The environment and U.S. competitiveness.

• Author: Crews, Clyde Wayne, Jr.
• Position: Meeting the Environmental Challenge

A new regulatory focus is essential to get the maximum amount of protection at minimal economic and competitive disadvantage.

According to the Environmental Protection Agency, compliance costs for environmental regulation make the typical family of four $1,800 poorer each year. That breaks out of about half the family's yearly clothing budget or about one-sixth of its grocery budget. Professor Thomas D. Hopkins of Rochester Institute of Technology writes that environmental regulation is now the fastest-growing major component of the federal regulatory enterprise, accounting for 23% of the $400 billion-plus yearly price tag on federal regulation.

By the most conservative estimates -- including EPA's -- expenditures on environmental control are expected to grow from 2.1% of GNP at present to at least 2.8% by the end of the decade. EPA's estimate excludes costs stemming from the 1990 Clean Air Act Amendments, variously estimated to add between $25 billion and $30 billion annually. Moreover, it obviously doesn't take into account upcoming amendments to the Clean Water Act and the Resource Conservation and Recovery Act (the country's chief solid and hazardous waste law).

What impact does environmental regulation have on U.S. competitiveness? High compliance costs and uncertainty over future regulation hamper our ability to compete by diverting funds otherwise available for research and development or capital improvements. They also divert management's attention from the key day-to-day concerns of operating their enterprise.

Consider this telling example: For those under the mistaken impression that Mobil's primary business is oil and gas exploration, business columnist Michael Silverstein points out that "Mobil's 1990 environmental budget of about $950 million plus $166 million in Superfund set-asides was greater than its 1990 budget for either oil and gas exploration or marketing." He also points out that Chevron will spend around $700 million in the next five years to comply with new Clean Air Act regulations, and auto makers like Ford will spend more than $1 billion on environmental compliance before 1995.

In the U.S., total annual expenditures on pollution abatement and control grew over 27% from 1982 to 1988. Capital investments to control pollution equalled 2.8% of total U.S. capital investment in 1990, according to conservative estimates. Citing the Organization for Economic Cooperation and Development, EPA reports that while U.S. pollution control expenditures as a percentage of GDP were 5% lower than West Germany's, they were 9% to 76% higher than those of other advanced countries for which data is available. As a percentage of GNP, the U.S. spends four times more on pollution control than France or Japan. As we will see below, while these costs clearly...