How Great Is The Threat To The Global Environmental Consultancy Services Market From Trump's Policies?

30-May-2018

The USA's market for environmental consultancy services (ECSs) accounts for 44% of the global total, a new report from The Business Research Company shows.

Because of the USA's dominance, the knock-on effect for the global market of any slowing or decline in the USA could be severe. As the Trump Administration's repealing of the country's Clean Power Plan and the weakening of its Environmental Protection Agency is expected to restrain the growth and even possibly lead to a decline of the ECS market in the USA, the risk to the industry is substantial.



As the chart shows, growth in the USA has been 1.9% a year and will be only 2.4% a year up to 2021. Both these are well below the global average. Because of its size the US market has and will hold global growth back to below global GDP growth. If growth in the US market were to equal the global average it would be worth nearly $700 million more a year in 2021 than its expected level. Some markets, such as those of France, Russia and India will grow at a much faster pace, but these are too small to have much effect on the global picture; these three together were less than a fifth the size of the US market in 2017.

The United States Environmental Protection Agency, which enforces regulations to protect human health and the environment, had a budget of $8.6 billion for the financial year 2016. This was $452 million more than the previous year’s budget. However, for the 2018/19 year the Agency is only requesting a budget of $6.1 billion, a 23.2% reduction from the Agency’s Financial Year 2018 Annualized Continuing Resolution (ACR) level. The new executive order signed by President Trump will result in a rollback of the country's Clean Power Plan and reconsideration of carbon emission standards for new coal plants and regulations on methane emissions from oil and gas extraction. This reduction of government spend on environmental protection in such a large market as that of the USA, combined with looser regulations requiring corporate compliance, will seriously impact the market for the ECs. There are, though, countervailing influences at work in the USA. Corporations and individual states are taking environmental initiatives that will prevent the ECS market in the USA from sliding into negative growth territory.

From a global perspective, however, unlike in some other markets, China's ECS market is unlikely to compensate for any restraint on the USA's growth. China's market has been growing at a rate well below the global average, and that is predicted to continue. It is true that there are environmental regulations applying to large manufacturing industry in the country, and following disasters such as an explosion at Tianjin and leakage from Guiyu’s e-waste graveyard, the country is legislating to impose controls on environmental damage. In addtion, in 2016, China committed to reduce its pollution levels and lower the carbon intensity of its gdp by 60%-65% below 2005 levels by 2030. Again, it has committed to reduce by 40-45% its CO2 emissions per unit of gdp from their 2005 level by 2020. However, most of the large polluters in China are state-owned enterprises and they are likely to aim to keep their operations in-house and employ the necessary experts rather than use external consultants, so the impact of these changes on the ECS market will be limited.

The largest segment of China's environmental consultancy market, as in most other major economies, is site remediation, needed where land wanted for development has been polluted by industry or extraction. In part, this predominance results from the immense cost and duration over time of site remediation projects, and the high value of urban land, which is where contaminated land is most frequently found. These factors induce would-be developers to regard the cost of professional ECS advice as a minor part of the project and one that they must undertake to obtain official permissions to build. However, most environmental consultancies working in China are international companies, and they have limited access to this market.

The fastest-growing part of China's environmental consultancy services market, however, is not site remediation but water and waste management, which consists of providing advice and assistance to businesses and other organizations on activities such as waste water treatment and solid waste management. Environmental consultants offer expertise on processes to treat solid, liquid, gaseous or radioactive substances waste matter from businesses and other organizations. In China waste and water management consultancy grew at 3.7% year on year to 2017 and has now accelerated and will achieve 4.9% annually to 2021. However, both these rates are well below the global average equivalents.