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Outsourcing And The Environment: Five Trends to Watch

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Waste paper being loaded on a truck and transported to China for recycling.
Gillian Tso/Moment Open/Getty Images

Over the past few decades, America has become much more aware of the environment, and as a result many of the worst pollution issues in the US have been cleaned up. While there were many positive changes in the US, such as improved emission standards and the cleanup of the most toxic waste dumps, much of the progress made in the last 30 years may be erased due to changes in US outsourcing policies. Surprisingly, outsourcing has played a major… if little-understood… role in reversing pollution in the US. Recent changes to the US economy and an emerging environmental movement China could threaten decades of environmental improvements in the US. Let’s take a look at the top issues and see how seemingly beneficial changes can have very unexpected consequences!

Overall, the environment in America is cleaner and healthier than it was in the 70s. However, that doesn't mean that we pollute less. Recycling programs are a big part of our clean up. However, the secret behind recycling isn't super-efficient high-technology factories that turn our pollution into new products.

Instead, the secret is that we have been outsourcing old paper, plastics and broken equipment to offshore locations where our refuse is very manually processed. The processing of old computers and digital products releases many toxic and dangerous chemicals into the environment. Primarily into China's environment, now that China has become the world’s largest recycler. In the US, we have not opened a new recycling plant in 10 years. The plants we do have are running at lower capacity than 10 years ago, due to the competition from offshore recycling. The Chinese are now concerned about how their own recycling industry has degraded their local environment, and their citizens’ health.

Over the last decade there has been another important trend in the environment, and that is the insourcing of energy. At the start of the war in Iraq, he cost of oil was $22 a barrel, far less than the cost of imported water. Oil was o cheap that the US essentially outsourced much of our fuel capacity to the Middle East.

As the war continued and the price of fuel skyrocketed, America learned the importance of a domestic energy policy. The tar sands of Alberta, which contain more petroleum than the entire Middle East, was joined by new oil discoveries in North Dakota and… with the introduction of new fracking technologies… and explosion in gas mining on the east coast and mid-west. Suddenly domestic oil production is in full swing in North America. And so too are pollution issues that the US hasn't dealt with since the 70s.

If we have less opportunity to outsource our refuse and if fuel production is fully brought back to the US, there could be catastrophic consequences for the environment. However, there are also powerful economic incentives to onshore more of this work. Here are the five to issues that the coming changes in outsourcing will drive.

ECONOMY: Bringing petroleum production back to the US was a key issue of the last two Presidential elections. The idea was to both lower the price of fuel and to create new jobs. Both goals have been achieved. The price of natural gas continues to drop, and the ever-increasing number of oil jobs in North Dakota has exceeded all expectations. In Canada, the tar sands are producing the equivalent of 1 million barrels of oil a day, and are expected to rise to 5 million a day by 2030. While all of this is good for our economy, it is not as good for the environment.

PETROLEUM: Oil sands and the shale that contains natural gas does not easily give up their riches. To get petroleum out of the ground, you need to inject millions of gallons of water and industrial solvents, and then you need to extract the water, chemicals and petroleum by-products. This not only depletes the local water supply, it can also poison the water table if the chemicals seep out of the shale. Shale deposits lie under existing homes and farms, increasing the chances toxic contamination.

Extracting high-grade petroleum from the sands of Alberta or from the low-grade oil of North Dakota requires a similar extraction process, and also creates a by-product… petroleum coke. Petroleum coke is a coal-like material that can be used instead of coal, but which much higher levels of sulfur, mercury and lead.

How are the refineries dealing with the growing mountain of petroleum coke? They are selling it to China, India and other countries without strong environmental protection. As developing countries created a middle class, these countries became environmentally aware, and have questioned the use of environmentally damaging fuels.

PLASTIC: Our garbage, such as plastic soda bottles, becomes a raw material for China, because they can convert the plastic into new products. These products are primarily the insulation in cold weather great and clothing, fibers for blankets, and other microfiber materials. Since the US does not manufacture these textiles, we could not use them as raw materials for industry, even if we built the recycling facilities, the related manufacturing facilities do not exist.

China’s Green Fence Policy has already begun to turn back contaminated plastics and recycling materials. Will we add he expenses of cleaning and more carefully sorting recyclables before they are sent to China? Or will the fishing cost of recycling and the falling cost of petroleum cause manufacturers to create more new plastic, and abandoning or reducing the recycling of old plastic bottles? Of course, if we’re going to make new plastic, why not make it in the US, where we have an advantage in the cost of fuel? Is recycling offshore better or worse for the environment than ramping up domestic plastics production?

GOVERNMENT: The Federal government is dramatically cutting back on its budget. State and city budgets are reflecting this cut, and they are outsourcing or reducing local services. A number of municipalities, with Detroit as the “test case” are filing for bankruptcy. All of these factors are reducing money for environmental programs and for monitoring of environmental waste. As China continues to cut back on recycling our waste, what will we do with it? It seems certain that there will be more domestic outs outsourcing of Waste Management facilities. This trend can only accelerate the environmental changes in China.

TRANSPORTATION: One of the factors that is slowing down the growth of China’s economy is that outsourcing is no longer quite as profitable as it used to be. When the outsourcing of manufacturing became a big trend in the 1990s, the cost of fuel was very low. This meant that the cost of transporting goods from China to the US and Europe was not a significant cost component of outsourcing. Today, transportation costs are much higher, and decisions to in-source may revolve around transportation issues.

Chinese car manufacturers are following the trend of European and Japanese manufacturers and building cars for the US market on US soil. The first Chinese cars will be produced in the US in 2015. The value of recycled goods is no longer as high is China, and new technology may make it more efficient to recycle locally, but as more recycling is done domestically the cost of land for recycling and stockpiling of materials will undoubtedly become more scarce, and drive up prices. Transportation will be a key factor for recycling, but the opposing cost prices are as yet too unpredictable to determine if local or offshore recycling has any long term advantage.

These different global forces have a push and pull effect on where we do our recycling. Bring it back to the US and we may create a lot of new jobs, and we may create a lot of jobs and even revive follow-on industries…. such as textiles. But if we are going to recycle our garbage, will you let a recycling plant be built in your neighborhood? The desire for a community to clean up the environment can quickly fade when they learn that garbage and potentially toxic industrial processes are headed to their neighborhood. There are many benefits and questions about how, and where, outsource our recycling. The only aspect of this process that isn't open to questions is that more recycling is going to be “recycled” to outsourcers, wherever they are based!

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