The Environmental Protection Agency. Established in 1970, the EPA was born out of the wake of growing concern for the ever worsening impact of the United States on the environment. From banning DDT, to limiting SO2 pollution in factories meaning reduce acidity in rain by 89%, the ecological fragility of the Land of the Free would be in a much more dire state if it weren’t for this organisation’s hard approach to reducing the negative impacts of economic development.
However, President Trump seems to disagree. To him, the regulatory measures of the EPA are “clogging up the veins of the country with the environmental impact statements and all of the rules and regulations.” According to the President, a new man must head-up EPA “Trump-style”. Someone who can restrict this heinous abusive agency from their commie prevention of good old American industry. Trump’s man? Scott Pruitt. Ex-attorney-general of Oklahoma- he has sued the EPA 14 times before for their “abuses”… Indeed, the new head man for environmental protection said that “we don’t know” how much of an impact that humans had on climate change, and is likely to replace Obama’s Clean Power Plan (which reduces greenhouse gas emissions from thermal power stations), with a new plan that works in accordance to Trump’s plan to revive the coal industry. It seems that for the new head of the Environmental Protection Agency, the protection of the environment does not seem to be too much of an issue.
What does this means for America economics wise? With reduced taxation and increased subsidies towards polluting industries, the cost of production of these goods will fall. This will cause an extension in demand, which will cause an increase in real GDP, hence an increase in short-run economic growth.
However on the other hand, for a good such as coal, it is overproduced such that its Marginal Private Cost > Marginal Social Cost, meaning that the cost of cleaning up emissions, purchasing air filters etc, is greater than the private cost to the firm. If the firm is therefore able to produce coal at a reduced cost, it will increase the distance between the MPC and the MSC curves, hence overall welfare loss will increase. This translates into a worsening negative production externality, which will lead to further damaging of environmental welfare as the market failure worsens.
Effectively, there is a policy conflict between economic growth and environmental protection. It is pretty much impossible to maintain strong economic growth in a capitalist system without subsequent environmental damage. A trade off must be made, as an administration must choose to sacrifice a proportion of their real GDP growth, if they are to encourage environmental protection. The Obama administration chose to make this sacrifice, epitomised by Obama’s 2015 rejection of a 1,200 mile Keystone XL oil pipeline from Canada to Texas, which may well have increased production capabilities/RNO, but also would have encouraged use of non-renewable oil over clean energy sources. The Trump administration has been clear with their intentions, and has already green-lit the Dakota pipeline and the Keystone XL Pipeline. Within one month, Trump has showcased a clear prioritisation of economic growth over environmental protection- ultimately a decision that will cause worsening market failures and increased negative externalities, as society must adapt to absorb the burden of increasing environmental deterioration. It seems that environmental protection is not part of the recipe in Making America Great Again.