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Strategies for Improving Environmental Quality
and Increasing Economic Growth
A monograph published August 1995 by the ACCF Center for Policy Research.
ISBN: 1884032044
Introduction
What new directions should U.S. environmental policy be taking? A blue-ribbon
symposium sponsored by the ACCF Center for Policy Research examined this
question on November 16 in Washington, D.C. Scholars, regulatory officials,
and business leaders also offered new thinking on the future of risk-based
regulation and the consequences of carbon dioxide (CO2) emission reductions
on U.S. economic growth and on global climate change. An international
comparison of the tax treatment of pollution control investment was also
featured at the Center's symposium, "Strategies for Improving Environmental
Quality and Increasing Economic Growth."
John Stossel, investigative reporter for ABC's "20/20," gave
the keynote address. Mr. Stossel stressed the difficulty of getting balanced
coverage of environmental issues in the media. He noted that "media
moguls" have difficulty accepting the idea that free markets can
solve many environmental problems without government mandates. Mr. Stossel
concluded that the media could make an important contribution by improving
the public's understanding of the real sources of environmental risk,
rather than giving disproportionate coverage to environmental issues that
he called the "risk-of-the-month."
John D. Graham, Director and Professor of Harvard's Center for Risk Analysis,
presented new findings that suggest U.S. environmental policies must be
overhauled. The cumulative impact of historical events and new political
movements has persuaded elected officials to take a serious look at the
future direction of risk regulation, according to Professor Graham's study,
"The Future of Risk Regulation."
"Risk regulation" is responsible for the majority of regulatory
costs. Environmental regulation, in the form of policies implemented by
the U.S. Environmental Protection Agency, is now recognized as the fastest
growing segment of regulatory costs.
Since Congress faces numerous issues and will have only limited time
to devote to risk regulation, we should not seek or expect a highly technical
or detailed approach to legislative reform. Instead, Congress should pass
broad-based legislation that requires all risk-protection agencies to
embrace the following fundamental principles of risk analysis: undertake
responsible risk assessments; conduct risk rankings to help set regulatory
priorities; and when risk regulations are adopted, report the benefits
and costs.
Stanford University Professor Emeritus Alan S. Manne's new study, "Global
Carbon Dioxide Reductions-Domestic and International Consequences,"
assesses the likely costs associated with taking drastic action to reduce
CO2 emissions. This issue arose as countries attempted to implement the
Framework Convention on Climate Change, which 160 nations signed in Rio
de Janeiro, Brazil, in June 1992. In his paper, Professor Manne concludes
that "an aggressive CO2 abatement policy is unwarranted for the near
term." Such action, he points out, could result in annual losses
equal to 1.0 to 2.5 percent of U.S. Gross Domestic Product (GDP) and hinder
OECD (Organization for Economic Cooperation and Development) countries'
competitiveness in such basic industries as chemicals, steel, aluminum,
petroleum refining, and mining. Professor Manne does not discount the
possibility of global warming, but he notes that CO2 buildup is not likely
to cause a near-term rise in global temperatures. The most prudent course
of action for the next several decades, he argues, is a "hedging
strategy" that delays taking strong measures to reduce CO2 emissions
until more is known about specific risks to the environment. "Even
after 2020," he says, "there would still be enough time to adapt
the global economy to a sharp decline in carbon emissions if we learn
that such action is warranted."
International Monetary Fund Consultant Victoria P. Summers provided a
survey of tax and other incentives for pollution prevention and control
in a sample of Central European, Asian, and developed countries. Her study,
"Tax Treatment of Pollution Control in the European and Central Asian
Economies in Transition and Other Selected Countries," shows that
approaches to using the tax system for environmental protection and pollution
control in the transition economies of Europe and Central Asia vary. These
approaches include subsidies for environmentally-related equipment and
activities provided through incentives in various general taxes, as well
as direct taxes on the actual discharge of pollution itself. Since the
introduction of capitalist-style tax systems, many countries have introduced
tax incentives directed at pollution control.
Several types of incentives to improve the environment are found in corporate
income taxes around the world. These include: (1) incentives for investment
in end-of-pipe pollution control equipment; (2) incentives for investment
in less-polluting production technologies (as opposed to controlling pollutants
emitted at the end of the process); and (3) reductions of tax on profits
derived from production of "environmentally friendly" products
or intermediate goods.
The ACCF Center for Policy is grateful to our presenters and respondents
whose contributions made this symposium and book possible. We are also
grateful to the underwriters of our 1994 conference series and this book.
Financial support was provided by the American Business Conference; American
Petroleum Institute; Chemical Manufacturers Association; Dean Witter,
Discover & Company; Edison Electric Institute; Ernst & Young;
Exxon Company, USA; Grocery Manufacturers of America; Hewlett-Packard
Co.; Investment Company Institute; J. L. Kirkpatrick Foundation for Pension
Actuarial Education and Research; Marisol, Inc.; Merrill Lynch, Pierce,
Fenner & Smith Inc.; National Association of Manufacturers; National
Association of Securities Dealers, Inc.; National Coal Association; Nestle
USA, Inc.; Prudential Securities, Inc.; John and Lolita Renshaw; Securities
Industry Association, Inc.; Shell Oil Company; Starr Foundation; Synthetic
Organic Chemical Manufacturers Association; Texaco Foundation; Thermo
Electron Company; and Weyerhaeuser Company.
Charls E. Walker, Chairman
Mark Bloomfield, President
Margo Thorning, Director of Research
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