The United States spends roughly double the next highest-cost country, Japan with regard to pollution investment. A new MAPI Foundation study finds that the U.S. spends three times as much as Germany, and about six times as much as Canada and Korea.
The study compares manufacturing's pollution abatement and waste management costs in the United States and eight of its largest trading partners: Brazil, Canada, France, Germany, Japan, Korea, Mexico, and the United Kingdom. China was not included in the study because its government and industry data in this area are not considered reliable. The costs examined were for air pollution and greenhouse gas abatement as well as waste disposal and wastewater treatment.
"Our analysis shows that American manufacturers continue to bear a significant burden in environmental regulatory costs, especially when compared with their competitors in developing nations. Those nations that are air treatment or water treatment intensive have a relatively higher portion of the total cost," said Daniel J. Meckstroth, Ph.D., chief economist and report author.
U.S. manufacturers spent $24.6 billion in 2014 on pollution abatement and waste management, the highest for any country in the study. As a percentage of manufacturing value-added, however, the 1.2% spent is comparable to what manufacturers experience in the other advanced economies. Canada’s manufacturers pay the most as a percentage of manufacturing GDP (2.2%) and Mexico’s manufacturers pay the least (0.8%).
When looking solely at air pollution abatement—specifically, the reduction of nitrogen oxides, sulfur dioxide, particulate matter, and volatile organic compounds—manufacturers in the United States spent $5.3 billion in 2014. This is more than all the other eight countries combined and equals 0.27% of manufacturing value-added; only Canadian manufacturers have a higher share. Japan and Korea spend the least to reduce air pollution.
For waste disposal and wastewater treatment, U.S. manufacturers spent $17.9 billion in 2014, or 43% more than Japan ($12.5 billion), twice as much as Germany ($7.4 billion), and more than the six remaining countries combined ($13.9 billion). At 0.9% as a percentage of manufacturing GDP, the United States’ proportion is somewhat below the average of our major trading partners. Canada’s share (1.48%) is highest, primarily because of the nation's industry structure: waste- and wastewater-intensive industries, such as pulp and paper, steel, and petroleum refining make up a large share of the sector.
Annual waste disposal and wastewater treatment costs are significantly larger than new air pollution and greenhouse gas abatement costs because waste is properly disposed of and treated each year, while the latter involve the marginal addition to existing equipment.
"The costs involved depend on the regulatory environment in each country," Meckstroth said. "The U.S. has a relatively strict environment and Europe has an even stricter model, but many other countries don't have the environmental mindset or value the enforcement process, which leads to the cost differential."