Question

Explain the concept of economic losses from excessive or inadequate environmental regulation in the context of standard setting under compliance cost uncertainty.

Answer 1

-->Excessive Environmental regulations, intended to protect human health and the environment, generally result in higher production costs and lower productivity in firms, which can lead them to shift investment and production to less stringent locations leading to slower economic growth. Research on the effects of environmental regulation has focused mainly on air pollution regulations. Overall, regulatory benefits clearly outweigh the costs, but most benefits come from reductions in fine particulates; some other regulations have costs that exceed the benefits. Society gains only from environmental regulations whose benefits exceed their costs.