How companies “cry wolf” in the face of new environmental laws

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Chemsec

Companies and trade organisations frequently tell politicians that stricter environmental legislation would harm the economy significantly – but such claims have repeatedly been proven wrong. This is shown in the report ‘Cry wolf’, presented today by ChemSec.

The report reviews examples of past industry cost estimates of complying with suggested environmental regulations and compares them with the actual costs after the laws have entered into force. Industry systematically “cries wolf”, saying that compliance costs would be considerable and jobs lost. But this is a false warning – research shows that it is not the case. Rather, the cost for industry to adapt to environmental policies has decreased since the 1990s, and industry has managed well with adjusting their operations to new regulations.

– Political decision makers need to approach cost estimates presented by industry with caution, since many times industry has cried wolf, but in fact the wolf never turned up. It’s a myth that environmental legislation is always a burden for industry, says Anne-Sofie Andersson, ChemSec director.

The lessons presented in the report point towards three main problems with industry’s response to proposed green regulations: the cost models used are too static and limited, the cost reductions when complying with several regulations at the same time are ignored and the benefits of adapting are underestimated.

A somewhat old, but very clear, example is from when the European community in the 1980s started a process to curb emissions through more stringent fuel and emission standards for motor vehicles.The automotive industry then predicted that the catalytic converter technology would cost up to £600 per vehicle. It turned out that after the changes were implemented catalytic converters were sold for around £30–50.

Another lesson presented in the report is from the US and highlights how environmental regulations can generate substantial economic benefits. For its proposed regulation to reduce greenhouse gas emissions from power plants, the Environmental Protection Agency (EPA) has estimated that in 2020, the proposal will yield climate benefits of $17–18 billion, in comparison to compliance costs of $5.5–7.5 billion.

The report also covers other examples from different environmental policy areas over recent decades, such as initiatives to save the ozone layer, reduce pesticides and detox the electronic sector.

– Industry overestimating the costs of complying with environmental laws is a major obstacle to implementing new laws to protect health and environment. This is a systematically used strategy that can also be relevant to take into account today, for example in the on-going debate about the TTIP trade agreement between the EU and US. Other current examples are the EU process to develop criteria for Endocrine Disrupting Chemicals, as well as the implementation of the authorisation part of REACH, comments Theresa Kjell, ChemSec Policy Advisor.

Download the report (pdf)

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