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OCR for page 17
Changes in Pollution and
the Implications for Policy
David W. Rejeski and James Salzman
Ask people to describe the archetypal pollution problems we face today
and they may well recount a Dickensian vision a dirt-streaked factory
shrouded in smoke, leaking effluent, churning out drums of waste. And
for good reason. When the drafters of our pollution control statutes surveyed the
landscape in the 1970s, their regulatory landscape was filled with smokestack
industries. But what if this vision of environmental threats, still resonant today,
has become largely irrelevant? What if we have transformed from a manufactur-
ing-based to a service-based economy? What if manufacturing itself is being
transformed radically, if we are entering a new industrial revolution?
This is no idle speculation, for big changes are afoot in both the service and
manufacturing sectors. In this chapter, we will begin to explore these changes
and transformations and try to tease out their implications for environmental
protection and policy. We begin with the transformation in services.
The service sector now dominates America's economy, supplying more than
three-quarters of our Gross Domestic Product (GDP) and four-fifths of our em-
ployment (The Economist, 1994~. Over the past few decades, manufacturing's
relative economic importance has dramatically declined (a phenomenon known
as "deindustrialization"~. In 1970, roughly one in four workers was employed in
manufacturing. By 2005, that number will drop to less than one in eight (Bureau
of the Census, 1997; Rowthorn and Ramaswamy, 1997~. Over the same period,
employment in services has increased correspondingly, and most often the new
service jobs have been knowledge based, marking a shift from material-process-
ing to information-processing activities (Stewart, 1993~. Just think of the trans-
formation of Pittsburgh from dirty center of steel production to hub of clean
high-tech services. As The Economist has asserted bluntly (The Economist,
17
OCR for page 18
8
CHANGES IN POLLUTION AND THE IMPLICATIONS FOR POLICY
1994:91~: "It is still common to refer to [Organization for Economic Co-opera-
tion and Development (OECD)] members as the 'industrialized economies.'
Common, yet quite wrong.")
It has become commonplace for commentators to speak of a fundamental
transformation now shaping our economy. The labels vying to capture this era
include the "service economy" and the "postindustrial society," but the most
commonly used name is the "information revolution" hailed as the third great
economic revolution of human history.2 The agricultural revolution generated
wealth from plowed fields, the industrial revolution from the mechanized pro-
duction of material goods. In the information revolution, its observers claim,
wealth derives from the management, creation, and ownership of knowledge
(Carnoy et al., 1993~. Famed management guru Drucker has succinctly described
such an economy as one where "the basic economic source . . . is no longer
capital, nor natural resources nor land. It is and will be knowledge (Drucker,
1994:8~.3 To be sure, the term "information revolution" is a trendy label, sug-
gesting the increasingly central role of information in how we think of ourselves
and our society, but it also describes very real transformations. For our purposes,
regardless of the label, if the rise of services signals a fundamental change in
means of production and patterns of consumption, then the law must adapt
accordingly. Otherwise environmental law's focus on smokestack sources risks
becoming a Maginot Line: "strong, powerful, bristling with legalistic weaponry,
providing comfortable but illusory control and dominance and increasingly
irrelevant" (Allenby, 1997:36~.
What are the environmental implications of this transition? Does the rise of
services pose important new challenges, or perhaps powerful opportunities, for
environmental protection? Surprisingly, no one seems to know. More surpris-
ingly, almost no consideration has been given to these questions. Although liter-
ally thousands of books and articles have explored the implications of smoke-
stack industries for environmental law and policy, a mere handful have
considered the service sector. To begin to provide answers, we need to rethink
our basic assumptions of pollution sources and, as a consequence, environmental
protection strategies. This requires understanding better the current economic
and environmental trends and their underlying causes.
DEINDUSTRIALIZATION
What is the evidence for this new economy? Most suggestive is the process
of deindustrialization the dramatic decline of manufacturing's relative econom-
ic importance. The unrelenting growth of the service sector and the apparently
corresponding decline of the manufacturing sector has been taking place for
decades in the United States, Europe, and Japan, engendering heated debate over
the consequences. The service sector has expanded in all but one quarter over the
past 50 years (Rejeski,1997~. Between 1955 and 1980, the U.S. economy added
OCR for page 19
DAVID W. REJESKI AND JAMES SALZMAN
~0
70
~0
~0
40
30
~0
10
19
-
-
~Manufacturing |
~ Pi Cow
-
~-
1 1
T
~ ~ ~ ~ ,~ l a a
Year
FIGURE 2-1 Value added by sector as a share of U.S. Gross Domestic Product (GDP) at
current prices.
Source: Rowthorn and Ramaswamy (1997~.
40 million jobs, yet only 1 in 10 of these was in manufacturing (see Figures 2-1
and 2-2~. Over the same period, the health sector added more jobs than did all
of manufacturing combined (Cohen and Zysman, 1987~. Most services, such as
communications, wholesale trade, finance, insurance, and real estate, have grown
steadily. In recent years, the health care and computer systems fields have been
among the fastest growing sectors in the entire economy for both employment
and revenue.4
In considering these impressive figures, one must keep some points in mind.
First, note that Figure 2-2 shows employment data. Because of the way the
Bureau of the Census defines manufacturing and service employment, the statis-
tics tend to overstate service employment (Salzman, 1999:429~. Second, be-
cause labor productivity has risen faster in the manufacturing sector than in
services, employment has fallen while production has increased. Much of this
increased productivity has been due to greater reliance on the services sector,
which has not increased productivity at the same rate (Salzman, 1999:434~. Fi-
nally, Figure 2-1 shows sectoral contribution to GDP as a percentage. During
this period, though, GDP has been growing as well.
As a result, a close analysis of economic indicators reveals two broad trends
at work in the past few decades. First, there has been sustained growth in the
service sector such that in relative terms it now dominates our nation's economic
OCR for page 20
20
90
~0
70
~0
~0
30
20
-
10
—
-
~o ~ ~ ~ ~ ~ ~ ~ ~ ~ ~o
Year
FIGURE 2-2 Employment as a percentage of total labor force.
Source: Rowthorn and Ramaswamy (1997~.
CHANGES IN POLLUTION AND THE IMPLICATIONS FOR POLICY
Manufacturing,
-
_~ . ~ Services
mi ning construction
Manufacturing
activity. Despite overestimates of its growth, the service economy is for real.
Second, this rise of services has masked significant productivity gains and an
absolute increase in manufacturing activity. It is not the case that services have
grown while manufacturing has disappeared. Rather, the growth of services has
outpaced manufacturing's growth, despite the fact that we are producing more
than ever (Bureau of the Census, 1995:748, 759~. These results should not, on
reflection, be surprising. The need for food did not go away at the end of the
agricultural revolution nor has industrial activity dimmed in the brilliance of the
information revolution's dawn.
Even if the smokestack economy is still alive and well, albeit diminished in
stature compared to services, one might still expect environmental benefits. The
core thesis of Drucker's (1994) and others' writings on the information revolu-
tion has claimed that knowledge is supplementing natural and human made cap-
ital as factors of production. Intuitively, this makes sense. One would expect,
for example, that increasing use of e-mail would reduce the environmental im-
pact from overnight express and postal mail, that telecommuting and videocon-
ferencing would reduce the transport impacts from traveling to work, and that
bioengineered crops would reduce the need for pesticides and fertilizer. (von
Weizsacker et al., 1997~. Such examples surely suggest that as the information
revolution advances, there will be an "environmental bonus." But is this hap-
pening? The best data to assess this question comes from a series of studies
conducted by the World Resources Institute (WRI) that examined material flow
OCR for page 21
DAVID W. REJESKI AND JAMES SALZMAN
21
through the United States economy (Adriaanse et al., 1998~. WRI sought to
quantify all the natural resources directly and indirectly consumed by economic
activity in four major industrialized nations (the United States, the Netherlands,
Germany, and Japan). Based on the industrial ecology principle of material flow
accounting, the study tracked the consumption of natural resources in the econ-
omy, from the extraction of raw materials through to their ultimate disposal.
Importantly, the study sought to track the entire lifecycle, capturing material
flows overseas as well as domestically.
Figure 2-3 shows the results for U.S. material intensity, measuring Total
Material Requirement (TMR) per unit Gross National Product (GNP).5 If the
economic infrastructure is changing, moving toward more information process-
ing than material processing, then this should be reflected in less material con-
sumption per unit of economic activity. In mathematical terms, the measures of
material intensity should show decreasing slopes. The study found that TMR
material intensity has, in fact, decreased, as has the measure of direct material
intensity (which included traditional material inputs such as oil, copper, or wa-
ter, but not the hidden material flows captured in TMR). Less comprehensive
studies have reached similar conclusions. These data therefore are consistent
with the thesis that knowledge is replacing physical inputs as factors of produc-
tion and, that services are replacing resource-intensive activities.
These results can be explained by a number of other factors as well. The
first of these is input substitution, the use of new materials as efficient replace-
150 -
o
° 140 -
x
-
o,
48
o
u
ILL
n
`~
130 -
120 -
1 1 0 -
100 -
90 -
80
70
1 975 1 977 1 979 1 981 1 983 1 935
Year
1 937 1 989 1 99 1 1 993
FIGURE 2-3 Overall material intensity: Total Material Requirement/Gross Domestic
Product (TMR/GDP) Index.
Source: Adriaanse et al. (1998~. Reprinted with permission of World Resources Institute.
OCR for page 22
a: a:
CHANGES IN POLLUTION AND THE IMPLICATIONS FOR POLICY
meets for current materials. Fiber optics, for example, are replacing old copper
wire communication lines, using less material and increasing the carrying capac-
ity by 30 to 50 times (Cleveland, 1985~. Similarly, the amount of steel in a car
has decreased by more than a third since the early 1970s, while plastics and
composites have increased (Wernick et al., 1996~. A second factor is increased
production efficiency that conserves materials. This can occur through redesign
of the process, closed-loop recycling, and other pollution prevention techniques
that contribute to improved manufacturing efficiency. Finally, product design
has helped to reduce material consumption. Changes as simple as "light-weight-
ing," or reducing the weight of a product, have led to dramatic differences in
material consumption. Beverage cans, for example, have become much smaller
and lighter, first moving from glass to steel to aluminum, and then reduced in
weight an additional 25 percent. As in the case of pollution reductions, these
types of changes also may be driven by command-and-control regulations, by
market prices reflecting scarce resources, or by environmental regulations that
implicitly or explicitly change relative prices.
Focusing only on the material intensity slope misses the central point, how-
ever, for there has been little improvement in the measure of material consump-
tion per capita. In fact, in Japan, Germany, and the Netherlands, material con-
sumption per capita has increased. Put another way, GNP has grown faster than
population. Thus measures of material intensity will be more impressive than
measures of per capita consumption. What matters for the environment, of
course, is total consumption of physical units (Stern, 1997~. The important
corollary is that because of population growth and increasing economic activity,
absolute resource consumption has actually increased, despite reductions in ma-
terial intensity. As the WRI study concluded, "meaningful dematerialization, in
the sense of an absolute reduction in natural resource use, is not yet taking place"
(Adriaanse et al., 1998:2~. These findings have been confirmed by other research
in the field.6
If services are substituting for manufacturing, if knowledge is in certain in-
stances replacing inputs of natural capital, we would expect to see improvements
in material intensity, and we do. The observed improvements in material intensity,
though, largely may be due to other factors such as increased production efficien-
cies and input substitution. The data also suggest that rising absolute consumption
is offsetting improvements in dematerialization and efficiencies. In fact, the data
raise the possibility of a counterthesis that the information revolution and rise of
services have a net negative environmental impact because they increase overall
economic activity and thus overall resource consumption (Ehrlich et al., 1999~.
This may occur in two related ways. First, as knowledge becomes a more impor-
tant factor of production in some sectors, reductions in the cost of obtaining that
knowledge stimulate economic growth, leading to increased environmental im-
pacts through increased resource flow and conversion. Second, services may serve
as complements to, rather than substitutes for, traditional production factors such
OCR for page 23
DAVID W. REJESKI AND JAMES SALZMAN
23
as labor and resources, simply increasing their efficiency, rather than replacing
them. In both cases, technical advances decrease the cost of an activity and, as a
result, increase the overall level of activity. Thus advances in telecommunications
and data processing technologies, by making relevant information cheaper and
transactions easier, have increased the total number of transactions.
ENVIRONMENTAL PROTECTION AND THE SERVICE SECTOR
Despite the relative growth of the service sector and decline of manufactur-
ing, the data clearly show that these factors have not led to a decrease in resource
consumption. Hence, although the service economy may not mark a clear path-
way toward sustainable development, it surely merits explicit consideration in
environmental policy both because services are important sources of pollution
and because they pose different challenges than traditional smokestack sources.
Overlooking the role of the service sector in environmental protection is myopic,
for it produces environmental impacts in its own right. But we know remarkably
little about either the environmental impacts of services or the appropriate policy
tools. The few writings seriously examining the environmental impacts of ser-
vices have identified important themes using anecdotes, but they have not set out
a coherent framework for thinking about services' impacts and, depending on
their severity, the appropriate governmental response.
This is no easy task, for the service sector comprises a remarkably heteroge-
neous grouping of economic activities as varied in their function as in their
environmental impact. They include transportation and public utilities, whole-
sale and retail trade, finance, insurance, real estate, business services, health
services, legal services, and government services. To develop effective policy
recommendations, we must first delineate services into categories meaningful
for environmental protection. To do so requires distinguishing between services
that cause high direct impact per facility and low (smokestack services), those
that do not cause significant environmental harm at the level of individual oper-
ation but collectively have large impact (cumulative services), and those that act
as leverage points, influencing behavior both upstream and downstream (lever-
age services). It is important to note that these categories of services are not
mutually exclusive. A sector such as the electric utilities, for example, is both a
strong smokestack service and a strong leverage service. The following sections
briefly explain these categories and their policy implications.
Smokestack Services
As set out in Figure 2-4, smokestack services have high direct environmen-
tal impact per facility. For environmental policy analysts, smokestack services
are the most obvious of the three categories because their activities already are
regulated. Sulfur dioxide emissions from power plants are heavily regulated, the
OCR for page 24
24
High
. _
. _
ad
Q
Cal
Q
. _
Cal
o
. _
an
as
. _
Low
FIGURE 2-4 Categories of service.
CHANGES IN POLLUTION AND THE IMPLICATIONS FOR POLICY
Smokestack Services
Electric utilities
Federal express
Hospitals
Airlines
Business Services Cumulative Services
Insurance Fast food chains
Financial services Dry cleaners
Retail sales Dentist offices
Law firms Hotels
· High
Cumulative environmental impact
subject of the entire trading program of the 1990 Clean Air Act amendments
(U.S. Code, 1998a). Air pollution from the Federal Express fleet of delivery vans
is subject to requirements under the mobile sources provision of the Clean Air
Act (U.S. Code, 1998b). Biomedical waste from hospitals is regulated by the
federal Resource Conservation and Recovery Act (RCRA) (U.S. Code, 1998c).
If smokestack services do warrant further attention from environmental law-
makers, it stems from the historical fact that many of the applicable laws were
not drafted with service industries in mind. The net result can be inefficient
governance, requiring the regulated entity to devote quite significant resources
to compliance. Although this is, of course, a general problem of regulatory
design, inefficient regulation of smokestack services can significantly impede
innovative environmental protection measures. A recent study in the Harvard
Business Review of productivity in the service sector made a similar point, con-
cluding that regulation of services is very inefficient. One of the most important
ways "government can help the service sector is not to overregulate it . . . The
point is that regulation should be carried out in both spirit and practice to mini-
mize the demands made on [service] businesses' attention and resources" (van
Biema and Greenwald, 1997:87-88~. As an example, consider the situation of
the telecommunications provider in the Northeast, BellAtlantic (now known as
Verizon Corporation).
OCR for page 25
DAVID W. REJESKI AND JAMES SALZMAN
25
Although BellAtlantic does not produce large amounts of hazardous waste,
its diffuse operations constitute innumerable small sources that must be individ-
ually regulated. This includes wastes from maintaining a fleet of more than
18,000 vehicles, treating sediment from 113,000 manholes, and managing the
use and disposal of more than 2.5 million utility poles treated with wood preser-
vatives (of the 170 million poles in the country). The manhole sediment is
typical of the mismatched regulatory burdens facing BellAtlantic. When repair-
ing cables, BellAtlantic employees often work in manholes that contain water
and sediment from the street. To get at the cables, it may be necessary to remove
some of the water and sediment from the manhole. If they contain more than 5
parts per million (ppm) of lead, however, the water and sediment must be treated
as RCRA hazardous waste. BellAtlantic tests have shown that the sediment is
below 5 ppm about 55 percent of the time. Yet, in practice, BellAtlantic routinely
treats the sediment as hazardous waste (complying with all the attendant RCRA
Subtitle C requirements) in order to save time. This means the company must
obtain a separate U.S. Environmental Protection Agency (EPA) hazardous waste
identification number for every manhole treated. The ID system, required for
waste manifests, was designed with smokestack sites in mind because it was
assumed there would be one site, and therefore one source of hazardous waste
generation. Perhaps not surprisingly, BellAtlantic has the largest number of
waste ID numbers in the country.
Similarly, when BellAtlantic designed a mobile treatment unit that would
eliminate the toxicity characteristics of the sediment, it found itself prevented
from improving environmental performance by a regulatory system that had not
anticipated the application of regulation to this service industry. New Hamp-
shire refused to permit the process, stating that mobile on-site treatment only
was allowed for manufacturing companies. Because BellAtlantic's Standard
Industrial Classification (SIC) code identified it as a service company, it could
not apply for the permit. Another example is BellAtlantic's use of emergency
standby generators. BellAtlantic has more than 1,800 emergency diesel genera-
tors to provide power for the phone system in the event of a power failure. The
generators run an average of 29 hours per year. The 1990 Clean Air Act amend-
ment's "potential to emit" clause requires hundreds of permits or exceptions
annually because it is assumed the generator runs constantly in a factory setting.
In addition to the permits, there is considerable paperwork required for the com-
pany to report the presence of and risk management plans for the lead acid
batteries in every BellAtlantic building.7
The point in raising these brief examples is not to argue that the regulation
of smokestack services is unnecessary but, rather, that such regulation warrants
special attention because of the potential for poor fit. RCRA, for example, was
not written with services in mind. BellAtlantic's operations simply do not fit the
model situation the law was drafted to address. Indeed, smokestack services
provide an excellent opportunity for innovative regulatory strategies. Large trans-
OCR for page 26
26
CHANGES IN POLLUTION AND THE IMPLICATIONS FOR POLICY
port services such as Federal Express, Hertz, and Allied Van Lines, for example,
might be willing to reduce their overall emissions if they could "bubble" their
vehicle fleet, treating it as one larger source of pollution, or obtain other forms of
regulatory relief. One would think such possibilities should be attractive to the
Common Sense Initiative and Project XL, the EPA's flagship reinvention initia-
tives to develop smarter, more effective, and cheaper alternatives to traditional
regulation. The Department of Energy's well-funded Industries of the Future
initiative also would seem appropriate. These initiatives receive more than $100
million in support, but have ignored services. None of the implemented Project
XL initiatives have focused on services, none of the Industries of the Future
include a service, and only one of the six Common Sense Initiative sectors is
considered a service industry.
Cumulative Services
This category contains the largest number of services and is in many re-
spects the most difficult to address because it brings into play the problem of
cumulative impacts. In describing the history of environmental protection ef-
forts, Caldwell (1990) described two generations of environmental problems.
The first generation consisted of traditional point source emissions of local or, at
worst, regional pollutants. These were classic smokestack industry problems of
air, water, and soil pollution. Their impacts were reduced by a series of 1970s
statutes and what has become known as command-and-control regulation. The
second generation introduced transboundary and global threats such as ozone
depletion, trade in hazardous wastes and climate change, problems requiring
coordination among nations and therefore problems that are poorly suited for
first generation command-and-control policies and institutions focused on do-
mestic concerns.
The rise of the service sector may well coincide with the advent of a third
generation of environmental problems, the challenge of atomized sources.
These sources create, from a policy perspective, a "nonpoint" world where the
cumulative impacts of small diffuse sources become significant and begin to
resemble unmanageable runoff, potentially overwhelming traditional regulato-
ry approaches.
Many cumulative services may be viewed as simply concentrating everyday
activities, such as those at a hotel or restaurant. The environmental impacts do
not differ in kind from those of a household; they are simply magnified. Consid-
er the little placards discreetly placed in hotel rooms asking whether you want
your towel washed daily. The energy and wastewater impacts of washing the
towel at a hotel are little different than if you did so at home. The impact from
washing a thousand rooms' towels, however, differs greatly. Although the envi-
ronmental impacts from a single McDonalds drivethrough are minor, the cumu-
lative impacts of 22 million meals served daily are significant.
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DAVID W. REJESKI AND JAMES SALZMAN
27
A similar concern arises from cumulative services with more direct causal
links to specific environmental harms. The services' pollutant emissions indi-
vidually are negligible, but cumulatively significant and identifiable. The contri-
bution of dry cleaners' volatile organic compounds to smog formation provides
one example. Perhaps surprisingly, dentist offices provide another.
In the early l990s, the San Francisco Bay Regional Water Quality Control
Board started detecting significant levels of the heavy metal silver in the water,
in sediment, and in tissues of fish and marine mammals in the Bay (Rejeski,
1998~. But where was the silver coming from? No silver mines were anywhere
near the Bay's watershed. A material flow analysis provided a surprising result,
pointing a finger directly at dentist offices. Indeed, the 90,000 dentist offices in
the United States account for roughly half of the more than 3,800 metric tons of
silver consumed annually. The silver dissolves in fixer solutions used to develop
x-rays and goes down tens of thousands of drains and eventually into bays and
other watersheds. The small amount of fixer used at each office (less than 5
gallons per month at 80 percent of the sites) provides too little silver to offset the
costs of recovery equipment, and RCRA presents serious regulatory burdens to
on-site and off-site recovery efforts.
Thus cumulative services pose significant administrative challenges to regu-
lation. This plays out first as an informational challenge. Using the silver
discharges by dentists as an example, it is no simple task to link such diffuse
emissions with an identifiable harm. Assuming the link has been established,
however, how much silver should each office be allowed to discharge? There is
a significant difference between regulators allocating SO2 emissions among 3
smokestacks in an airshed and 1,200 dentist offices in a watershed. Determining
equitable and efficient levels can be done, but at a high cost.
Compliance and monitoring expenses may be even higher. For pollutants
with clearly identifiable impacts of concern, such as dental offices, auto repair
shops, and dry cleaners, the traditional regulatory response has been local com-
mand-and-control regulation. Although the idea of a meaningful point source
permit for every dentist office seems horribly resource intensive, it can work.
Palo Alto's water district, one of the best funded and most sophisticated in the
country, routinely regulates small services and inspects their premises. Its ordi-
nance on photoprocessors and medical offices reduced silver levels in the Bay by
more than 90 percent in 5 years (Palo Alto Regional Water Quality Control
Plant, 1998~. In the face of such informational, compliance, and enforcement
costs, however, a more common response to cumulative services has been no
response at all. As the environmental manager for Palo Alto's treatment plant
observes, "People [in wastewater treatment] look to industrial sources and aren't
used to thinking about services or residential activities as the source of the prob-
lem" (K. Moran, Manager, Palo Alto Pollution Prevention Program, personal
communication, April 14, 1998~. Although cumulative services' concentration
of activities provides a more accessible target for permit-based regulations, the
OCR for page 32
1^
Electronics equipment
cost of goods sold
Electronics
manufacturing
services market
1 998
CHANGES IN POLLUTION AND THE IMPLICATIONS FOR POLICY
2003
FIGURE 2-5 The growth of outsourcing.
Source: Clancy and Rejeski (2000~. Reprinted with permission of RAND.
percent of all Hewlett Packard's personal computers and about 75 percent of
their inkjet printers. These companies represent the emergence of manufactur-
ing as a service, a service that is becoming increasingly globalized. Revenue
growth in the contract electronics-manufacturing sector has been exceeding 30
percent per year consistently since 1992 (see Figure 2-5~. In the pharmaceutical
industry, contract manufacturing of key chemical inputs accounted for 50 to 60
percent of production in 1998 and is projected to reach 60 to 70 percent by 2005
(Van Arnum, 2000~.
If environmental policymakers are looking for emerging industrial sectors,
contract manufacturing is one that will have increasing importance. It also serves
as an indicator of larger changes in the manufacturing landscape.
Some people have viewed this trend as the emergence of a new model of
industry organization, one reliant on the development of turnkey production net-
works (Sturgeon, 1997~. This is a large departure from early organizational mod-
els where companies were concentrated in one geographical area, focused on one
OCR for page 33
DAVID W. REJESKI AND JAMES SALZMAN
33
piece of the value chain, and were vertically integrated (Cohen, 2000~. By using
networked models, companies can now decouple production from innovation,
thereby reducing manufacturing overhead and inventory/logistics costs, and fo-
cus on core values around product design and marketing. What began with
IBM's decision to outsource its microprocessors and operating system has
changed our industrial landscape.
Flexible, networked manufacturing will allow companies to effectively "de-
construct" their value chains and reassemble them close to cheap labor, large
markets, and key customers (Evans and Wurster, 2000~. Firms can shift to open-
source models for manufacturing and postpone various aspects of the production
process to the point of final assembly or use. This actually may transform the
geography of production and shift new production away from traditional indus-
trial corridors. For example, in 1980,50 percent of auto production employment
in the United States was concentrated in 16 counties. By 1996, only a third of
manufacturing was concentrated in these counties (Helper et al., 1997~. Much of
this new manufacturing activity moved into new areas in the Southeast United
States (see Figures 2-6a, 2-6b).
In a highly networked and Reconstructed world, manufacturing does not
look like manufacturing anymore; it begins to take on the characteristics of both
mobile and nonpoint sources. Right now, it is possible to purchase or lease
turnkey production miniplants that will fit into 20- or 40-foot containers, trans-
port these plants to nearly anywhere in the world, and make everything from
baked goods to roofing materials, medical equipment, or mufflers. Imagine this
scenario. Two German-made robotic-manufacturing modules are air lifted to
Mexico and produce cell phones, one for an American firm and one for a Japa-
nese firm. After 6 months, they are moved to Ireland and reprogrammed to
produce parts for personal digital assistants for two firms, one in England and
one in Thailand. Who is responsible for the environmental performance and
compliance of these systems and their products?
The other possibility that has emerged is to completely decouple production
codes from production. Design verification software now allows a three-person
firm in California to design logic chips and ship the production code anywhere,
such as to a silicon wafer fabrication plant in a jungle in Borneo (see Doler,
2000~. This scenario is likely to become more and more common, especially for
low-weight/high-value items that can be moved rapidly from far-flung produc-
tion facilities to markets via airfreight.
Maybe the ultimate service will be the ability to manufacture at a personal
level. Neil Gershenfeld at the Massachusetts Institute of Technology (MIT) Me-
dia Lab makes the point that fabrication today is where computation was 20
years ago (Clancy and Rejeski, 2000~. It tends to occur in large, centralized
facilities and it is only now finding its way out into the wider world (as the
personal computer did) at smaller scales that allow customized production of
short runs (lot-size-of-one). Take a look at what has happened to that workhorse
OCR for page 34
34
CHANGES IN POLLUTION AND THE IMPLICATIONS FOR POLICY
Rae
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~ a'
~=1 ; mu''
(a) Counties representing 50 percent of allied automobile employment in 1980
EN E)
\
,~
~ ~~ . ~
~.~
Eli ~J
r r
\~
0~'
(b) Counties representing 50 percent of allied automobile employment in 1996
FIGURE 2-6 Allied automobile employment. Reprinted with permission of RAND.
Source: Clancy and Rejeski (2000~.
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DAVID W. REJESKI AND JAMES SALZMAN
35
FIGURE 2-7 Computer-driven, powder metallurgy press (foreground) with traditional
press behind. Reprinted with permission of Mii Technologies.
Of the first industrial revolution, the press. New powder metallurgy presses can
generate twice the pressure in a fraction of the space and can produce parts 50
percent faster than traditional presses (Kruger, 2000~. We now have a high-
volume, computer-controlled production system that can almost fit on a desktop
(see Figure 2-7~. But change often moves in two directions. Take the workhorse
of the information revolution, the printer, and turn it into a production machine.
There are a wide range of desktop systems that allow very complex objects to be
printed using polymer-based powders (see Figure 2-8~.
We can begin to see the outlines of a world where production can take place
nearly anywhere (see "Manufacturing Anywhere," in Clancy and Rejeski, 2000~.
In a recent book that explores manufacturing in the year 2020, the authors sug-
gest that "steel manufacturing that could only be performed in Cleveland will be
everywhere. Autos produced only in Detroit's mile-long factories will emerge
from knockdown garage assembly shops in the Amazon and East Eighty-sixth
Street in New York" (Moody and Morley, 1999~.
It is not far fetched to imagine 10 to 20 years in the future, systems that store
production codes on servers and allow the code to be downloaded to small-scale
and personal fabrication devices, much in the way we download music today
(we might describe this as an MP 3-D system). Another possibility is to upload
production code directly from desktop computer-aided design and verification
systems (see Figure 2-9~.
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36
CHANGES IN POLLUTION AND THE IMPLICATIONS FOR POLICY
FIGURE 2-8 Object with seven articulating joints from a 3-D printer. Courtesy of the
MIT Media Lab.
/
~~ .........
. ~
..'N
MP 3-D
server
Production code
3-dimensional particle printer
or small-scale powder press
Computer-aided design/
Design verification systems
FIGURE 2-9 Schematic diagram of a system for the deconsruction and personalization
of production.
From an environmental standpoint, the positive aspect is that we could pro-
duce where needed, moving bits (production code) to atoms (production process),
and avoiding a significant transportation and logistics penalty. On the other hand,
production then could take place anywhere, in thousands of unregulated, and large-
ly nonregulatable, environments. That means that environmental considerations
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DAVID W. REJESKI AND JAMES SALZMAN
37
would have to be integrated into the production codes and operations of the fabn
caters (we would also need a corresponding capacity to defabricate).
In the more distant future, it may be possible to combine the capacity to self-
fabricate with autonomous design based on evolutionary computation. Such
production could be set in motion with the specification of a set of outcomes or
characteristics we would desire from a yet-to-be designed or produced device.
This process would result in one-of-a-kind products that have evolved to meet
our specifications in Darwinian-like process (Lipson and Pollack, 2000~. Produc-
tion truly begins to replicate nature.
Environmental policy was not set up to handle highly dynamic and mobile
production systems, systems that may become increasingly autonomous. The
EPA has struggled for years to develop facility identification codes based on the
premise that production stays put, or at least does not change faster than the
phone book. The rules of the environmental protection game change if produc-
tion begins to operate more like a service; if it can be moved, reprogrammed, and
reconfigured; if it is organized using networks, not hierarchies. From a policy
standpoint, it is important to understand that these emerging networks may re-
quire very different strategies than those applied to the hierarchies or markets
where most environmental policy traditionally has focused (Powell, 1990~.
More than 30 years ago, the modern environmental movement began by
focusing on the byproducts of production. More recently, policies have ad-
vanced to consider the products of production (for instance, European take-back
laws or the E.U. Integrated Product Policy). The challenge we now face is to
focus on production itself, including the intimate relationship between produc-
tion and services.
An incredible opportunity is appearing on the horizon. Let us assume that
the management gurus and industrial researchers are right in their assessments of
a rapidly globalizing service sector, a second industrial revolution, the decon-
struction of value chains, an explosion in contract manufacturing, the personal-
ization of fabrication, and the emergence of a digital economy. It would be like
creating an environmental protection agency in the late 1800s when the first
industrial revolution was occurring, when we had an opportunity to proactively
shape the system rather than simply react to its adverse impacts for the next 100
years. Maybe our existing system of regulations will work in this rapidly chang-
ing world, but maybe not.
Management guru Drucker has made the comment that the theory of business
is no more than a hypothesis that must be examined and tested continually (Druck-
er, 1999~. The same is true of environmental policy. Built into our regulatory
system and environmental policy institutions must be ways to continually test our
system of regulation and the models of business on which our regulations are
based. In today's rapidly changing world, the greatest danger posed to effective
environmental policy will be unchallenged assumptions about the nature and
dynamics of business. We need to put every regulation, every policy, and every
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38
CHANGES IN POLLUTION AND THE IMPLICATIONS FOR POLICY
assumption about the causes and effects of environmental damage on trial for life.
Otherwise, we will face a radically transformed future both ill informed and un-
derequipped.
NOTES
1 OECD is an international governmental organization dedicated to the promotion of policies
that expand growth in market-based economies. Its 29 members include all of the major industrial-
ized modern economies.
2 A December 1997 LEXIS/NEXIS database search found 125 separate newspaper and maga-
zine stories contrasting the information and industrial revolutions. The following passage from
Foreign Affairs is embellished, but typical of these references (Wriston, 1997: 172):
We are now living in the midst of the third great revolution in history. When the princi-
ple of the lever was applied to make a plow, the agricultural revolution was born, and the
power of nomadic tribal chiefs declined. When centuries later, men substituted the power
of water, steam, and electricity for animal muscle, the Industrial Revolution was born.
Both of these massive changes took centuries to unfold. Each caused a shift in the power
structure. Today, the marriage of computers and telecommunications has ushered in the
Information Age, which is as different from the Industrial Age as that period was from
the Agricultural Age. Information technology has demolished time and distance.
3 Consider the central role of information in the following descriptions:
[I]n the changed world economy, the sources of higher productivity are increasingly
dependent on knowledge and information applied to production, and this knowledge and
information is increasingly science-based. Production in the advanced capitalist societ-
ies shifts from material goods to information processing activities that focus on symbol
manipulation in the organization of production and in the enhancement of productivity
(Carnoy et al., 1993:5).
With rare exceptions, the economic and producing power of a modern corporation or
nation lies more in its intellectual and systems capabilities than in its hard assets of raw
materials, land, plant, and equipment (Quinn et al., 1997:20).
A pre-industrial society is primarily extractive, its economy based on agriculture, mining,
fishing, timber and other resources such as natural gas or oil. An industrial sector is
primarily fabricating, using energy and machine technology, for the manufacture of goods.
A post-industrial sector is one of processing in which telecommunications and computers
are strategic for the exchange of information and knowledge (Bell, 1976:xi-xiii).
4 An additional 44 million jobs were added between 1980 and 1999 (Bureau of the Census,
2000). The Statistical Abstract lists the fastest growing occupations as home health aides, computer
engineers and analysts, physical therapists, systems analysts, and correction officers (Bureau of the
Census, 1995).
5 WRI researchers developed a new measurement unit of Total Material Requirements. This
quantifies both the direct and indirect use of natural resources flowing through an economy. Direct
material requirements include feedstock resources in the production process such as grain, copper,
coal, and gas. Indirect material requirements include "hidden flows." These are natural resources
that are not sold as commodities and never enter the economy, such as overburden and waste from
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DAVID W. REJESKI AND JAMES SALZMAN
39
extractive activities, biomass from crop harvesting and logging, soil erosion from agriculture, and
earth moved during construction.
6 A study at Rockefeller University concluded (Wernick, 1996:5):
[A]n assessment of consumption per unit of economic activity shows a dematerialization
in physical materials of about one-third since 1970 . . . [I]ndividual items in the Ameri-
can economy may be getting lighter but the economy as a whole is physically expanding
. . . We see no significant signs of net dematerialization at the level of the consumer or
saturation of individual material wants.
Since 1950, per capita consumption of copper, steel, energy, timber, and meat has doubled;
consumption of plastic has increased fivefold and aluminum sevenfold. Although America has the
highest per capita consumption levels in the world, the resource consumption in Western Europe and
Japan is only slightly less (Durning 1992:29, 38).
A 1997 study examined the consumption of a range of metals, minerals, agricultural chemi-
cals, and pertroleum products in 32 countries over 21 years. They concluded that a general reduction
in resource consumption was not evident in the most developed countries (Janicke et al., 1997:467).
The most exhaustive literature survey (Cleveland and Ruth, 1998:45) on the subject similarly con-
cluded that "[d]espite claims to the contrary, there is no compelling macroeconomic evidence that
the U.S. economy is decoupled from material inputs." OECD studied the global material intensity for
steel and wood from 1970 through 1992. Throughout this period, although the material intensities of
wood and steel showed a negative slope, the "total world materials consumption rose by 38%"
(Organization for Economic Co-operation and Development, 1998:64-65). The linkage of economic
growth and resource consumption also was confirmed by a recent government study (Interagency
Working Group on Industrial Ecology, 1998).
Analyses of energy consumption and waste generation show similar results. Ausubel (1996:4)
notes, "Although the soaring number of products and objects, accelerated by economic growth,
raised municipal waste in the United States annually by about 1.6% per person in the last couple of
decades, trash per unit of GDP dematerialized slightly."
7 The information about BellAtlantic is drawn from a consultant's report written for NYNEX
(a corporate predecessor to BellAtlantic) (MacDonald, 1999), and personal communication with Roy
Deitchmann (former environmental manager at NYNEX) on March 5, 1999.
8 Prior to becoming a law professor, the author served as the environmental manager for a
major consumer products company. The company had a special sales office in a small town in
Arkansas for the simple reason that Walmart's purchasing office was located there. If, for whatever
reason, Walmart requested a change in product formulation or packaging, there was an immediate
and compliant response. This represents a sharp break from the earlier balance of power in the
consumer goods market. The retail trade traditionally has been highly fragmented. As a result,
companies such as Procter & Gamble or Coca Cola, because of the importance of their products to
consumers, generally hold the upper hand in negotiating with retailers.
9 Reviews of the 33/50 program have been mixed. Contrast Mazurek (this volume, Chapter
13) and Harrison (this volume, Chapter 16) with Karkkainen (2001).
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Representative terms from entire chapter:
cumulative services
