Jobs and Environmental Regulation

Abstract

Political debates about environmental regulation often center around the effect of policy on jobs. Opponents decry the “job-killing” Environmental Protection Agency (EPA) and proponents point to “green jobs” as a positive policy outcome. Beyond the political debates, Congress requires the EPA to evaluate “potential losses or shifts of employment” that regulations under the Clean Air Act may cause. Yet there is a sharp disconnect between the political importance of the jobs question and the limited research on the job effects of policy and general skepticism in the academic literature about the importance of those job effects for the costs and benefits of environmental regulation. In this paper, we discuss how the existing research on jobs and environmental regulations often falls short in evaluating these questions and consider recent new work that has attempted to address these problems. We provide an intuitive discussion of key questions for how job effects should enter into economic analysis of regulations. And, using an economic model that incorporates labor market frictions, we evaluate a range of environmental regulations in both the short and long run to develop a set of key stylized facts related to jobs and environmental regulations and to identify the key questions that current models cannot yet answer well.