Elevator pitch
Environmental regulations such as air quality standards can lead to notable improvements in ambient air quality and to related health benefits. But they impose additional production costs on firms and may reduce productivity, earnings, and employment, especially in sectors exposed to trade and intensive in labor. The limited empirical evidence suggests that the benefits are likely to outweigh the costs.
Key findings
Pros
Stronger air quality regulations have improved ambient air quality.
Ambient air quality and health indicators are linked (lower mortality rates, reductions in hospital admissions), so air quality regulations can contribute to better health outcomes.
Efforts to improve air quality can boost productivity by motivating regulated firms to optimize their production processes and nudging less productive firms out of the market.
Cons
Environmental regulations generally impose additional production costs by requiring pollution abatement equipment in certain industries.
Environmental regulations can put affected plants and industries at a competitive disadvantage, reducing productivity and employment, especially in sectors exposed to trade and intensive in labor.
Workers displaced by the regulations in polluting sectors may experience losses in long-term earnings as they make the transition to new jobs.