The Cost Doesn’t Matter…It’s For the Environment

A refreshing take on environmental policy appeared recently in Governing Magazine, written by Stephen Goldsmith, the Deputy Mayor of Operations for New York City. Arguing that policymakers need to assess the cost of reducing environmental risk, he highlights the negative tradeoffs that can result from making poor environmental policy. He writes:

Green is not free, however. We have to make public decisions with an eye toward how to accomplish our environmental goals in a way that compliments and does not threaten essential services. If we prematurely commit to expedite expensive school renovations in order to mitigate against “risks” that aren’t risky at all, that $1 billion expense would result in layoffs for teachers.

When governments spend billions to make only minor improvements in environmental quality, they miss opportunities to address more serious, but less trendy, environmental problems, or use those resources to address other issues, like education, health or improving the business climate to create jobs.

It is a lesson that is not being learned in Oregon. For years, the state has offered generous taxpayer subsidies to “green” industries in an effort to reduce unemployment. For their efforts, Oregon has been rewarded with an unemployment rate of 10.2%, more than a point higher than the national average. The Portland Oregonian reported last week that the subsidies have failed to produce the promised jobs, writing:

In some cases, the state has spent millions of tax dollars and gotten only a handful — or no — jobs in return because the companies didn’t perform as billed, were sold and shut down, or went bankrupt and folded.

What’s more, the subsidies are breaking the state’s budget. The subsidies are so generous and have so few restrictions, that costs have exploded.

The net result has been an explosion in state spending on the tax credits. The latest estimates, contained in a recently released state report, show the subsidies will cost Oregon’s general fund nearly $300 million over the next two years. That’s a 60 percent increase over current spending and quadruple what the state shelled out just four years ago.

This comes at a time when Oregon is grappling with a significant budget shortfall.

The irony is that these lavish expenditures are not only bad for the economy and the budget, failing to create the promised jobs, but the spending is also bad for the environment. Spending billions on projects that result in very little improvement in energy efficiency leads policymakers to eliminate funding for other efforts to improve environmental quality. While legislators justify the expenditure in the name of environmental protection, it is more likely they are actually doing environmental damage by ignoring real risks.

Comments (2)

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  1. Simon says:

    Great Post.

    This brings to point Peterson’s typology of economic development. Benefit/cost ratio for these techonogies are less than one, making them redistributive. This will have little benift for the local growth or development. Generally redustributive policies /funding are the acepted role of the federal government, but is not wise as local goverments are considered the best level of government for economic development.

  2. RVB says:

    Great analysis. Government subsidize what is trendy and popular to subsidize but not what produces the best results. If they are going to spend tons of money, the least they can do is maximize return.

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