Strict Regulation = Economic Growth?
There is an article on The Christian Science Monitor website that suggests a very counter intuitive but, if oversimplified, logical suggestion that tougher environmental laws stimulates economic growth in certain industries because “Weak environmental regulations may hurt, not help, industries by blunting their technological edge.”
The article sites that after the 1970 Clean Air Act the smoke stack scrubber industry in the U.S. became the world leader. Then in the ‘80’s when “many power plants were able to avoid scrubbers” the industry slowed down. “When tougher laws went into effect in the '90s, the industry perked up.”
By this reasoning it is suggested that the wind turbine industry is suffering in the U.S. due to lagging regulation. And the lagging continues, as recent legislation, the Kyoto Protocol, will not be signed that was intended to cut greenhouse gases.
I certainly agree that regulation can create an incentive for private industries to improve technologies in the long run, but not just any type of regulation will do that in the short run. Too strict of command-and-control type of regulation applied too quickly will damage the regulated industry too greatly in the short run. The costs of compliance would be too high. Regulation must allow for market principles to work by allowing things like trading of the “right to pollute” to occur among companies so that those best equipped with the potential to create new pollution reducing technology will have a financial incentive to do so; while the companies that aren’t in position to do that can “specialize and trade” as well.