Beyond the Smokestack: Environmental Protection in the Service Economy

79 Pages Posted: 3 May 1999

See all articles by James E. Salzman

James E. Salzman

University of California, Santa Barbara (UCSB) - Donald Bren School of Environmental Science & Management; University of California, Los Angeles (UCLA) - School of Law

Date Written: April 25, 1999


When our pollution control statutes were drafted in the 1970s, smokestack sources sat squarely in these laws' regulatory cross hairs. Over the past few decades, however, manufacturing's relative importance has declined while the service sector has ascended to the point where services now dominate America's economy, comprising 75% of GNP and 80% of employment. Yet consideration of services remains almost entirely absent from environmental law and policy scholarship. This article addresses the implications for environmental protection of the service sector's ascent.

Commentators have suggested that the ascent of services provides an important path toward sustainable development. Part I of the article examines the phenomenon of deindustrialization, analyzing statistics on employment, productivity, and economic activity over the last three decades to describe the relative fortunes of the service and manufacturing sectors. It also explores the physical implications of these findings and demonstrates two key findings at odds with common wisdom. First, despite the undeniable growth of services in employment and economic activity, manufacturing in America has not declined. Indeed in absolute terms we are manufacturing more than ever before. Second, while there is indirect evidence of an "environmental bonus" from the growth in services and other facets of the information revolution, improvements in material intensity have been offset by increasing levels of economic activity. In fact, a plausible interpretation of the data suggests a counter-thesis, a correlation between the rise of services and increased resource consumption. Part II considers how best to reduce the environmental impacts of specific services, delineating two categories of services with distinct implications for law and policy. "Smokestack services" include operations with large physical plants such as utilities and hospitals that emit significant quantities of air pollutants or solid waste. Traditional strategies for controlling industrial sources of pollution go to the very core of environmental protection but they often match poorly smokestack services. "Cumulative services" such as fast food chains and dentist offices do not cause significant environmental harm at the level of individual operation but collectively have important impacts. They pose the challenge of a nonpoint source world, where the universe of diffuse sources threatens to overwhelm command-and-control regulation. Appropriate regulatory and non-regulatory instruments are analyzed in each category.

Part III employs a fundamentally different type of approach, focusing not on the impact of the services themselves but on their ability to reduce environmental impacts throughout product life-cycles. Such "leverage services" act as a funnel through which products, electricity and financing must flow to end users. They raise intriguing possibilities for environmental protection because, while not necessarily causing significant environmental impact in their immediate activities, their commercial links provide a uniquely effective fulcrum to leverage environmental improvements upstream and downstream in the life-cycle. This presents a novel vision of environmental protection, moving from a narrow focus on production and disposal to energizing the web of commercial relationships.

JEL Classification: K32, L1, L2, L5, L8, Q3

Suggested Citation

Salzman, James E., Beyond the Smokestack: Environmental Protection in the Service Economy (April 25, 1999). Available at SSRN: or

James E. Salzman (Contact Author)

University of California, Santa Barbara (UCSB) - Donald Bren School of Environmental Science & Management ( email )

4670 Physical Sciences North
Santa Barbara, CA 93106-5131
United States

University of California, Los Angeles (UCLA) - School of Law ( email )

385 Charles E. Young Dr. East
Room 1242
Los Angeles, CA 90095-1476
United States

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