The Greening of Industrial Ecosystems. 1994.
Pp. 123-133. Washington, DC:
National Academy Press.
Industrial Ecology: The Role of Government
MATTHEW WEINBERG, GERGORY EYRING, JOE RAGUSO, and DAVID JENSEN
There is nothing more difficult . . . than to take the lead in introducing a new order of things.
Niccolo Machiavelli, The Prince
The relentless pace of technical and industrial advancement over the last century has fundamentally transformed the relationship between human society and the natural world. As the scope and range of human activities have expanded exponentially, profound and possibly irreversible environmental changes have been set in motion.1 For the first time in history, humankind can potentially alter the basic biophysical cycles of the earth.
Modem social systems have clearly broken away from the patterns of global ecological stability that existed during the 2 million years when humans lived in small nomadic bands (Ponting, 1990). But realistically there can be no turning back. While some believe that humanity's capacity for technical and economic progress is virtually boundless, the fact that human activities are now resulting in materials flows commensurate with those of nature should give one pause. Human activities are estimated to release several times as much mercury, nickel, arsenic, and vanadium to the environment as do natural processes, and more than 300 times as much lead (Galloway, 1982; see also Ayres, 1992). Concentrations of carbon dioxide in the atmosphere are increasing at a rate 30 to 100 times faster than observed in the climatic record; methane concentrations are increasing 400 times faster than historically (U.S. Congress, Office of Technology Assessment, 1991a).
The challenges for our institutions of governance in addressing emerging en-
NOTE: The views expressed here are those of the authors alone and do not necessarily reflect those of the Office of Technology Assessment.
vironmental threats are indeed formidable. Traditional formulas of environmental management will no longer suffice. The reactive strategies of remediation and ''end-of-pipe" modification will have to be supplanted by new strategies and approaches. Systematic changes are needed in materials use, production processes, product formulation, product use, and disposal practices.
The evolving concept of industrial ecology could serve as a significant catalyst in transforming societal patterns of production and consumption. 2 Although at first glance the term industrial ecology appears to be an oxymoron, the notion of connectivity and interdependence that it embodies is extremely important. Interdependence is the dominant phenomenon of our age. With elaborate webs of production now stretching across the globe, the economic destinies of nations are closely intertwined. 3 Since these production networks draw on the natural resource endowments of countries around the world, our economic activities, regardless of how localized they appear, are becoming more closely tied to global ecological disruption4 (Wyckoff and Roop, 1992). Tighter economic linkages among nations are accentuating the world's environmental interdependence.
Societies can no longer separate economic imperatives from ecological imperatives. Economic productivity cannot be improved if the natural ecosystems on which the economy depends are undermined. Industrial enterprises need to create the same strong linkages at the postconsumer end of our economies that exist at the front end. Today's highly efficient one-way systems of providing goods and services must give way to circular systems of production. Use of both products and product waste streams needs to be optimized (Frosch, 1992). At all stages of production and consumption, actors must shape activities to minimize both resource use and waste generation. A true systems view of our industrial activities, and the impact of those activities on the environment, is required. This implies a fundamental reorientation of both the principles of product design and the institutional arrangements that govern the delivery of goods and services.
Yet, given the complexity and diversity of modem industrial economies, such a change in outlook is not readily achieved. Government thus has a pivotal role to play in ensuring that such a systems perspective is integrated into its programs of research and education, as well as its regulatory and fiscal policies.
BARRIERS TO CHANGE
Like physical systems, political, social, and economic systems are subject to inertia. Political barriers to change usually mirror broader societal barriers. As an illustration, families of technologies that become integral to the workings of societies tend to remain dominant for many decades. Trains, for example, were the dominant transport system for more than 70 years until they were displaced by trucks and automobiles, which have been dominant for much of this century and are not likely to be displaced soon (Ausubel, 1989). In some cases, once a partic-
ular technology path is chosen, the choice may become "locked in," regardless of the advantages of the alternatives (Arthur, 1990).
Technological trajectories are shaped by a variety of economic, social, and political forces. Such trajectories usually cannot be changed without encountering opposition from well-entrenched interests. Reconciliation of these conflicting interests requires the articulation of broad social goals by political leaders, and historically has been achieved only in times of crisis. Thus, harnessing technology in ways that are both productive and ecologically sound is a formidable undertaking, given the inertia or our political and economic structures. However, as society begins to grapple with the potentially serious environmental implications of its economic and industrial practices, the systems perspective provided by industrial ecology is likely to gain a more sympathetic heating from policymakers.
ENCOURAGING INDUSTRIAL ECOLOGY CHANGES
Practical expression of industrial ecology ideas will have to start at the design level. The product design stage offers a unique point of leverage from which to address environmental problems. Design decisions directly and indirectly determine levels of resource use, types of manufacturing processes, and the composition of waste streams. By giving designers5 the proper signals about the environmental impacts of their decisions, policymakers can address environmental concerns that arise throughout the product life cycle, from the extraction of raw materials to final disposal.
The principal conceptual questions are when and how policymakers should intervene. Companies already have a number of incentives to move toward "greener" products and processes. For instance, waste-prevention strategies can reduce materials use and energy consumption, and thereby reduce the costs of manufacturing and waste disposal, while limiting potential liability. The consideration of environmental objectives by designers can also have important implications for competitiveness. Market opportunities for environmentally sensitive goods and services are expanding rapidly. Surveys indicate that a substantial percentage of consumers are willing to pay a premium for environmentally sound products.6
But despite these incentives for the creation of "green" products and "clean" technologies, a number of technical, behavioral, economic, and informational obstacles need to be addressed. Perhaps the most important obstacles are a variety of market distortions and environmental externalities. For example, government subsidies or preferential tax treatment for the extraction of some virgin materials (e.g., timber and minerals) encourages materials inefficiency. Also, consumers do not pay the full environmental costs of products that are consumed or dissipated during use (e.g., gasoline, agricultural chemicals, and cleaners), nor do they pay the full cost of solid waste disposal. Until such distortions and environmental
costs are internalized, environmentally sound design and production decisions are likely to remain economically unattractive.
In general, policymakers can achieve internalization in two ways: by regulation or by economic instruments. Each approach has advantages and disadvantages: regulations, if properly designed, can produce swift and relatively predictable results (e.g., the mandatory phaseout of leaded gasoline), but they can also impose unnecessary costs on industry and stifle environmentally innovative designs. As an example, some environmental regulations discriminate against new technologies by prescribing rigid design standards (the so-called best available technology). Unfortunately, environmental laws have too often been written as if the world were static. Change brings new risks, but the risks to society of not innovating are usually not considered. 7
Economic instruments, such as surcharges on industrial emissions, can provide flexibility by focusing on desired outcomes rather than methods, but they can be expensive to administer and are often politically unpopular (for example, recall the opposition to the 5 cent gasoline tax, the "nickel for America"). Yet, despite such shortcomings, market-based incentives should be given serious consideration by policymakers. Many environmental problems, such as groundwater contamination or dissipation of heavy metals into the atmosphere, are not caused by large point sources of pollution and therefore cannot be easily addressed by using command-and-control methods. Due to the proliferation of design and materials technology choices, and given that product impacts are almost always multidimensional, policies need to be crafted with flexibility.8 If particularly acute environmental problems necessitate regulatory action, efforts should be made to design enforcement mechanisms so that innovative and efficient solutions are not ignored. In many cases, market mechanisms can supplement regulatory measures—for example, the excise tax on chlorofluorocarbons. Thus, the challenge for policymakers is to employ a mixture of regulations and economic instruments that encourage designers to take account of rapid technological change while simultaneously safeguarding environmental quality.9
THE IMPORTANCE OF A SYSTEMS APPROACH
From an environmental perspective, it is simplistic to view products in isolation from the production and consumption systems in which they function. The greatest environmental gains lie in changing the overall systems in which products are manufactured, used, and disposed of rather than in changing the composition of the products themselves. 10 Product design that accounts for the dynamic relationships among all companies involved in a production system has the potential to produce less waste than product design that takes account of only an individual company's waste stream. This is the central appeal of the industrial ecology concept.
But encouraging a systems approach is a nontrivial undertaking. While in
recent years industrial enterprises have demonstrated an increasing ability to manage energy and materials flows in an integrated fashion, these efforts have been highly atomistic, taking place primarily behind the factory gate. In-house waste products are indeed being recycled and reused with greater efficiency and creativity. But there has been little intra-industry and inter-industry coordination in materials management. In some cases there have been regulatory disincentives (e.g., the Resource Conservation and Recovery Act, or RCRA).11 In other cases, there has been a lack of awareness of the possibilities.
A systems solution to a design problem will often require new patterns of industrial organization, such as the formation of cooperative relationships among manufacturers, suppliers, and waste management providers. The creation of industrial networks can expand the scale of a firm's operations and thereby permit a firm to consider. design solutions that would otherwise not be possible. Such cross-company relationships could promote greater materials efficiency in the economy. However, it will not be easy for industry to consider such dramatic changes in its existing production networks. After all, long-standing relationships among manufacturers and suppliers may have to change, and millions of dollars may be invested in the existing infrastructure for production and distribution. Indeed, a systems approach requires a shift in perception by top management such that environmental quality is viewed not as a cost but as a strategic business opportunity.
Government has a key role to play here. First, there is the power of exhortation. Government can encourage new collaborative arrangements across industries and can provide research funds to facilitate such arrangements (e.g., the cooperative agreement among automakers, plastics suppliers, recyclers, and the federal government to explore methods of recovering automotive materials).12 Next, and probably most important, systems solutions can be encouraged either directly by regulation or indirectly through economic incentives. Recycled content regulations or manufacturer take-back requirements are examples of a regulatory coupling between manufacturing and waste management. The proposal of the German government to require auto manufacturers to take back and recycle their cars, for example, has stimulated the German automakers to rethink the entire industrial ecology of auto production and disposal. As a consequence, new relationships are emerging. Automakers will encourage their material suppliers to accept recovered materials from dismantlers and will specify the use of recovered materials in new car parts, thus "closing the loop." This approach though, may be more appropriate for high-value, durable products with complex material composition than for nondurable or disposable products.13
An alternative to take-back regulations involves measures to encourage corporate decision makers indirectly to take a systems approach by using economic instruments to internalize the costs of environmental services (examples include taxes on emissions or virgin materials use; tradable emissions or recycling credits; tax credits; or deposit refund schemes on packaging or hazardous products). This
approach would rely on market forces to sort out what new interfirm relationships make sense economically, while giving designers the flexibility to design products with the best combination of cost, performance, and least environmental impact. For example, a substantial carbon tax on fuels could have a dramatic impact on the systems by which products are manufactured, distributed, and disposed of, because fuels are consumed at every stage of the product life cycle.
A FOCUS ON FUNCTION
A true systems view implies a unified consideration of production and consumption activities: supply-side and demand-side requirements need to be treated in an integrated way. This implies a new way of looking at products. The opportunities for linking product design with system-oriented thinking have not been fully explored, but examples are beginning to appear in different sectors of the economy. For instance, pesticide use has declined dramatically where farmers have adopted integrated pest management schemes involving crop rotation and the use of natural predators (U.S. Congress, Office of Technology Assessment, 1990). Due to the success of these new methods, chemical companies are no longer simply supplying pesticides to farmers but are also providing expertise on how to use those chemicals in conjunction with better field design and crop management. In effect, services (i.e., knowledge) have been substituted for chemicals.
Similarly, in the energy supply sector, many utilities are providing energy audit services, and are promoting customer use of energy-efficient equipment, instead of constructing new generating plants. Energy, after all, is used not for its own sake but rather for the services it provides, such as heating, lighting, and transportation. But to encourage decision making on a systemwide basis, utilities need to be allowed to benefit financially from investments in efficient end-use equipment. Recent changes in regulatory frameworks have played a key role in moving utilities in this direction (U.S. Congress, Office of Technology Assessment, 1991b).
The examples of integrated pest management in the chemical sector, and demand-side management in the utility industry, can be applied in a more general way to other industries. When a product is viewed as an agency for providing a service or fulfilling a specific need, the profit incentive changes; income is generated by "optimizing the utilization of goods rather than the production of goods."14 The notion of thinking about a product in terms of the function it performs is a logical extension of total quality management philosophy. The aim of total quality management is to satisfy customer needs. Customers usually do not care how their needs are met, as long as they are indeed met. Thus, it should not matter whether a customer's requirements are satisfied by a specific product or by a service performed in lieu of that product. (For more on this subject, see Stahel, in this volume.)
Perhaps one of the more intriguing applications of this idea is the "rent mod-
el," in which manufacturers retain ownership of products and simply rent them to consumers.15 By retaining ownership of the products they lease, companies would have a strong incentive to design goods so that they can be reused or remanufactured.16 However, if the idea of renting rather than selling is to gain currency, public attitudes toward "used" goods will have to change, and government procurement regulations will have to be modified to eliminate biases against refurbished or recycled products. While government-imposed take-back laws would move industry in such a direction, policymakers should proceed cautiously. Although take-back schemes may be a good option for some products, further research on the costs and benefits for a range of products is needed. Mandated design approaches could undermine overall resource efficiency and have unforeseen environmental consequences.
THE CHALLENGE OF GOVERNANCE
A major obstacle to acceptance and application of the principles of industrial ecology is the structure of government itself.17 Congress, the writer of laws, is organized in a way that works against a systems consideration of environmental problems. Environmental policy is treated in a fragmented fashion. Air, water, and land pollution issues, along with taxes and research, are all under the jurisdiction of separate committees. One consequence of this jurisdictional division is that research needed to implement environmental regulations is often neglected.18
This fragmentation extends to the executive branch. The Environmental Protection Agency (EPA) is organized around regulatory responsibilities for protecting air, water, and land; it does not address industries or industrial sectors in a natural way, and its technical expertise in design and manufacturing is slight. The Department of Commerce, on the other hand, is concerned with the competitiveness of industrial sectors, but has little environmental expertise. There is considerable technical expertise in the U.S. Department of Energy's (DOE's) national labs that could be brought to bear on improving design for energy efficiency and solid waste recycling processes, but environmental quality has not traditionally been a part of DOE's mission.
Recognizing opportunities for systems-oriented design requires that the economic performance and environmental impact of industries or sectors be viewed in an integrated way. Individual companies have little incentive to promote an overall greener vision of their sector. And in general, this cannot be done in the context of a single federal agency. A greener transportation sector, for example, may involve not only improved vehicle fuel efficiency but better management of materials used in automotive, rail, and aviation applications, as well as changes in urban design. An institutional focus above the agency level might spur a more holistic analysis of total sectoral issues, through forums or grant programs.
In Japan the Ministry of International Trade and Industry (MITI), which has responsibility for both trade and competitiveness matters, is also involved in im-
plementing a new recycling law. MITI's involvement is expected to be a strong inducement for companies to comply in a timely way. But in United States, there is no comparable institution that can address trade, competitiveness, and the environment in a coherent fashion. In general, there has been little or no coupling between U.S. technology policy and national environmental requirements.
While it would not make sense to create a separate institution within government to promote industrial ecology concepts, greater coordination between agencies would certainly be desirable. Industrial ecology concepts could be integrated into new interagency initiatives, such as the Manufacturing Technology Initiative and the Advanced Materials and Processing Program announced by the White House in early 1992. In addition, consideration could be given to creating a national environmental technology laboratory (Allenby, unpublished draft). 19
THE NEED FOR INFORMATION
Government institutions cannot rationally formulate policies without knowing which environmental problems pose the greatest risks. Policymakers currently lack critical information on how materials flow through the economy and about the relative dangers of different materials, products, and waste streams. For instance, there has been considerable concern expressed about the releases of mercury from the incineration of discarded batteries. Yet these releases may be small compared with mercury releases from coal combustion in power plants. Thus, in identifying the major sources of environmental pollutants, it is clear that a systems view is of paramount importance. We need to focus our resources—whether financial or technical—where the risks are greatest, not where the problems are most visible.
Since our industrial activities have multiple environmental effects that are not easily disentangled, a systemic approach to environmental policy is needed. But given the barriers enumerated here, such a change in perspective will not come about easily. It is to be hoped that as we increase our understanding of the interconnections between economic and ecological systems, there will be greater political will to develop coherent environmental strategies.
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