LAWRENCE, Kan., Aug. 12 (UPI) -- Industry rarely accepts new or stronger environmental regulations willingly or without a well-funded fight. Lobbyists and spokespeople for companies do their best to argue new rules and regulations will hurt their profitability and make them fail to achieve their aims.
But new research partially undermines the first premise, that regulations put a dint in company profits.
When implemented in moderation, the U.S. Clean Water Act bolstered profits for many chemical manufacturing firms. The key was not to couple stricter rules with stricter monitoring.
Economists at the University of Kansas found that between January 1995 and June 2001, when companies were held to stricter wastewater discharge limits, but not subjected to stricter government monitoring -- or vice versa -- they were able to increase profits, compared to companies facing neither of the two regulation enforcement strategies.
"If an environmental agency pushes hard on a pollution limit, but does not monitor the limit too stringently, the agency creates a space in which companies can be creative and discover ways in which they can either market their environmental protection efforts to customers and secure a bigger market share or find less costly ways of manufacturing their products or dealing with waste," Dietrich Earnhart, a KU professor of economics and leader of the study, explained in a news release. "The regulations put a different pair of glasses on companies; by looking through a new lens, companies get creative."
Earnhart and his research partner, Dylan Rassier, an economist with the U.S. Bureau of Economic Analysis, published their findings in the Journal of Regulatory Economics.
Of course, the purpose of environmental regulations is to protect the environment and human health, not boost profits. But in theory, policymakers may be able to pass more effective legislation with the cooperation of business interests.
"Any agencies working on clean water or clean air regulations should be concerned about how they induce compliance and what the trade-offs are," Earnhart said. "If there is a win-win situation, everyone should want to learn about it."