Close your eyes for a moment and think about the word manufacturing. What image came to mind? Did you think of smokestacks? You’re not alone. Valid or not, many people equate manufacturing with pollution. Indeed, the phrase smokestack industry is often synonymous with manufacturing as a whole, even if a steel mill and, say, a medical device assembly plant are polar opposites.
That’s unfortunate. For one, it doesn’t help efforts to get young people interested in manufacturing careers. More importantly, U.S. manufacturers have cleaned up their act considerably. Despite claims to the contrary, they did not offshore their most environmentally harmful industries to countries with lax pollution laws.
In a new study, Arik Levinson, a professor of economics at Georgetown University, shows that emissions reductions by U.S. manufacturers over a 20-year period are the result of process improvements rather than offshoring.
From 1990 to 2008, U.S. manufacturing output grew, while pollution emitted by manufacturers fell. One explanation for this trend is that we merely offshored our most polluting industries. Another explanation is that manufacturers adopted cleaner production processes. By implementing cleaner fuels, less energy-intensive processes, pollution-control technologies and recycling, the U.S. is producing the same volume of goods as before with less pollution.
To resolve the issue, 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 from 1990 to 2008. He created an index of technological change that compares actual pollution levels to what pollution levels would have been if pollution intensities were allowed to change over time, but manufacturing output and the mix of goods produced remained fixed at 1990 levels.
This approach is different from previous studies, which measured the effect of cleaner processes as a residual. In other words, when researchers examined the change in the pollution-to-output ratio, whatever reductions that couldn’t be attributed to more easily quantified variables must therefore be the result of process improvements. Levinson argues this methodology overstated emissions reductions resulting from offshoring pollution-intensive industries.
Levinson found that his index drops nearly as fast as actual emissions, suggesting that nearly all of the cleanup of U.S. manufacturing can be explained by greener practices within industries, rather than offshoring. He estimates that 92 percent of emissions reductions reported by U.S. manufacturers between 1990 and 2008 resulted from technological improvements.
His results also indicate that industries with the largest declines in their pollution-to-output ratios expanded as a share of the total manufacturing sector. This suggests that if the cleanup was the result of environmental regulation, then these regulations did not lead to more offshoring, but rather to emission reductions on an industry-by-industry basis.
For that, U.S. manufacturers deserve a pat on the back. Let’s hope manufacturers in developing countries take note.