Overhauling US Chemical Policy Will Create Jobs, Study Finds

While we're on vacation, we're re-posting content from earlier in the year. This post was originally published on May 12, 2011.

By Liz Borkowski

For many years, the public health and environmental communities have been calling for reform of the 1976 Toxic Substances Control Act (TSCA), which governs the use of chemicals in US commerce. Instead of requiring companies to demonstrate the safety of chemicals they intend to use or produce, TSCA puts the burden on EPA to request this data and justify their request based on anticipated hazards or substantial human exposures. EPA can only ban or restrict a chemical if it presents "an unreasonable risk of injury to health or the environment." Of the tens of thousands of chemicals now in use in this country, EPA only regulates five under TSCA. Of the 62,000 chemicals already used in commerce before implementation began in 1979, EPA has required testing for fewer than 200.

In recent weeks, we've seen two new calls for TSCA reform that focus specifically on children's health. The American Academy of Pediatrics has issued a policy statement (published in Pediatrics) recommending that TSCA be revised to protect children and pregnant women, who are particularly vulnerable to chemical hazards. The latest issue of Health Affairs features a review of findings on children's greater sensitivity to toxic substances and recommendations for improving US chemicals policy; it's by Philip Landrigan, dean for global health and a professor of both preventive medicine and pediatrics at the Mount Sinai School of Medicine, and Lynn Goldman, who's currently dean of the School of Public Health and a professor of environmental and occupational health at the George Washington University (where I work) and was EPA's Assistant Administrator for Toxic Substances from 1993-98.

TSCA reform's potential to improve public health probably isn't enough to guarantee it support when we're seeing Congressional backlash against the EPA and when even President Obama seems to have bought into the mistaken assumption that regulation is bad for business. But maybe this will help: Today, the BlueGreen Alliance has released a study that finds that a shift to safer chemicals - supported by TSCA reform - could create more than 100,000 jobs.

The BlueGreen Alliance, a partnership of labor unions and environment organizations, commissioned the Political Economy Research Institute of the University of Massachusetts, Amherst to produce The Economic Benefits of a Green Chemical Industry in the United States: Renewing Manufacturing Jobs While Protecting Health and the Environment. It considers the impacts on the chemical industry if production were to shift to chemicals that are safer for workers and the public, and one calculation finds that if 20% of current production shifted from petrochemical-based plastics to bio-based plastics, 104,000 additional jobs could be created.

Missed opportunities for investments and savings
The report notes that the non-pharmaceutical chemical industry has eliminated more than 200,000 jobs over the past two decades, resulting in a 38% drop in chemical-industry employment. Essentially, the authors explain, the industry has remained profitable by cutting its costs rather than by innovating; the industry invests just 1.5% of sales in R&D (compared to 3.4% in the US manufacturing sector as a whole). The report links this trend to the regulatory climate, stating, "TSCA contributes to low R&D spending by reducing incentives for industry to innovate, since many of the existing chemicals grandfathered in under TSCA face fewer regulations."

Costs of registering and testing chemicals under the European Union's new REACH system, which requires companies to generate and disclose information on their products' health and environmental effects, are estimated to cost less than one percent of sales. One-time costs of this size should be doable for companies manufacturing and marketing in the US, too - and requiring such testing for all chemicals (old and new) would make investment in new, safer chemicals more attractive.

While the US chemical industry isn't putting a large share of its money into R&D, it is spending heavily on environmental abatement and lawsuits. The study reports that the chemical industry spent an estimated $5.2 billion on pollution abatement in 2005 (compared to $3.7 billion for petroleum and coal products). And companies that open themselves up to environmental lawsuits put shareholder value at risk. The report explains (references omitted):

A study by Shameek Konar and Mark Cohen measured environmental performance in two ways: in terms of reported toxic releases from the Toxic Releases Inventory (TRI) and in terms of the number of pending environmental lawsuits. Controlling for other factors which determine the value of a firm's assets, they found that the average firm, with regard to the negative impact of environmental outcomes on the firm's market value, experienced a reduction in its market value equivalent to nine percent of the replacement value of its assets. For the chemical industry, they estimated the loss in value to be 31.2 percent of the replacement value of assets.

To give a better sense of the magnitude of these effects, it is helpful to translate the percentages into dollar values. The Census Department estimates that the total assets of the non-pharmaceutical chemical industry were valued at approximately $650 billion in the third quarter of 2010. Therefore, the reduction in the value of the U.S. chemical industry due to environmental performance, using Konar and Cohen's estimates, would be over $200 billion. Shareholders have a strong incentive to improve the environmental performance of the industry in order to boost the value of the firms in which they have invested.

Switching to less-hazardous chemicals and improving efficiency can also bring more immediate savings by lowering handling and disposal costs, reducing waste, and reducing the need for non-renewable fossil-fuel inputs (which will only get more expensive as the global demand for these inputs increases). Plus, using greener chemicals can increase potential sales by meeting consumer demands and the requirements of countries with more-stringent chemical laws.

The most important reason to require companies to test their chemicals and find safer alternatives for the hazardous ones is that workers, consumers, and our country as a whole are currently the ones to bear the vast majority of the costs when chemicals damage health. But chemical companies can benefit financially, too, and their innovation and expansion will create jobs. My guess is that some companies already see the business case for going green, but that case will become much stronger if the US system alters the incentive system to reward the companies that innovate for health and safety and to penalize those that skimp on testing or health improvements.

Recommendations
The Economic Benefits of a Green Chemical Industry in the United States gives three recommendations:

1. Reform TSCA to create an effective new regulatory environment that reduces hazards and supports innovation and competitiveness. The reforms should require a minimum data set on all new and existing chemicals sufficient to determine safety. They should shift the burden of proof, so that industry would need to show that their chemicals are safe, instead of the EPA proving that there is harm. The unfair advantage given to chemicals grandfathered in under TSCA must end and be replaced by reforms that support innovation and provide access to information that allows consumers, downstream users, and shareholders to make better decisions without compromising fundamental safety standards.

2. Implement complementary policies to promote innovation, commercialization, and the development of human resources to create a greener and safer chemical industry. The federal government has supported innovative developments in agriculture, biotechnology, computers and the Internet. Similar support will help build a green chemical industry. Strategies include implementing policies, such as tax incentives that spur investment in sustainable chemistry, support green chemistry education, and scale up public support for technological innovation. Government programs can facilitate coordination between industry, academic researchers, and innovative managers, critical for the successful development and transfer of technologies.

3. Disseminate environmental and health-related information on the chemical industry as widely as possible to improve the choices available to consumers, workers, downstream users, and investors and to mobilize investment in emerging opportunities. If new markets and investment opportunities are to be realized, consumers, workers, and businesses need as much information as possible on the ongoing environmental damage and health hazards associated with all chemicals and the possibilities that exist to develop alternatives. TSCA reforms should also insure that the relevant information generated by better regulations is readily accessible and disseminated as widely as possible.

Inertia is powerful, and shifting the US approach to the development, testing, and use of chemicals will require substantial effort. This report shows that the investment of such effort can be worth it for all involved - the chemical industry, its workers, overall public health, the environment, and the US economy.

Liz Borkowski is a research associate at the George Washington School of Public Health and Health Services, Department of Environmental & Occupational Health. Her work on occupational health issues is funded by the Public Welfare Foundation, which also funds the BlueGreen Alliance Foundation.