Economists are at their best when they challenge conventional wisdom and debunk the spurious claims of vested interests. The boffins at the Organization for Economic Cooperation and Development (OECD), one of the world’s top research outfits, have done just that with a ground-breaking analysis of the economic effects of environmental policies, often derided as “green tape.”
Conventional wisdom says green tape is a necessary evil. The rules are needed to protect the environment but they come at an economic cost, BussinessDay reported.
Businesses claim there are too many restrictions. Green tape has become a by-word for burdensome regulations that erode profits and cost jobs. The Abbott government seems to agree – its election manifesto said that green tape, and its big brother “red tape”, were excessive and promised “sensible whole-of-government initiatives that will assist in reducing red and green tape.” But the economists at the OECD have made a surprising discovery: green tape might not cost nearly as much as politicians and business leaders claim. The Organization has created an index that calculates the explicit and implicit cost of environmental policies. Its economists used this index to assess the strictness of environmental regulations across 24 wealthy OECD members – including Australia – between 1990 and 2012 and to measure the effect of those regulations on productivity.
They found the strictness of environmental policies has “increased significantly” in all the countries over the past two decades. But that increased stringency has not harmed productivity growth or productivity levels. In fact, new green regulations “may translate into a permanent increase in productivity levels in some industries.”
