The factory sector presents opportunities for bespoke environmental insurance because the US Environmental Protection Agency (EPA) is expected to propose tighter rules on air pollution.
EPA data revealed that if its new rules go into effect, 75% of the country would be unable to meet these new standards. The rules are seen to further restrict smog-causing ozone, demanding the use of more financial resources from manufacturers.
Once these EPA rules take effect, manufacturers will need tailored insurance products to cover risk from non-compliance.
The factory sector has seen an upward trend in abatement costs with the fall of manufacturing pollution. Currently, they spend $25 billion per year to shrink their environmental footprint. This represents around 1% of the manufacturing value-added, which is similar to most other advanced economies.
With the rise of abatement costs, the game has shifted from one of effectiveness to one of efficiency, which poses the challenge of maintaining the competitiveness of the US manufacturing sector as it reduces pollution. Observers noted the trend of diminishing returns at this point, with investments in pollution control yielding lower results, and actually becoming more expensive to implement.
