The 1990 Clean Air Act has been estimated to cost Americans around $30 billion a year by the early years of the next century, for environmental gains of less than half that amount. A recent review of green policies of the USA by the EPA reckoned that the cost of complying with them was already higher as a proportion of GNP than in any other country (except, perhaps, western Germany), and would rise to at least 2.6% of GNP by the end of the century. Already such policies cost one-third of the nation's spending on medical care.
The estimated cost to British business of new environmental regulations is estimated to be many billions of pounds a year. Proposals to increase the efficiency of gas boilers alone will cost the UK £2 billion, and implementing the proposed directive on diesel engine pollution will cost £70 million a year in extra fuel costs. Early EEC/EU calculations (1991) estimated that the proposed carbon tax could raise coal and heavy fuel costs by 30% (by 1995), electricity costs by 16% (by 2000) and natural gas costs by almost 31%, though not uniformly across the community due to national differences in existing tax regimes.
A certain amount of regulation is essential, not least to ensure public safety and to promote quality standards. But these benefits have to be weighed against the costs of enforcing regulation and complying with it. In the case of environmental regulations, every emitter is required to meet a particular standard, even if one factory or industry could cut twice the pollution at half the cost. Costs are hidden from consumers. Regulations are inherently static with even those specifying the use of "best available" technologies acting as a cramp on innovation. Such regulations spur the use of what is at the cutting edge at the time they are formulated, but when an entrepreneur subsequently produces a better product, this faces a market locked into whatever was specified by the regulations.