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The Economic Benefits of a Green Chemical Industry: Renewing Manufacturing Jobs While Protecting Health and the Environment James Heintz and Robert Pollin,

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Presentation on theme: "The Economic Benefits of a Green Chemical Industry: Renewing Manufacturing Jobs While Protecting Health and the Environment James Heintz and Robert Pollin,"— Presentation transcript:

1 The Economic Benefits of a Green Chemical Industry: Renewing Manufacturing Jobs While Protecting Health and the Environment James Heintz and Robert Pollin, PERI Commissioned by the Blue-Green Alliance May 20, 2011

2 (2) Outline of Presentation The U.S. Chemical Industry and Employment Opportunities and Challenges Facing the Industry Rethinking the Relationship between Regulatory Reform and Competitiveness Innovation and Reform Creating Jobs Through Green Chemistry

3 (3) The U.S. Chemical Industry Today The chemical industry is an important part of U.S. manufacturing, contributing $273 billion to GDP ($390 billion if we include the plastics sector). But employment in the chemical industry has been declining sharply over the past few decades, despite the fact that the value of production has been growing 4% per year. Between 1992 and 2010, employment has  Declined 38% in non-pharmaceutical chemicals (a loss of over 300,000 jobs)  Declined 22% in plastics.  But has grown by 24% in pharmaceuticals

4 (4) Trends in Employment in the U.S. Chemical, Petroleum, and Plastics Products Industries, 1992-2010

5 (5) Non-Pharmaceutical Chemical Employment, Actual and Projected Jobs (1992, 2010, and 2030)

6 (6) Markets for U.S. Chemical Products Fewer jobs are being generated for a given amount of chemical production. Therefore, maintaining access to markets is a critical component to creating jobs in the chemical industry. U.S. remains the world’s largest chemical producer, but its share of the global market has been declining. Imports into the U.S. have increased and off- shoring of production has grown.

7 (7) Distribution of the Value of Production of the Global Chemical Industry, 2009

8 (8) Off-shoring: Employment in Foreign Affiliates of U.S. Companies

9 (9) New Opportunities in Greener Chemical Products There are emerging market opportunities in a number of areas: bio-based chemicals, building materials, flame retardants, healthcare, personal care products, among others Opportunities are driven by:  Consumers  Costs of inputs (petro-chemicals v. alternative inputs)  Investors  Innovation

10 (10) Regulatory Changes The Toxic Substances Control Act is outdated and ineffective. Changes in chemicals regulation in other countries  European Union (REACH)  Canada (CEPA)  China (proposing regulatory changes similar to REACH) State level initiatives in the U.S.

11 (11) TSCA Reform: What’s at Stake? Not only important for health and safety reasons. Also important for the future of the industry. Access to markets is being determined by regulatory changes elsewhere. TSCA yields inadequate information to make the best decisions possible. TSCA actually slows down innovation by creating the wrong incentives. These factors have important implications for the performance of other sectors which use chemical products.

12 (12) Competitiveness and Regulation Common argument: regulations undermine U.S. competitiveness and cost jobs. Need to unpack this:  Currently, chemical products impose large costs on consumers, workers, downstream users. Costs of handling, storage, and disposal are high for the chemical industry itself.  Competitiveness of chemical industry has been supported by passing on these costs, which hurts other sectors of the economy (and can cost jobs elsewhere).  Concepts such as productivity – the amount of output produced with a certain amount of inputs – need to take into account the production of undesirable by-products.  Evidence suggests that regulations can provide incentives for companies to make investments which improve productivity (measured correctly)

13 (13) Pollution Abatement Costs

14 (14) Greener Chemistry & Regulatory Reform Supports Competitiveness Lowering handling, storage, and disposal costs Ensuring access to global markets Reducing waste by using inputs more efficiently Moving away from fossil fuel based inputs Meeting consumer demands for safer products Protecting shareholder value

15 (15) Innovation and Regulation Another common argument: regulations will reduce innovation in the chemical industry. Reality: the U.S. chemical industry, apart from pharmaceuticals, under-invests in research and development. Regulation, by explicitly recognizing the costs of producing traditional chemicals, provides incentives to innovate (‘technology forcing regulation’) Competing on the basis of innovation creates jobs. Competing on the basis of minimizing labor costs destroys jobs.

16 (16) Research and Development Expenditures by Sector

17 (17) Research and Development Expenditures as a Percent of Total Output, 1989-2009

18 (18) TSCA and Innovation TSCA actually discourages innovation How?  Grandfathered in 62,000+ chemicals (not subject to regulation)  Some reporting requirements on new chemicals  EPA cannot effectively regulate potentially hazardous chemicals (new or old) Creates incentives to stick with older chemicals instead of investing to develop better alternatives. Not a question of regulation v. no regulation, but rather getting the regulations right.

19 (19) Greener Alternatives and Employment Creation The development of safer and more sustainable alternatives, supported by regulatory reform, can save existing jobs and create new ones. How?  Access to markets, development of new markets  Competitiveness focused on innovation, not cutting labor costs  Better information allows investors to take advantage of opportunities In addition, greener alternatives can result in more jobs for a given level of production.

20 (20) Job Creating Potential of Alternative Chemical Products Many chemicals and plastics are based on petrochemicals which create few jobs. Bio-based alternatives have greater job creation potential  Can source biomass within the U.S. economy – while fossil fuels are largely imported  Sectors supplying bio-based chemicals employ more people than fossil fuel based chemicals Biomass feedstocks create 3-4 times as many jobs as petroleum feedstocks for the same amount of spending. Shifting a fifth of plastics production into bio-plastics would create 104,000 additional jobs – EVEN IF THE TOTAL PRODUCTION OF PLASTICS PRODUCT DID NOT CHANGE.

21 (21) Main Take-Away Points The chemical industry has been shedding jobs and will continue to do so in the future, unless fundamental changes are made. Shifting the industry onto a new growth path based on safer and sustainable alternatives can turn this situation around. However, the regulatory environment and the incentives that are currently in place do not support this. TSCA reform is a critical component of an overall strategy for renewing the U.S. chemical industry.

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