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Speech to Environmental Council of the States

by Attorney General Ken Cuccinelli
Tuesday, March 29, 2011, 11:30am

The AG speaks to 150 state environmental officials from around the country about the effect of
environmental regulation on jobs and the economy.

Thank you for inviting me to your gathering today. It‟s great to have this opportunity to speak with you.

Regulatory policy involves large-scale delegation from state legislatures and Congress to state
environmental agencies and the EPA.

The original rationale for this delegation was because of your expertise. Decades ago, the idea was that
regulation involved choices that were primarily technical and not political, and state environmental
quality experts and the EPA could make more informed decisions than legislators could.

But eventually, that evolved into the current situation where politicians vote for big, generic goals – such
as clean water, clean air, and clean land – while leaving the hard decisions on implementation – as well
as much of the blame for the controversial decisions – to the experts. That‟s a powerful and difficult
position to be in, and as a former state legislator, I don‟t envy you.

As you may be aware, now as an attorney general, I‟m engaged in a legal battle with the EPA over the
agency not following its own rules. But that doesn‟t mean I have a battle with environmental protection.

To the contrary, my office works in close coordination with our Virginia regulatory agencies to enforce
environmental laws. And twice during my first year as Attorney General of Virginia, I authorized my
office to join the EPA in storm water management enforcement cases against major homebuilders. I‟ve
applauded the agency‟s efforts to punish those polluters while at the same time working out balanced
settlements to achieve environmental compliance without hindering the ability of these companies to
continue their needed work in my state.

This is the type of balancing you undertake on a daily basis as state environmental regulators.

I‟m a proponent of environmental protection because I have seven children who will be on this earth for
the better part of this century, and I certainly have a vested interest in seeing that they have clean water,
clean air, and clean land. For the good work you do for them and for all of us, I thank you.

But I also have a vested interest in seeing that my children have the opportunity to get good jobs and
achieve at least the same standard of living we have today – if not a better one. And history suggests that
a better standard of living is likely, as long as we allow it: Subsequent generations are wealthier and
healthier, because as a result of their increased wealth, they spend even more on environmental
protections than their predecessors.

I‟m sure you have the same dreams for a high standard of living for your own children and grandchildren.
That‟s why I as an elected official, and you as experts in the area of environmental protection, must take
great steps to balance care for our environment with care for our economy, as both are so intertwined that
one can‟t flourish without the other.
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We have to recognize that economic growth underwrites environmental regulation. Wealthy countries pay
for the environmental regulatory state, and healthy economies add to it, while economically struggling
societies devalue environmental protection.

The only places on earth that have ever strived for a clean environment all shared two key characteristics:
free people and free markets. You need both – yet we‟re gradually suffocating our free market with more
and more regulation.

Every society follows an equivalent of the Environmental Kuznets Curve when it comes to environmental
protection, whereby societies as they develop and grow first concentrate on economy-building activities
that may cause harm to the environment. But after a certain level of economic growth is attained,
environmental quality becomes important to the society, and so harm to the environment drops. We know
that as societal wealth increases, the prevalence of some pollutants decreases, as the society has the
money and the will to tackle environmental concerns.

A variety of research projects, including one by the United Nations Development Program, have found
this same curve. For different environmental improvements, the curves are different,. In general,
however, environmental improvements begin in earnest after GDP reaches $8,000 per capita. Before that
threshold, other needs take precedence.

This is because, as an old proverb tells us, when there is food on the table, there are many problems; but
when there is no food on the table, there is only one. Or viewed another way, environmental protection
drops as net economic security drops.

After the $8000 threshold, however, environmental quality begins to achieve its own value; a value that
citizens are willing to purchase.

Environmental quality is not only best achieved through, but is actually intrinsic to, the economic
development and rising standards of living that the free enterprise system has best delivered. Economic
success will help deliver environmental improvement far more effectively than any number of forcibly-
applied regulations.

Economic growth also leads to increased private property ownership. As private property ownership
expands, individuals have a greater incentive to manage, conserve, and accumulate land that can be traded
or passed to future generations. People take better care of their own property. And those who damage
others‟ property are held accountable.

Despite this fundamental and proven relationship of economy and environment, there seem to be all sorts
of justifications for ever-increasing government intervention. Product and activity bans, punishing taxes,
or subsidizing or mandating alternative “good” behavior or products are all part of the interventionist‟s
toolkit. And many carry a spectacular history of failure – especially the subsidies!

Examples of the tragedy of interventionism abound. When the Iron Curtain fell, we discovered that state
management of economies didn‟t work out that well after all. Pollution and environmental degradation in
government-planned societies was in abundance.

On our own shores, consider the Endangered Species Act, which goes to the lengths of saying no cost is
too high or no diminution of property rights is too excessive to save certain insects or fish. The act has
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led to very negative environmental consequences, such as the incentives it has put in place for landowners
who find protected species on their property to quietly get rid of the species by any means necessary,
including shooting them.

Interventionism can work to some degree, but often has just such unintended consequences. Certainly,
there must be some environmental protections when an entity damages common resources, but the market
can be a trusted force to bring about the best outcome, and the government doesn‟t always need to step in
and micromanage every situation.

It is also important to realize that regulations are bringing about diminished returns. EPA regulations
were substantially more cost-effective in the 1970s and 1980s, when initial rules were giving us bigger
reductions in air, water, and land pollution than in more recent times. Now that there isn‟t as much
pollution, the regulations can‟t achieve as large a result, which means citizens and industry – and the
American economy – are paying higher costs for smaller and smaller environmental benefits.

For example, in the EPA‟s April 2010 document on vehicle greenhouse gas emission standards, it said
that its own models showed that by 2100, the rule would reduce temperature increases by 0.006 to 0.015
degrees Celsius. The agency says these new rules would add about $950 to the price of each new car and
light truck – all to achieve not even two hundredths of a degree of change during the next 90 years.

I‟ll tell you this though, there will be a lot of poor and lower-middle class families that – at the margin –
won‟t be able to afford the extra $950 and so will forgo a new car. Ironically, „buying up‟ by buying a
new car is a great way for a family to reduce its contribution to our air pollution because of how much
cleaner newer cars operate (and that‟s without the GHG requirements).

When you start to consider ANY new regulation, before you put pen to paper, go to the poorest part of
your state and just drive around, then walk the streets and talk to folks. If anyone is willing, I‟m happy to
drive you to Southside Virginia where – last time I checked – we still had over 20% unemployment. Why
should you go stare your poorest in the face before creating any new regulation? Because, broad
regulations hurt the poor first and worst.

The companies that are often targeted lay people off and raise their prices to contend with your new
regulatory burdens. Not because they‟re bad, but because they can do math – they have to pay for your
new regulations. They don‟t get to borrow from the Chinese to pay their bills… but they can move their
plants to China to lower their bills… while laying off those poor and lower-middle class Americans I was
talking about.

As I said, there just isn‟t as much pollution in America as there was 40 years ago. Despite all the dire
stories we see in the news, we have consistently found that environmental quality in America is
improving.

With air quality, for example, on most every indicator Steve Hayward of the Pacific Research Institute
has measured, air quality has been improving for decades. Ditto for water and for toxic releases. Excess
ozone, carbon monoxide, and sulfur dioxide are all down substantially since the 1970s and have
continued that trend in recent years, despite our expansion in population and economic activity.

So with the indicators suggesting that pollution is far less of a problem now than it was a decade or more
ago, new and existing regulations show diminishing returns when we look at a cost versus benefit analysis
that includes the total cost to society, including higher taxes and inflated prices of goods and services. In
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addition, the cost of excessively stringent regulations can also include the loss of productivity and real
wages, and the cost of lost jobs when factories never open or move to other nations with less burdensome
environmental controls.

These costs total hundreds of billions of dollars nationally. Even greater costs are coming when the
EPA‟s decision to regulate carbon dioxide as a pollutant ends up costing every American household an
additional $3,000 a year in higher-priced energy, food, and clothing, and could cost Virginia another
50,000 jobs over the next decade. (Sources: $3000 in increased energy, goods, and services costs per
average household per year – Heritage study on cap and trade; also a Treasury Dept. memo obtained via
FOIA showed costs between $1,761 to $3,522 per average household per year. 50,000 Virginia jobs lost
– National Association of Manufacturers.)

Can you imagine asking some of the lowest paid people in your agency, who probably already struggle to
pay their bills, to cough up another $3000 a year to pay for more regulation? A family making $100,000
per year can absorb a $3,000 hit to its budget a lot more easily than a family making $50 or $25,000 per
year. It‟s the poor hit the hardest by your new regulatory burdens.

How long can we pretend that these costs don‟t exist? How long can the public be misled that regulation
will bring large improvements for little expense when the opposite is true?

When we don‟t take these costs into account when deciding to move forward with regulation, we add to
our economic burden and cripple the very economy that gave us our healthy environment.

Before I leave today, I offer three challenges to you:

The first is a challenge for your states to reform what isn‟t working, what‟s creating unintended
consequences, or what‟s costing more than it‟s benefiting society. And when I say “reform,” what
I mean is “eliminate.” If it isn‟t working, get rid of it. Start from scratch if need be.

The second is a challenge to inform the public of the true environmental and economic impact of
existing and proposed regulations, so lawmakers and citizens can make informed decisions about
the trade-offs they will need to make. Improving the environment while crippling the economy
will prove to be a net loss for society.

The third is to remember the inevitable economic impact on your state‟s poor people, and no
amount of rationalization will ever overcome the reality that you are hurting them first and worst
with new regulations.

We need legitimate, transparent cost-benefit analyses of federal and state environmental regulations. And
we should NEVER issue a new regulation unless we can get a cost-benefit analysis where the actual
benefits SIGNIFICANTLY outweigh the true costs! Why? Because we need to remember that we
ALWAYS miscalculate: estimating benefits that are too high and estimating costs that are too low.

Additionally, any analysis should include real numbers, not the subjective intangibles such as equity,
human dignity, fairness, or distributive impacts, as President Obama‟s new executive order states.

While President Obama recently told the bureaucracies to subject all regulations to a cost-benefit test,
adding unquantifiable things such as equity and human dignity on the benefits side of regulation will
always tip the scales in regulation‟s favor, because the system is already heavily biased to make its
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cost/benefit analysis look better than reality. Even the president said these were “difficult or impossible
to quantify,” but he still wants to try to account for them in mathematical formulas. He‟s stacking the
deck from the outset in an already-biased system.

We have to be more forthright with our citizens. We must remember that we in government are public
servants. If I as an elected official and you as regulators fail to reveal the complete picture to the people
who have to bear the full cost of our actions, then we abdicate our duty to the public we serve.

When the people have the full picture, you help them make informed choices to balance care for our
environment with care for our economy. A clean world, a vibrant economy, and a prosperous future for
our children and grandchildren all depend on that balance. And that balance depends on you.

Thank you again for having me today, I‟d be happy to take a few questions.