Economic research

The Clean Water Rule and Economic Research on Water Pollution Regulation in the United States

David Keizer, Joseph S. Shapiro October 05, 2019

Earlier this month, the Trump administration repealed the Clean Water Rule, also known as the Waters of the US Rule. This rule was intended to ensure that federal water quality regulations protected most US rivers and streams. The rule was originally created during the Obama administration and its repeal has been controversial.

Until the 2000s, courts and the Environmental Protection Agency generally assumed that the Clean Water Act of 1972, one of the most iconic environmental laws in US history, protected most US surface waters. . The Clean Water Rule responded to two Supreme Court cases from the 2000s that had created uncertainty about whether the Clean Water Act protected certain waters, including wetlands, intermittent and ephemeral streams.1

Some industry groups and farmers celebrated the repeal of the Trump administration. These groups argue that the Clean Water Act was not intended to protect small, intermittent streams and that protecting these waters would limit their activities. Environmental groups, however, have decried the Trump administration’s repeal of the clean water rule as likely to worsen public health and increase water pollution.

A serious controversy surrounding the clean water rule involves its benefits and associated costs. Under the Obama administration, the Environmental Protection Agency deemed the Clean Water Rule to have passed a test of profitability. A review of this analysis carried out under the Trump administration reversed this conclusion and found that this rule created greater costs than benefits.

This reversal is due to the fact that the Trump administration has assumed a significant share of the benefits attributed to wetlands. Administration officials have defended the action, arguing that these profit estimates were made more than 20 years ago. Boyle et al. (2017) argue that the administration assumption is inconvenient.

The controversy highlights a deeper problem with US water quality policy. Over the past few decades, Americans have consistently identified pollution of surface waters and drinking water as among their top environmental concerns (Figure 1). Yet many regulations governing surface water quality fail the cost-benefit test.

Figure 1 Share of population very concerned about various environmental issues

Source: Keiser and Shapiro (2019a)

Drinking water regulations fare better, as do regulations that govern other pollutants such as air pollution and greenhouse gases. As we approach the 50th anniversary of the U.S. Environmental Protection Agency, we seek to better understand the effectiveness of key laws that govern surface water and drinking water quality in the United States. , the effectiveness of these laws, and the state of water quality economic research and other media. (Keiser and Shapiro 2019a).

How have the Clean Water Act and the Safe Drinking Water Act affected water quality?

The Clean Water Act relies heavily on two main elements. The first is federal funding to help local communities build and upgrade wastewater treatment plants. A sewage treatment plant is an industrial site that receives sewage and some industrial waste from underground pipes, then treats it to remove pollution before discharging the cleaned water into a river, lake or ocean. The second component is the National Pollutant Discharge Elimination System, which limits direct discharges of pollution from factories and other sites into waterways.

Research has found that the municipal subsidy program (Keiser and Shapiro 2019b) and the application of the National Pollutant Discharge Removal System have reduced surface water pollution (Magat and Viscusi 1990, Laplante and Rilstone 1996, Gray and Shimshack 2011). As a result, measurements of surface water pollution directly targeted by the Clean Water Act have also declined steadily since the 1970s (Figure 2).

Figure 2 Share of non-exploitable waters, 1972 to 2014

Source: Keiser and Shapiro (2019a)

Trends in drinking water quality are more difficult to document, as limited data are available on drinking water pollution concentrations. This data is often housed within state environmental agencies and only collected at the federal level through special monitoring programs.

As another measure of drinking water quality, Allaire et al. (2018) analyze violations of drinking water standards governed by the Safe Drinking Water Act. Figure 3 shows the trends they document over the period from 1982 to 2014. This data shows that violations increase when standards tighten, then steadily decrease over time. This trend suggests that drinking water has gradually improved over time, even in the face of more stringent standards.

picture 3 Drinking water quality violations in the United States, 1982-2014

Remarks: Data are from Allaire et al. (2018). The vertical lines show the years of the most significant changes in the standards (total coliform rule in 1990, Stage 1 drinking water by-product rule in 2002, and drinking water by-product rule in 2002). stage 2 drinking water in 2013). Source: Keizer and Shapiro (2019).

Of course, incidents like the drinking water crisis in Flint, Michigan are powerful reminders that enforcement of safe drinking water law is still far from over.

How effective are these efforts?

Expenditure on the Clean Water Act and the Safe Drinking Water Act has been enormous. We estimate that public and private investments in surface water pollution control have totaled approximately $3 trillion since 1970. Spending on drinking water pollution control has approached nearly $2 trillion. dollars over the same period. By comparison, spending on air pollution control exceeded that on potable water, but was lower than that on surface water (Table 1, Panel A).

Table 1 Benefits and Costs of Federal Regulations

Source: Keiser and Shapiro (2019a)

In Table 1, Part B, we summarize the estimated costs and benefits of 240 environmental regulations implemented over the period 1992 to 2017. The corresponding cost-benefit ratios contrast sharply between water quality regulations surface and for other purposes. About 67% of these surface water quality regulations fail a cost-benefit study, compared to only 20% of drinking water quality regulations and 8% of air pollution regulations. These studies mirror government analyzes of implemented regulations, but in previous work we find similar ratios when examining academic studies (Keiser et al. 2019).

The fact that most cost-benefit studies of surface water quality regulations fail is troubling. This is not the case with most environmental regulations. However, we argue that these measured benefits of surface water pollution control may be underestimated, for several reasons. These benefits often exclude human health impacts from improved surface water quality, non-use (or existence) values, and benefits that may arise from complex ecosystem feedback. More favorable cost-benefit ratios for drinking water are consistent with those of air pollution regulations, highlighting the importance of the direct impacts of pollution on human health.

Call for research

Given the disproportionate amount of funding devoted to protecting surface water quality and drinking water, one would expect equally disproportionate attention from academics. However, we find that this is not the case. In Table 2, we summarize several ways to measure university research on surface water and drinking water pollution. This includes the number of academic journal articles, presentations at economics conferences, and textbooks. For comparison purposes, we also examine these measurements for air pollution. We find that by almost every measure, water pollution has been understudied compared to air pollution.

Table 2 Prevalence of economic research on air pollution versus water pollution.

Source: Keiser and Shapiro (2019a)

These results highlight the need for more research on the total costs and benefits of water quality policies in the United States. The recent controversy over the Clean Water Rule only accentuates this need.

The references

Allaire, M, H Wu and U Lall (2018), “National Trends in Drinking Water Quality Violations”, Proceedings of the National Academy of Sciences 115(9): 2078–83.

Boyle, KJ, MJ Kotchen and VK Smith (2017), ‘Deciphering the Duel Analyzes of Clean Water Regulations’, Science 358:49–50.

Gray, WB, and JP Shimshack (2011), “The Effectiveness of Environmental Monitoring and Enforcement: A Review of the Empirical Evidence”, Environmental Economics and Policy Review 5(1): 3–24.

Keizer, DA and JS Shapiro (2019a), “U.S. Water Pollution Regulation Over the Last Half-Century: From Burning Waters to Crystal-Clear Springs? », Economic Outlook Journal, future.

Keiser, DA, and JS Shapiro (2019b), “Implications of the Clean Water Law and Water Quality Demand”, Economics Quarterly Review 134(1): 349–396.

Keizer, DA, CL Kling and JS Shapiro (2019), “The Small but Uncertain Measured Benefits of US Water Quality Policy”, Proceedings of the National Academy of Sciences 116(12): 5262–69.

Laplante, B, and P Rilstone (1996), “Environmental inspections and emissions from the pulp and paper industry in Quebec”, Journal of Environmental Economics and Management 31: 19-36.

Magat, WA, and WK Viscusi (1990), “Effectiveness of EPA Regulatory Enforcement: The Case of Industrial Effluent Standards”, Journal of Law and Economics 33(2): 331-360.


[1] These cases are Rapanos vs USA and SWANCC versus Army Corps of Engineers.