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) 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) 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) Trends in Employment in the U.S. Chemical, Petroleum,
and Plastics Products Industries, 1992-2010
(5) Non-Pharmaceutical Chemical Employment, Actual and
Projected Jobs (1992, 2010, and 2030)
(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 offshoring of production has grown.
(7) Distribution of the Value of Production of the Global
Chemical Industry, 2009
(8) Off-shoring: Employment in Foreign Affiliates of U.S. Companies
(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) 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• The Toxic Substances Control Act is outdated and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) 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) 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) Pollution Abatement Costs
(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) 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) Research and Development Expenditures by Sector
(17) Research and Development Expenditures
as a Percent of Total Output, 1989-2009
(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) 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) 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) 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.