WHAT would life in America be like if the Clean Air Act of 1970 had never been passed? In terms of breathing, an activity that's easy to overlook until it becomes difficult, it would probably resemble life in many of today's developing countries, where factories and cars are multiplying unhindered by environmental regulations. In Hanoi, where I lived in the mid- to late 2000s, the importance of breathing really started to make itself felt five or six years ago, and at that point a number of my friends decided to leave. By the time my wife and I left too, at the end of 2010, our then 8-year-old daughter had a persistent thick yellow slime in her throat that she would periodically cough up (it went away after about a year living in the clean air of the Netherlands). Things are even worse in large Chinese cities, where coal fumes, auto exhaust, smog and particulate matter are so coruscating that most Americans would consider raising a family there an act of child abuse. Rich people send their children to private schools with pressurised domes over the sports fields. Every well-off family owns an air purifier. Poor people cannot afford air purifiers; they and their children will die earlier.
American cities once looked rather similar, in the 1950s and ‘60s. And if the coal, electric power and automotive industries had had their way in the early 1970s, American cities would look like Chinese cities today, too. As Tom Zeller notes at Bloomberg View, the adoption of the 1970 Clean Air Act triggered the same kind of hysterical industry denunciations we are seeing today in response to Barack Obama's move to force the electric power industry to reduce greenhouse gas emissions. Ford Motor Company claimed the 1970 act "could cut off automobile production in just five years, lead to huge price increases for cars even if production were not stopped, do 'irreparable damage' to the American economy—and still lead to only small improvements in the quality of the air." The auto industry reprised that act in 1972, when Congress was considering forcing them to adopt catalytic converters: the vice president of General Motors said "complete stoppage of the production line could occur," while Lee Iacocca, then president of Ford, claimed it would "cause Ford to shut down", cut gross national product by $17 billion, and raise unemployment by 800,000. The mining and electric power industries made the same sorts of wild claims. In 1974, as Congress debated amendments to the act cutting sulfur emissions, the head of American Electric Power spent $3.1m on an ad campaign to convince the American public that installing scrubbers on coal-fired power plants would be a disaster.
Needless to say, this was all nonsense. Since the Clean Air Act was signed in 1970, America's GDP has grown 212% while emissions of traditional air pollutants fell by 68%. Without the Clean Air Act's pollution reductions, adult mortality in the United States would have increased by 160,000 in 2011 alone. Over the course of 40 years, the act's pollution reductions have quite literally saved millions of lives. This follows a fairly reliable pattern: whenever the government considers environmental or safety regulations, manufacturing and energy companies and industry associations put out "studies" that grossly overestimate the costs and understate the benefits. In retrospect, the industry response to environmental regulation in the 1970s can best be described as mendacious, homicidal, greedy whingeing.
Predictably, the US Chamber of Commerce's Energy Institute and the American Petroleum Institute have recently released reports warning of economic disaster if Mr Obama's new rules limiting greenhouse-gas emissions are implemented. The CoC report, carried out by an economic research bureau called IHS, is typical: it finds that the rules will lead American GDP to be about $50 billion per year (around 0.3% of total GDP) lower than it otherwise would be, but does not provide any estimate of the value of lower carbon and other emissions the rules will produce. This is akin to doing a cost analysis of the Clean Air Act without trying to account for the value of your kids being able to breathe. And why does IHS think the rules will lower GDP? Because of the opportunity cost of forcing utilities to replace coal-fired power plants early; this, they say, takes up capital that otherwise would have been employed in ways that generate more economic activity. How do they know that? They know it because they plugged it into their economic model, which assumes that capital generates more economic activity when its use is not dictated by regulations. Other economists have other models, some of which take into account the fact that in conditions like those we have today, with a glut of capital, low aggregate demand and little productive lending or borrowing going on, regulatory requirements can actually increase GDP by forcing companies to invest. Obviously, though, those economists would not get hired by the CoC.
The passage in the IHS report that really jumped out at me was this one:
“The required capital expenditures are essentially unproductive uses of capital because one source of electricity generation (i.e., coal-fired plants) will simply be replaced by an alternative source (i.e., natural gas–fired plants, renewables, nuclear).”
This, as far I can tell, is gibberish. The productive difference between a coal-fired power plant and a solar one is that the solar one does not produce carbon dioxide. That is the added value, just as the added value in switching from a crummy old refrigerator to a frost-free one is that you don't have to clean out the ice. The need to build solar power plants will drive the development of new technologies and of a whole new chain of suppliers, just as any other technology investment drives innovation and supports new chains of suppliers. IHS's attempt to call the switch to renewable energy "essentially unproductive" is hocus-pocus, strangely akin to the manoeuvre Soviet economists used to pull off claiming that Ladas were just as valuable as Mercedes because they're both cars.
All of which might just occasion a bit of eye-rolling, were it not for the fact that the carbon which utility companies churn out is gradually cooking the climate. It is difficult to decide what tone to adopt when speaking of organisations that spew foulness for a living, and then employ their free-speech rights to advocate for their interest in spewing more of it. Mr Zeller takes a modest, reasonable tack, writing that one should “[keep] the end-times wailing of the fossil-fuel lobby in perspective” when considering the CoC's and API’s claims. This is one way to phrase it: when considering the industry response to stronger greenhouse gas limits, one should keep in perspective that in the past they have been laughably wrong, and that the positions they have advocated would have led to the deaths of millions. But Mr Zeller also writes, in passing, that businesses can be expected to protect their bottom lines, and are "right to do so."
That's clearly true in general, but I don't think it bears any application to this situation. Even people who believe the debatable proposition that corporations have no responsibilities except to maximise shareholder return recognise that there are some limits to the arguments a business can make. Raytheon might sell more missiles if the United States were to go war against Iran, but the American public would react with disgust if a defence industry association were to put out a report arguing that war against Iran would be great for the economy. If the electric power industry wants to "talk its book", that's fine, but there need to be consensual limits set by the public's sense of the decent interests of society. The tone of hard-line, toes-in-the-dirt opposition to any and all greenhouse-gas regulation that we see from industry today is in some ways more extreme than what one saw in the 1970s; in those days, one would sometimes find business leaders expressing a recognition that they had to strike deals with government based on the broad public interest.
The obvious environmental challenge America faced 40 years ago, and which China and other developing nations face today, was the struggle for clean air. Executives in the power, mining and automotive industries made fools of themselves at the time by cooking up economic and scientific arguments against pollution regulations that turned out to be utterly wrong. Today the glaring environmental challenge is the effort to reduce carbon emissions and avoid catastrophic climate change. If America's power industry had any sense, it would have spent the past four years backing the cap-and-trade approach to reducing carbon emissions, which gives businesses more flexibility to adapt. By helping lead the campaign to defeat cap-and-trade, as Mr Zeller writes, power industry leaders have brought Mr Obama's more rigid regulatory approach on themselves. It is infuriating to see them now cough up the same tired, half-baked arguments against carbon-emissions limits that they have been making, wrongly, for four decades against the whole slate of government environmental and safety regulations—the very regulations that have made America the cleaner, safer country we know it to be. We have become so accustomed to seeing industry leaders spew this stuff out that we shrug and accept it; what do we expect them to say? We ought to expect them not to insult our intelligence. We ought to expect them to show some respect for our health, and that of the planet.
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M.S., Democracy in America, “Claws in the Dirt,” The Economist, June 4, 2014.