U.S. manufacturers increase production, reduce pollution; no offshoring required

Manufacturers in the United States have cleaned up their act considerably since 1990. Despite claims to the contrary, they did not “offshore” their most environmentally harmful processes to countries with lax pollutions laws.

In a new study of emissions trends in the U.S. manufacturing sector, Arik Levinson, a professor of economics at Georgetown University, shows that emissions reductions reported by domestic manufacturers between 1990 and 2008 resulted from process improvements. Levinson used historical data on the pollution intensity of 400 U.S. manufacturing industries to estimate the impact of adopting cleaner production processes on emissions between 1990 to 2008.

Previous studies measured the impact of cleaner production processes – which Levinson calls the “technique effect” – on emissions as the residual reduction in the pollution-to-output ratio that remained after other explanations for the reduction had been taken into account. This methodology may have overstated the emissions-reductions in developed countries that resulted from offshoring pollution-intensive manufacturing sectors.

Levinson created an index of technological change comparing actual pollution levels with what pollution levels “would have been if pollution intensities were allowed to change over time but manufacturing output and the mix of goods produced had remained fixed at 1990 levels,” according to the National Bureau of Economic Research’s summary of the paper.

The index fell nearly as fast as actual emissions, which suggests that emissions reductions in the manufacturing sector can be explained by technological changes within industries, rather than shifting output among industries.

Above and beyond the impressive intellectual gymnastics, the paper’s conclusion is so remarkable because it produces a bottom-line impact estimate that is quite close to estimates developed using the traditional methodology. Levinson estimated that 92% of the emissions reductions reported by U.S. manufacturers between 1990 and 2008 resulted from technological improvements. Studies using the traditional methodology had estimated that 88% of emissions reductions in U.S. manufacturing resulted from technological improvements during this period.

There are two key take-away points. First, technological innovation has achieved dramatic and indisputable efficiency gains in the US and EU manufacturing sectors since 1990. Second, there is no reason why those efficiency gains – and associated environmental benefits – cannot be achieved by manufactures in developing economies.

http://www.forbes.com/sites/williampentland/2015/02/06/u-s-manufacturers-increase-production-reduce-pollution-no-offshoring-required/?ss=energy