Wednesday, July 6, 2011

Diminishing Returns On Environmental Regulation?

I am generally more sympathetic to environmental regulation than many of my conservative compatriots. Even those who deny man's role in climate change, agree that promoting clean air and water for the sake of human health and welfare is an undeniable good. Nations oriented towards democratic capitalism always outperformed their socialist counterparts in environmental matters, yet it cannot be denied that regulation is a key component in this success. But, in the context of the global economy, environmental regulation does offer diminishing returns. Up to a certain point, most businesses will bear the added costs that government intervention imposes. But, once we cross that cost point, we see a rapid rise in the outsourcing of production to China and other countries that either do not have or (more often than not) choose not to enforce costly regulation. And the added carbon emissions that this shift implies will on a global level offset the carbon savings occurring in the United States and Western Europe. Understanding the dynamics of diminishing returns should not lead us to eliminate environmental regulation, but to simply accept the wisdom in adopting more modest goals that will paradoxically offer a higher net gains on a global level. Another option would be to level the playing field by imposing "environmental tariffs" on China and other heavy polluters. But, given the amount of American debt that China holds, this is politically and economically impossible. I believe that one of the long term consequences of our fiscal irresponsibility will be an increasingly diminished capacity to pursue important environmental goals.

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