Environmental regulations drove steep declines in U.S. factory pollution, study finds

Reed Walker_Air Quality Act drove steep drop in polluction

The federal Clean Air Act and associated regulations have driven steep declines in air pollution emissions over the past several decades—even as U.S. manufacturers increased production, according to a study by two University of California, Berkeley economists.

The study, co-authored by Berkeley Haas Assoc. Prof Reed Walker and forthcoming in the American Economic Review, found that polluting emissions from U.S. manufacturing fell by 60 percent between 1990 and 2008—a period in which manufacturing output grew significantly—primarily because manufacturers adopted cleaner production methods to meet increasingly strict environmental regulation.

Assoc. Prof. Reed Walker

“People often assume that manufacturing production pollutes less today because manufacturing output has declined, when in fact output was 30 percent greater in 2008 than in 1990. Others argue that manufacturing has shifted towards cleaner, high-tech products, or that the manufacturing of ‘dirty’ products like steel has moved to China, Mexico, or other foreign countries,” Walker said. “Our analysis showed that changes in the product-mix of U.S. manufacturing do not explain much of the reduction in emissions—instead, manufacturers are producing the same types of goods, but they’ve taken significant steps to clean up their production processes.”

Cleaner technology

Walker co-author Joseph Shapiro, an associate professor of agriculture and resource economics, analyzed newly available data on over 1,400 different products produced by U.S. plants between 1990 and 2008. They combined this with plant-level pollution emissions data over the same period. The authors then categorized reductions in overall emissions into those that can be explained by changes in manufacturing output, changes in the types of goods produced, or changes in production technologies. The researchers found that most of the decreases in emissions of important pollutants from manufacturing—such as nitrogen oxides, sulfur dioxide, and carbon monoxide—came from changes in production technologies.

UC Berkeley Assoc. Prof. Joseph Shapiro
Assoc. Prof. Joseph Shapiro

“In the 1960s and 1970s, people worried that Los Angeles, New York, and other U.S. cities would have unbearable air pollution levels by the end of the 20th century,” said Shapiro. “Instead, air pollution levels have plummeted, and the evidence shows that environmental regulation and the associated cleanup of production processes have played important roles in those steep declines.”

Regulations drive change

The researchers sought to identify the key driver of the change in production technology. They quantified the importance of reductions in tariffs and other trade costs, improved productivity, and environmental regulation in explaining decreases in air pollution emissions. Then they showed that the stringency of environmental regulation for manufacturing firms nearly doubled between 1990 and 2008. The researchers demonstrate that this increase in regulatory stringency—rather than improvements in manufacturing productivity or trade exposure—accounted for most of the decreases in pollution emissions.

The study was funded in part by grants from the National Science Foundation and the U.S. Department of Energy. Shapiro conducted much of the research in his former position at Yale University.