Cost and Benefits of Government Regulation: An Environmental Dilemma

There are three principal issues which need to be addressed in the broad spectrum of government environmental regulation: (1) what the nature of environmental regulation is; (2) its costs and benefits; and (3) how environmental regulation can be simplified and the cost reduced. Environmental regulation generally takes two forms: technology-based regulation and risk-assessment-based regulation. In technology-based regulation, uniform standards are set, based on available control technology. This is a very rigid form of regulation which does not require a cost/benefit test. Some individual environmental regulations conflict with each other. The regulations need to be synchronized and sufficient flexibility introduced into the regulatory process to achieve the greatest overall benefit. Risk-assessment-based regulation attempts to reach judgments as to the relative risks associated with human and environmental exposure to potentially dangerous substances, versus the benefits in using such substances. The scientific bases for these judgments are often very uncertain. Independent assessment of scientific and technical information in the decisionmaking process can be successful in improving the process and forestalling costly litigation. The cost to some small communities exacts a much higher economic and social price because the costs must be shared by fewer taxpayers, sometimes placing severe burdens on low-income residents. Economists differ as to whether expenditures are basically productive or add much lasting value to society. Knowing the actual state of the environment before imposing regulatory measures and developing innovative approaches can lighten the burden of regulation.