean Air Act. But by 1996, utilities were actually saving $150

million per year.

 

CFCs are another example. When a phase-out of these substances that damage the

ozone layer was announced, many industries claimed that alternatives did not

exist or were too expensive. In 1993, car manufacturers said the CFC regulation

would increase the price of all new cars by up to $1,200. Just four years later,

the industry admitted that costs were already down to as little as $40.

 

In perhaps the best-known Canadian case, Inco vehemently opposed reducing

emissions from its stacks. However, once it was forced to do so by government

regulations, it discovered money could be made from the material captured in

scrubbers and now boasts of its environmental awards and civic leadership.

 

There are several reasons why complying with environmental regulations is almost

always cheaper than claimed. First, much of the touted costs are for capital

equipment that is usually much more efficient and cleaner than old, dirty

equipment.

 

These costs more appropriately should be considered capital investments, which

end up reducing overall operating costs. Second, technologies change and

improve, and once adopted on a mass basis, these technologies benefit from

economies of scale that result in lower costs. Finally, in complying with

regulations, industries are forced to rethink standard business practices that

may have been wasteful or unproductive.

 

The oil industry flap about Kyoto will prove to be just another example of a

situation where the costs of meeting a regulation are blown all out of

proportion. Later, when it comes time to meet the goals, Alberta and the fossil

fuel industry will find ways to make it happen that may well prove to be

profitable. As Alberta senator and forward-thinking oil industry businessman

Nick Taylor said in an interview, " It is so transparently obvious that Kyoto is

going to make Alberta money that Alberta is bound to come around. "

 

Unfortunately, that hasn't happened yet, and the Alberta government is using

public money to campaign against Kyoto, despite numerous studies indicating many

economic benefits and opportunities resulting from the treaty. Mr. Taylor is

right, they will come around. But we must hope that they do so sooner rather

than later.

 

Traditionally, we have viewed air, water, and soil as limitless resources for

industrial use with little regard to long-term effects on ecosystems, health, or

aesthetics. Indeed, economists generally consider air, water, and soil as

" externalities, " factors outside the economy.

 

In recent decades, we've become aware of how much the massive use of fossil

fuels is altering the atmosphere, affecting both climate through greenhouse gas

accumulation and human health through air pollution. We cannot afford to ignore

these problems any more. Fortunately, we have history on our side. We can

change, and it won't cost us the Earth.

 

 

 

Copyright 2002, David Suzuki Foundation