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The Role of Regulation

greenmoneyecon.jpgThe European Union's been on quite a roll for changing how we produce goods. The Waste Electronic and Electric Equipment (WEEE) regulations went into effect in August; requirements that auto manufacturers be able to take back and recycle 85% of a vehicle become active January 1; the Restrictions on Hazardous Substances (RoHS) rules kick in next July. The Registration, Evaluation, and Assessment of Chemical Hazards (REACH) regulations don't yet have a start date, but will likely come to pass soon. In short, if you make something and want to be able to sell it in Europe, you'd better be certain that what you're making is non-toxic and readily recyclable.

But one of the (possibly) unanticipated results of the emerging battery of European environmental regulations is that many will come into effect elsewhere in the world, too, including the United States. Not because these non-EU countries are copying European rules, but because global manufacturers are already finding that it's often less costly to build and sell products that meet the tighter standards everywhere than to build to meet each market's varying guidelines. Moreover, some of the companies are starting to seek more regulation.

Why would companies want more regulation? Much of it is a desire for consistency, a "level playing field." Companies doing business in both more-regulated and less-regulated areas often find that meeting multiple rules can be costly. Greater regulation can end up being less of an issue than diverse regulation. This is one of the reasons that even the CEO of Duke Energy called for federal carbon taxes -- so as to avoid 50 different state tax schemes.

Many businesses are starting to see environmental regulations as a trigger for savings, rather than as a cost. some biz end up shifting to higher-standard goods generally, as they often find that the efforts to make a product more recyclable or rely less on toxic substances can lower production costs. As we noted back in February, many companies shifting material use to meet the EU standards are finding that it gives them an opportunity to re-examine their entire production process, for the better:

Designers also try to reduce the number of parts or materials used in a single product, making it simpler to sort and recycle."Four years ago, we did a survey of our usage of plastic resin," Thompson said. "We were using way too many grades of polystyrene. We standardized on a limited number."A 1984 Panasonic television, for instance, had 13 types of plastics, 39 plastic parts and took 140 seconds to take apart. The 2000 model contained just two types of plastic, eight plastic parts and took 78 seconds to disassemble.

Once companies start to see the benefit of adapting to environmental regulation, some find that it makes sense to meet even more stringent standards well before tighter rules are scheduled to kick in. Daimler-Benz, for example, is already ahead of the curve on meeting EU standards:

In 2007, networks set up by carmakers in the European Union must be ready to accept all scrap vehicles, regardless of age, at no cost to the car's last owner. In 2015, the portion of each vehicle that should be recycled increases to 95 percent.
Despite the complexity of construction and wide variety of materials in new vehicles, reducing potential waste to just 5 percent can be accomplished without the need for technological breakthroughs. For instance, the 2007 Mercedes-Benz S-Class sedan, which made its debut at the Frankfurt auto show last week, will comply with the 2015 regulation, the company said. The car was designed with recyclability as a goal, with materials selected for ease of processing from the beginning of its development.

And, of course, some companies find it simplest to fight. As Grist recently noted, the aggressiveness of the EU environmental regulations is a bit much for some US companies:

The law [REACH] has had chemical companies and their allies in a blue funk for some time. Thomas Donohue, president of the U.S. Chamber of Commerce, made his feelings known recently with typical American tact: "We're going to sue the hell out of them on some of this stuff."

Even if such lawsuits temporarily prevail, it's a losing battle. We're now starting to see more environmental regulations at the state level in the US, from electronic waste "take back" laws to appliance efficiency regulations. In 2005 alone, nine states adopted appliance and device efficiency standards, and four more have pending action -- see p. 6 in this presentation from the California Energy Commission's John Wilson (PDF). Although California has been particularly assertive in this arena, the states of the US Northeast are also very active.

The necessary transition to cradle-to-cradle and zero waste manufacturing isn't going to be easy, and some steps may end up being expensive enough initially to cause concern about relative competitiveness against those who don't shift. Such a transition requires a great deal of thought and planning; ultimately, the role of regulation is to provide both space and direction for companies moving towards a bright green model.


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Comments (3)


Interesting piece.
What strikes me is the difference between the level at which "state" regulations are created. It seems that in the US, each state can more or less make its own regulations, while in the EU, there's a stronger top-down approach; a single member-state can never overrule the EU regulations. This has the effect that there's a level-playing field within the entire EU, with, apparently a strong influence outside of the EU. Chinese, Indian and other manufacturers are already adopting the stringent EU standards, precisely because of what you say: once a product conforms to the strictest rules, it cannot be rejected by markets with less strict rules. For manufacturers aiming at global markets, this is the way to go. Simple but effective.

What I think would be most useful in the fight for a recyclable future would be the introduction of simple trademarks to categorize the waste stream of every available good. Anything that could not be recycled would be forced to state such a fact categorically on the product. Forcing companies (and hence designers) to think about these things is enough to ensure an eventual consensus emerges. An added (and important) bonus would be unequivocal certainty about what to do with an end-use product, regardless of it's appearance!

Philip M. Jonat:

I have read about companies accepting and embracing regulations in books and articles dating back to the early 1990s. I keep praying that it comes true, but for a very large majority, that is still a dream. Of course, some real corporate responsibility/proper incentives would utilize the free market to eliminate waste and the need to regulate with one stone, but alas that is another pipe dream. Keep dreaming,


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