Environmental regulations only reduce productivity and employment by a “small amount”, and can boost economic growth by encouraging innovation by businesses, according to a new report by the Grantham Research Institute on Climate Change and the Environment at London School of Economics and Political Science.
The report, The Impacts Of Environmental Regulations On Competitiveness, summarises research that shows the benefits of environmental regulations often vastly outweigh the costs.
The report states: “The costs of environmental regulations need to be weighed up against the benefits they provide and which justify the regulations in the first place. The benefits are often important and severely underestimated.”
It points out: “Environmental regulations can reduce employment and productivity by small amounts, in particular in pollution- and energy-intensive sectors, at least during the transitory period when the economy moves away from polluting activities and towards cleaner production processes.
“The effect of current environmental regulations on where trade and investment take place has been shown to be negligible compared to other factors such as market conditions and the quality of the local workforce”
“Job effects are more likely to occur within countries, where relocation barriers are low, than across borders. This suggests that government policies encouraging labour mobility, such as flexible labour markets, affordable housing and lifelong training, can help reduce or offset the costs of environmental regulations.”
The report also draws attention to the small impact of green regulations on international competitiveness.
It states: “The effect of current environmental regulations on where trade and investment take place has been shown to be negligible compared to other factors such as market conditions and the quality of the local workforce.”
The report highlights “ample evidence” that environmental regulations encourage businesses to undertake innovation in clean technologies, and discourage research and development in conventional polluting technologies.
The report was produced as part of the Grantham Research Institute’s programme on “Growth and the economy”, sponsored by the Global Green Growth Institute.
Red Tape Challenge
A report by Defra in April this year found UK business could save £300m each year through planned improvements to environmental regulation.
Defra: Better for Business, confirms plans for 336 regulatory reforms, which remove “unnecessary regulatory burden on business”.
The changes are expected to save business £300m each year, or £1.5bn over five years – an increase on previously estimated savings of £1bn.
The savings are expected to represent a third of all savings to business coming from planned government reforms to regulation through its “Red Tape Challenge” initiative.
Defra aims to reduce the time spent by businesses reporting information to the department and its regulatory bodies and agencies by 20 percent, saving business some 850,000 working hours by April 2016.