This chapter covers conditions and trends through calendar year 1998 using data and information available as of December 31, 2000.
What is the cost of a clean environment? What are the benefits?
Some people will argue that environmental regulations are too expensive, reduce economic growth, hurt international competitiveness, and cause plant closings and layoffs. Others will counter that these same very rules have resulted in dramatic improvements in environmental quality, have prevented countless disease outbreaks and other human ailments and thousands of premature deaths associated with pollution exposure, and have actually created jobs and economic opportunities. Still others contend that incentive-based mechanisms have the potential to achieve environmental objectives at lower cost than traditional "command-and-control" mechanisms required by many environmental laws. Examples of incentive-based approaches include effluent trading, emissions taxes, subsides to reduce pollution, and liability rules. (See the 1997 Annual Report of the Council on Environmental Quality and the 2000 Economic Report of the President for excellent discussions of these incentive-based mechanisms.)
Looking at the flip side of the issue, some people will point to economic growth, technological advancements, and globalized trade as the roots of many of the nation's environmental problems. Take, for example, how human population growth, energy use, and alteration of natural environments have impacted the earth's atmosphere and climate. Or consider the ever increasing trade of goods and materials among nations which has enhanced the invasion of exotic species. It is estimated that these introductions cause environmental damages/losses and control costs that add up to more than $138 billion per year. In contrast, others will provide examples of how developing countries can benefit from improved environmental technology and avoid the environmental problems that the United States and other industrialized countries have suffered since 1900.
A different approach is to assess the amount of "out-of-pocket" dollars American's spend and "willingness to pay" for a clean environment and associated amenities. These indicators include expenditures on hunting, fishing, and other wildlife-related recreational pursuits, willingness to pay fees to visit federal wildlife and recreation areas, and the value of eco-tourism.
Some indicators of the relationship between the U.S. economy and the environment are examined in this chapter.
TRENDS
Gross Domestic Product
The United States' economy has grown impressively for several decades. In 1998, U.S. gross domestic product (in constant 1996 dollars) stood at $8.52 trillion (Figure 2.1). Since 1992, the GDP has grown at an annual rate of nearly 4 percent, representing the longest period of sustained positive growth in the second half of the 19th century.
Ecotourism's Contribution to the Economy. Some tout nature study as the fastest-growing theme in tourism today, but there are few measures of market demand or participation and spending trends in this segment of the economy to quantify this claim. The natural environment provides such an immense diversity and broad range of interests that defining what ecotourism actually is and generating data on market demand have been difficult to achieve. As a result, estimates of ecotourism demand have to be extrapolated from general industry statistics and tourism trends and visitation data for national parks, wildlife refuges, and other conservation areas. While current data are not available, ecotourism was considered the fastest growing segment of the travel industry in the United States in 1991, accounting for approximately 10 percent of international travel for pleasure.
The ability to measure ecotourism demand may be improved with the U.S. Department of Commerce, Bureau of Economic Analysis' a newly developed travel and tourism satellite account (TTSA) which provides a picture of the importance of travel and tourism spending in the U.S. economy. According to the 1998 release of TTSA, travel and tourism generated approximately 300 billion dollars (or 5 percent of the GDP) in 1992 (the first year for which the new account was calculated). While this satellite account does not measure ecotourism demand directly, a new classification under the North American Industrial Classification System (NAICS) [formerly the Standard Industrial Classification System (SIC)] for "establishments engaged in operating, maintaining, and protecting nature parks, nature reserves or conservation areas" should assist in generating these statistics in the near future.
Federal Government Expenditures on the Environment
Federal spending on natural resources and the environment, however, has not seen similar growth in recent years. After growing from $10.6 billion (in constant 1996 dollars) in 1970 to $22 billion in 1992, federal environmental expenditures have remained at about the $21 billion level ever since (Figure 2.2). This represents about 1.3 percent of total federal outlays. Of the $21.6 billion spent in 1998, 29 percent was for pollution control and abatement, 25 percent for conservation and land management, and 21 percent for water resources. The remainder was spent on recreational resources and other natural resources.
Much of this federal spending is paying off in terms of a cleaner environment, prevention of premature deaths, and a wide range of additional human health and ecological benefits. A few examples are as follows:
Benefits of the Clean Air Act Amendments of 1990. In a recent report to Congress, EPA estimates that the economic value of the public health and environmental benefits that Americans enjoy from the Clean Air Act Amendments of 1990 exceed their costs by a margin of four to one. Using a sophisticated array of computer models and the latest emissions and cost data, the study shows that in the year 2010 the Amendments of 1990 will prevent 23,000 Americans from dying prematurely, and avert over 1,700,000 incidences of asthma attacks and aggravation of chronic asthma. In addition, in 2010, they will prevent 67,000 incidences of chronic and acute bronchitis, 91,000 occurrences of shortness of breath, 4,100,000 lost work days, and 31,000,000 days in which Americans would have had to restrict activity due to air pollution related illness. In addition, it finds that 22,000 respiratory-related hospital admissions would be averted, as well as 42,000 cardiovascular (heart and blood) hospital admissions, and 4,800 emergency room visits for asthma.
For those health and ecological benefits which could be quantified and converted to dollar values, EPA's best estimate is that in 2010 the benefits of Clean Air Act programs will total about $110 billion. This estimate represents the value of avoiding increases in illness and premature death which would have prevailed without the clean air standards and provisions required by the Amendments. By contrast, the detailed cost analysis conducted for this study indicates that the costs of achieving these health and ecological benefits are likely to be only about $27 billion, a fraction of the economic value of the benefits.
The report notes that beyond the quantified human health benefits, there are a wide range of additional human health and environmental benefits which scientists and economists cannot yet quantify and express in dollar terms. These include the control of cancer-causing air toxics as well as benefits to crops and ecosystems of reducing pollutants such as ozone and particulate matter.
For additional regulatory impact analyses, visit the EPA National Center for Environmental Economics (http://www.epa.gov/economics/).
Nonmarket Benefits of the Conservation Reserve Program. In a recent report on selected environmental effects associated with the Conservation Reserve Program (CRP), the USDA Economic Research Service examines how enrolling cropland in the CRP has affected freshwater recreation, pheasant hunting, and wildlife viewing. (Earlier studies have evaluated the CRP's impact on the value of freshwater fishing, waterfowl hunting, and bird watching.) A summary of the findings are as follows:
For a detailed description of the models and methods used in this study, visit the ERS Briefing Room for Land Use, Value and Management (http://www.ers.usda.gov/Briefing/LandUse/).
State and Local Government Expenditures on the Environment
State and local governments are spending substantially more on natural resources and the environment than the federal government, and spending has continued to rise in the 1990s. Total spending (in constant 1996 dollars) more than doubled between 1970 and 1996, the latest year for which data are available (Figure 2.3). Of the $74.3 billion spent in 1996, sewerage accounted for one third and parks and recreation for one fourth of the total.
Environmental Industries
U.S. environmental industries generated $190 billion in revenues in 1998, more than triple the 1980 amount. Solid waste management, water treatment works, and water utilities are the largest revenue generators. Solid waste management also is the largest employer (250,700 people in 1998), followed by consulting and engineering (171,500 people).
References
Executive Office of the President, Office of Management and Budget, Budget of the United States Government, Fiscal 2001 (GPO, Washington, DC, 2000). (http://w3.access.gpo.gov/usbudget/index.html)
Executive Office of the President, Council of Economic Advisers, Economic Report of the President, 2000 (GPO, Washington, DC, 2000).
--, Economic Report of the President, 1999 (GPO, Washington, DC, 1999).
