Environmental Quality and Inflation: A Regional Perspective on the Cost—Push Impact of the 1972 Pure Water Legislation

Abstract

The United States 1972 ‘Pure Water’ legislation (PL-92-500) requires a national effluent standard such that major industries must apply the “Best Available Treatment” to central waste discharges by 1978, and must reduce their waste discharges to zero by 1983. To meet these standards, industries will require increased capital investments and increased operations and maintenance costs for central equipment for pollution. Since these costs are not distributed evenly among all industries, they will have a differential impact on a regional economy. Furthermore, since technological coefficients in the short-run remain fixed, increased costs attributable to improved environmental quality legislation will affect the consumer in the form of inflated prices. A new approach to the tracing through of these inflationary trends in a regional input-output economy is specified, and applied to the regional economy of Corpus Christi, Texas. Results suggest that if environmental policies, even strict ones, are applied on a regional basis, their inflationary impacts are relatively small.

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