Government economists estimate that US firms pay more than $200 billion per year to comply with federal environmental laws. Is the money well spent? The benefits of US environmental regulation have outweighed the costs. As environmental regulation increases, additional spending on environmental protection will probably have increasing marginal costs and decreasing marginal benefits. This pattern suggests that the flexibility and cost savings of market-oriented environmental policies will become more important.
Clean air and clean water: The benefits of a cleaner environment are that people may stay healthier and live longer. Also, industries that rely on clean air and water may benefit, property values may be higher, and people may simply enjoy a cleaner environment. A recent EPA study estimated that the environmental benefits to Americans from the Clean Air Act will exceed their costs by a margin of four to one. This does not mean that every environmental regulation makes sense. For example, studies suggest that the benefits of air pollution control outweigh the costs mainly for particulates and lead.
Ecotourism, making environmentalism pay: Tourists who try to enjoy the ecology of their destination—ecotourists—have led to a growing business. The International Ecotourism Society estimates that international tourists interested in seeing nature or wildlife will take 1.56 billion trips by 2020. The residents of low-income countries may see that preserving wildlife habitats is more profitable than cutting down forests or grazing livestock in order to survive. In many countries, governments have enacted policies so that income from ecotourism is shared with local communities, encouraging people in those to conserve their local environment. Ecotourism needs careful management so that the combination of tourists and local entrepreneurs does not destroy what the visitors come to see. Often people living in poor countries will damage their local environment in their effort to survive.
Marginal benefits and marginal costs: When pollution is wide spread, there are usually a lot of relatively cheap and easy ways to reduce it, but the marginal benefits of doing so are quite high. However, as the extent of environmental protection increases, more costly methods must be used to reduce pollution. The marginal cost curve rises. Also, as environmental protection increases, marginal benefits are reduced.
Source: The benefits and costs of US environmental laws
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