The High Cost of Dirty Water

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By David Brodwin, American Sustainable Business Council

Recently the Environmental Protection Agency issued a new rule to protect America’s lakes, rivers and streams. The latest rule prevents the pollution of smaller streams, ditches and wetlands which drain into major rivers. The rule was needed because polluters have changed their practices in response to the Clean Water Act. Prevented from dumping directly into navigable rivers and streams, they move their dumping upstream. A polluter can legally dump toxic waste into a ditch that flows into a navigable river.

Of course, the companies that pollute oppose the new rule. They argue that these regulations, like most regulations, are bad for jobs and bad for economy. They say that regulations lead to higher prices and lower profits, and they cause businesses to eliminate jobs and reduce pay.

But now other companies are speaking out, dividing the business world. Strong water protections create opportunities in some industries even as they create challenges for others.

Regulations disrupt markets. But many other forces disrupt markets as well, and we generally welcome them. Breakthrough products (like the Apple Watch) disrupt markets. So do new platforms (like Uber) and innovative business processes. Regulation leads to change. In every change, some companies win and some companies lose. Some companies shed workers and other companies add them. Why should we fight or fear regulation that disrupts market any more than we fight or fear technological change that disrupts markets?

The market structures that tolerate pollution need to be disrupted. They are not economically efficient for the economy. Large scale water pollution is enormously costly. The Deepwater Horizon explosion and spill in the Gulf of Mexico led to a $20 billion fund to settle damage claims. The cost to fishing in Louisiana was pegged at $2.5 billion and the cost to tourism in Florida at $3 billion. The much smaller chemical spill at Elk River in West Virginia cost the local economy $19 million per day, roughly 24 percent of the economic output of the region.

In Ohio last year, blooms of toxic algae caused mostly by farm runoff hurt the tourist economy on Lake Erie’s south shore. Tourism there brings in $1.8 billion per year. In Toledo, Ohio, alone, in just one weekend, $3-$4 million was lost when restaurants and other businesses had to close due to lack of clean water.

Looking across these incidents and many more, there’s no doubt that clean water rules help some businesses while forcing others to spend money to improve their operations. Clean water rules directly help restaurants and bars, tourism services, recreation and fitness, and food and beverage producers. Clean water rules indirectly aid most other businesses whose consumers and employees count on clean water to live. That’s why large majorities of small business owners support clean water protections.

Meanwhile, lax pollution rules provide a substantial economic benefit to a few industries: chemical production, pipelines and certain factory agricultural operations. But even as profits may fall in these industries due to compliance costs, other opportunities are created as rivers and streams are cleaned up. And many companies find their profits are protected as large scale water quality disasters like the Elk River spill are prevented.

The challenge, politically, is that the few companies that are hurt in the near term by pollution rules are quite vocal and organized, while the many companies that benefit from the rules have been quiet. But that is changing. The beer industry has been particularly outspoken in its support for clean water. Andrew Lemley, an executive at New Belgium Brewing, supported the new clean water rules in recent testimony to Congress. New Belgium is joined by roughly 45 other brewers in calling for stronger clean water protections.

Elsewhere, Marne Hayes, director of Business for Montana’s Outdoors, penned an op-ed calling for clean water rules to protect $3.6 billion in tourism spending that comes to the state each year. Jim Epstein, a Virginia food entrepreneur, argues that the Clean Water Act has added nearly $16 billion in economic value to Virginia’s economy.

Now, when you hear regulation being called a “job killer,” think twice. A regulation may kill some jobs, somewhere, but it leads to the creation of other jobs elsewhere. That’s how it works with creative destruction. And now, more business owners are saying so out loud.

Originally posted here.

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