Topic Area:  Air Pollution

Geographic Area: United States
Focal Question:  What environmental and economic costs and benefits are evident from the US Clean Air Act Amendments of 1970 through 1990?

Sources:(1) “The Benefits and Costs of the Clean Air Act: 1970 to 1990,” United States Environmental Protection Agency, Office of Air and Radiation, Oct. 1997. (2) Greenstone, Michael. “The Impacts of Environmental Regulations on Industrial Activity: Evidence from the 1970 and 1977 Clean Air Act Amendments and the Census of Manufactures,” Journal of Political Economy. Vol. 110(6) p1175-1219, Dec. 2002.  (3) Sunstein, Cass R. “Is the Clean Air Act Unconstitutional?” Michigan Law Review. Vol. 98(2) p303-94, Nov. 1999.

Reviewer: Jonathan D. Hierl ’03        

Review:Implementation of The Clean Air Act in the United States has been an area of controversy since enactment in 1970.  Although numerous environmental, ecological, and health benefits have resulted, a number of economical and industrial disadvantages must not be ignored.  Firms in industries requiring compliance with the laws argue that they face a competitive disadvantage, both domestically and abroad.  Numerous studies have attempted to compare the costs and benefits of the CAA; however, it is difficult to value many of the environmental benefits, so the relationship of the benefits to the costs has been controversial.  This executive summary evaluates the controversy and the evidence.

The CAA was enacted in 1970 and amended in 1977 and 1990.  The primary purpose of the 1970 regulations was to set national standards for air quality.  The EPA identified major air pollutants and set emission level limits for each of these pollutants.  Under part of the 1970 regulations, all US counties were required to meet minimum levels of four major pollutants: carbon monoxide (CO), troposhperic ozone (O₃), sulfur dioxide (SO₂), and total suspended particulates (TSPs).  Those counties that exceeded the levels were designated as non-attainment areas, while those that met the standards were attainment areas (Greenstone 1176).  States had primary responsibility for enforcement and were required to submit implementation plans.  Under the 1970 laws, a number of deadlines were established before which polluters were required to have reached the target levels and states were required to have enforcement plans. 

The 1977 Amendment ordered further, new requirements.  One such program required permits for any new potential major source of hazardous pollutants.  Similar permit programs were established during the 1990 Amendment to the CAA; however, the 1990 laws were much more stringent than any of the past regulations.  Permit programs under the 1990 laws required violating sources to register with the EPA, regularly record and report pollution levels, and create and implement plans to lower levels below a minimum.  In addition to the permit programs, the 1990 Amendment identified 189 hazardous air pollutants and created a multi-step program to control toxic emissions of these pollutants.  Programs were also implemented focusing on reducing emissions contributing to acid rain and stratospheric ozone-depleting chemicals (ODCs).  The 1990 regulations were by far the most stringent of all the amendments, and included increases in enforcement by the EPA and more severe penalties for violations (“Benefits...” 1).

Many costs were associated with implementation of the CAA and its amendments.  The most significant costs associated with the CAA were requirements for installation, operation, and maintenance of new capital equipment needed to reach the new standards.  There were also numerous costs to design and implement regulations, regularly record and report compliance, and investments for related research and development.  In the EPA’s 1997 report to the US Congress, the total value of direct expenditures from 1970 to 1990 that were consequences of the CAA were estimated to be $523 billion in 1990 dollars (“Benefits...” 10).

Non-attainment counties faced more costs than the attainment counties following enactment of the 1970 regulations.  The attainment counties were in compliance with the federal standards and violating contributors were not evaluated as closely as those in the non-attainment areas (Greenstone 1213).  This put firms in the non-attainment counties at a greater competitive disadvantage that those in the attainment areas.  Michael Greenstone evaluated evidence of this imbalance in a study in 2002.  Greenstone found that from 1972-1987, relative to the attainment areas, non-attainment counties lost approximately 590,000 jobs, $37 billion in capital stock, and $75 billion of output in polluting industries (p1213). 

The direct benefits of the regulations are reflected in the emission reductions observed following 1970.  SO₂ levels decreased 40% by 1990, mostly attributed to utilities installing scrubbers or switching to lower-sulfur fuel.  Nitrogen oxide (NOx) levels decreased by 30%, mostly achieved through installation of catalytic converters to highway vehicles.  Volatile organic compounds (VOCs) lowered by 45% and CO levels lowered by 50%, mostly attributed to other vehicle controls.  The reductions in use of lead (Pb) in gasoline reduced Pb emissions from approximately 237,000 tons to 3,000 tons by 1990, about an incredible 99% reduction. 

A number of other hazardous pollutant emissions were reduced over the 1970 to 1990 period as well.  The EPA estimated the benefits of reductions in these pollutants.  Estimates of the benefits included the prevention of over 45,000 annual deaths, 13,000 heart attacks, and 7,000 strokes (Sunstein 307) in addition to many other health benefits associated with pollution reduction.  In their major report to Congress, the benefits of the new regulations were valued monetarily using a process of economic valuation, and were estimated to range between $5.6 and $49.4 trillion.  Relative to the approximate $0.5 trillion estimated in costs, the net benefit found by the EPA strongly outweighs the costs.

Despite the overwhelming results reached by the EPA, it is important to consider that the arguments against the CAA are not completely cost-based, and that there is empirical evidence supporting both arguments.  As Greenstone has found, the imbalances between firms in attainment and non-attainment areas appear to be highly significant.  However, the evidence presenting the accomplishments of the CAA suggests that the overall benefits to the US are not only positive, but quite substantial as well.