That brings us to EPA's proposed rules that would further tighten restrictions on smog-causing (i.e., ground-level) ozone, lowering allowable levels from 75 ppb to 65 ppb. Judging by EPA data, if the rules go into effect, three-quarters of the country would be unable to meet the new standard. Pursuing these remaining emissions will demand many, many more resources. Which is why, according to another study by NAM and NERA Economic Consulting, it could be the most expensive regulation ever imposed. A classic example of diminishing returns.
By introducing the most advanced technologies and processes in the world, the American factory sector has made tremendous strides in cleaning up its waste over the past two decades. As manufacturing pollution levels fall, their costs will continue to rise from the current tag of $25 billion per year. Policymakers need to take this, and the overall competitiveness of the sector, into consideration when pursuing their environmental goals.
U.S. manufacturers have been highly successful in reducing pollution over the past two decades, yet their costs to shrink their environmental footprint continue to grow. They're being affected by the law of marginal returns and each new pollution regulation that EPA devises will be increasingly more costly to implement.
Two recent studies help bear this out. In one, the MAPI Foundation compared pollution abatement costs among manufacturers around the world and found that U.S. manufacturers have the highest bill -- roughly double that of Japan, three times as much as Germany, and about six times as much as Canada and Korea. MAPI Foundation Chief Economist Dan Meckstroth's analysis, which examined air pollution, greenhouse gases, waste disposal, and wastewater treatment, showed that U.S. manufacturers spend roughly $25 billion annually in pollution abatement costs, the highest for any country in the world. This amounts to about 1.2% of manufacturing value-added, comparable to what manufacturers experience in most other advanced economies, where strict regulations have also increased business costs. (Canada's manufacturers pay the most as a percentage of manufacturing GDP, at 2.2%, primarily because of the nation's preponderance of waste- and wastewater-intensive industries, such as pulp and paper, steel, and petroleum refining. Mexico's manufacturers pay the least, at 0.8%.)