Sunday, February 8, 2015

Environmental Regulations Work

Here's an encouraging environmental trend that not many people know about. Between 1990 and 2008, US manufacturing output grew by one-third. Yet pollution from US factories declined by about two-thirds.
So what happened? One possibility is that by cracking down on pollution, we simply forced our dirtiest factories to go overseas, to countries like China. If so, that would actually be gloomy news — it would mean we're offloading pollution elsewhere rather than genuinely cleaning it up.
How could he tell? Levinson created an index of pollution from more than 400 different manufacturing industries between 1990 and 2008. This allowed him to see what would have happened if the composition of US manufacturing had stayed the same — in essence, factoring out any effects from offshoring. Even in this counterfactual, pollution still would have dropped nearly as much as it actually did.
That implies this isn't an offshoring story. US factories were genuinely finding ways to cut emissions. In fact, the industries that saw the biggest drops in pollution intensity actually grew as a share of output. Insofar as environmental regulations were behind this, they worked by getting companies to clean up their act — not simply by pushing the dirtiest factories overseas.
Fortunately, that gloomy story doesn't appear to be true. In a recent working paper, Georgetown economist Arik Levinson found that more than 90 percent of the decline in US factory pollution since 1990 was due to companies adopting cleaner production techniques — switching fuels, boosting efficiency, recycling, adopting pollution-capture technology, and so on.
I'd wager that most of the changes in the graph above come from new emission controls on coal power plants and the rise of natural gas power plants, the decrease in steel production from integrated mills and the increase from electric arc furnaces, and the use of ultra low sulfur diesel fuel.  The Clinton administration got settlements from a number of major utilities requiring them to add pollution controls to old coal-fired plants, while Chinese imports, the impact of regulations and age took out a number of century-old steel mills.  Despite all the griping that businesses do, most of these improvements wouldn't have been made without being forced on industry by regulations.  And also contrary to business complaints, the world didn't come to an end.

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