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The Economics of the CWA

I read a fascinating paper today by David Keiser and Joseph Shapiro on the environmental and economic impact of the CWA. The paper, which was forwarded to me by Joan Meyer of Industrial Economics, is “U.S. Water Pollution over the Last Half Century: Burning Waters to Crystal Springs?” National Bureau of Economic Research (2019). These two economists look at existing literature to determine how much the CWA has impacted the environment and at what cost.

They spot some large gaps in our knowledge about this important subject, but the existing literature tentatively reaches the following conclusions.

· By many measures water pollution has fallen significantly since 1972 when the Act was passed, but problem areas remain, especially with agriculture.

· The costs of these environmental improvements outweigh the benefits, although they point out that the research on this may either undervalue the benefits or exaggerate the costs. More research needs to be done.

· Looking at the number of publications in academic economic journals on all federal environmental statutes, the CWA is relatively poorly covered.

Here are some interesting factoids.

· In 1972 30% of water quality readings were unsafe for fish; in 2014, the number is 15%. Federal grants of $650 billion to cities to upgrade their wastewater treatment plants is a major contributor to this improvement.

· Between 1970 and 2014, total spending on water pollution in the U.S. was $2.8 trillion. Annual spending between 1973 and 1987 was $43 billion, with spending going up since 1987.

· Of the $2.8 trillion spent, $0.6 trillion was by the federal government, $0.6 trillion by industry and $1.6 trillion by municipalities (POTWs).

· In the top 5 economic journals, 45 articles discuss the CAA, but only 1 discusses the CWA.

· 60% of Americans lists water pollution as a great concern; all surveys since 1989 shows concerns over water pollution exceed concerns over air, climate change and other pollution problems.

I find it interesting that one of the cornerstone federal environmental statutes, and one that has generated such eye-popping compliance costs, has been so poorly researched, and the impacts of the law - - both environmentally and economically - - aren’t better documented. Economists out there, are you listening?



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