Redistributed as a Service of the National Library for the Environment*
|
Redistributed as a Service of the National Library for the Environment* |
|
|
|
RL30760: Environmental Protection: New Approaches John E. Blodgett Deputy Assistant Director December 11, 2000
Contents Summary In recent years, the interest in alternatives to the nation's "command-and- control" approach to environmental protection has heightened. Driving this interest are concerns that the current approach is inefficient and excessively costly, and that it is ineffective in addressing certain problems such as nonpoint source pollution and global climate change. Several blue-ribbon panels have issued reports on environmental protection needs for the next century, including one headed by former two-time Administrator of the Environmental Protection Agency, William D. Ruckelshaus - The Environmental Protection System in Transition: Toward a More Desirable Future (1998)- and one by the National Academy of Public Administration - www.environment.com: Transforming Environmental Protection for the 21st Century (2000). Alternative environmental protection approaches range from proposals that would replace the current system to ones that would supplement it. Elements of the proposals include enhanced information processes, greater reliance on market mechanisms, devolution of federal responsibilities to state and local decisionmakers, and substitution of private markets for public actions. The proposals for the most part represent a mix of techniques, and few are really new. Most of the ideas have been developed and promoted for some time; many have been incorporated to some degree in existing programs. This report summarizes briefly a number of "new approaches," grouped under the following categories:
Each approach seems to have some useful applications. Each has some disciplinary, ideological, or institutional proponent; but none commands the multi- stakeholder commitment necessary for truly transforming environmental programs. There may be consensus that environmental protection programs could and should be improved, but beyond modest iterative steps, there is as yet no consensus on what that would entail nor on how to achieve those steps. Critical to this lack of consensus is an apparent split in proponents' goals - those most focused on improving the efficiency of the current process, versus those most focused on finding new ways to address so-far intractable environmental problems such as global climate change. Since the early 1970s, as U.S. environmental policy burgeoned, a key debate has centered on the proper approach for federal environmental protection programs. The dominant approach of choice has been a regulatory one - often labeled "command and control"2 - in which government decisionmakers set standards or specify particular actions required of potential or actual polluters. However, concerns about economic inefficiency, the difficulty of addressing certain problems such as nonpoint source pollution, and other perceived shortcomings of the regulatory approach have from the beginning stimulated interest in alternative environmental protection approaches that would complement, supplement, or even replace the regulatory regime. In recent years, the interest in alternatives has taken on a new intensity. Several reasons explain this interest, including: First, while the regulatory approach has been quite successful in reducing pollution originating from large point sources - such as manufacturing facilities and sewage outfalls - as well as pollution arising from products with relatively few manufacturers - such as automobiles and pesticides - it has not been so successful in addressing "nonpoint" sources of pollution, such as agricultural and urban runoff, nor small "dispersed" sources, from domestic fireplaces to small businesses. Second, economic and other analyses have suggested that, compared to regulation, various alternative approaches may be more economically efficient and may encourage technological developments to reduce pollution, among other advantages. Third, the federal "command and control" approach troubles those concerned about the overall size and power of the federal government. Fourth, some argue that the regulatory approach has become captured by one or another set of stakeholders. Some environmentalists believe that those being regulated strongly influence the process, to the detriment of the environment, while others perceive regulators as overly responsive to environmentalists. Additionally, the advent of a new millennium has seemed, at least to some, a propitious symbolic opportunity for exploring alternatives. (For selected initiatives and publications relating to the future of environmental protection, see Appendix A.) Numerous alternative environmental protection approaches have been proposed. They range from proposals that would radically reshape the environmental protection approach in the nation, to proposals that would fine-tune existing programs. Metaphorically, some proposals represent new tool boxes for addressing environmental problems, others represent individual new tools. Generally, they are not exclusive; that is, any environmental protection program would likely draw on a mix of the tools. Moreover, their "newness" lies more in application than conception: most of these ideas have been developed and promoted for some time; many have been incorporated to some degree in existing programs. Environmental Management: A Portfolio of "New" Tools This report summarizes briefly a number of "new approaches," grouped under the following categories:
These categories are not necessarily mutually exclusive. Not only may the approaches overlap, but also the various "tools" may serve more than one approach. As will become apparent,the idea of a"new approach" to environmental management in reality consists of a mix of ideas and proposals. Information. This group of approaches centers on enhancing the information available to decisionmakers, including administrators, legislators, environmental managers, polluters, and the public. Legislatively establishing information generating processes is not novel, of course. It is the essence of the National Environmental Policy Act of 1969 (NEPA, P.L. 91-190), specifically the "environmental impact statements" (EIS) provision of section 102, which requires a study of environmental effects of alternative approaches to federal actions. Initially, there was a question of whether the EIS requirement of NEPA applied to environmental regulatory decisions; in the end, only selected environmental regulatory decisions were made subject to the EIS requirement. Proposals for cost-benefit analyses, risk assessments, and the use of "sound science" represent continuing pressure for generating and/or arranging information to improve decisionmaking. Within this group of information tools are a number that proponents believe will benefit decisionmaking in various ways. • In general - "Sound Science"3 • Information focused on improving regulatory decisions, in particular risk analysis and cost-benefit analysis • Information focused on improving planner/program manager decisions, in particular "green accounting" and materials accounting/materials management • Information focused on improving consumer/voter decisions, in particular the Toxic Release Inventory and energy efficiency ratings Often these proposals to enhance information for environmental decisions are proffered with the stated goal of improving regulatory decisions; certainly this has been the primary impetus for developing cost-benefit analysis and risk assessment, and for much of the concern about "sound science." Some alternatives to regulation may reduce the need for certain kinds of information. For example, a pollution tax may generate a price signal that leads to pollution controls without the government needing information on the specific controls used, as might be required by regulation. On the other hand, the alternative may require its own enhanced information base; thus, implementing a pollution tax could depend on developing particular information in order to set such a tax at an appropriate level. (It should be noted that reliable information may be costly to collect, maintain, and interpret and may raise issues of confidentiality.) Public Sector Processes. This second set of approaches proposes to improve environmental decisions by restructuring the processes by which those decisions are made in the public sector. Proposals include:
These proposals are designed primarily to reform and improve the regulatory process, not to replace it. Incentives. A third set of approaches seeks to shift the emphasis from a government regulatory role with its enforcement and compliance emphasis to a supportive role based on incentives to encourage environmentally beneficial actions. These include:
If the role of government in a regulatory approach is that of the "stick," then for these alternatives the role of government is to offer "carrots." Inducements can include the provision of information; technical and financial support; or regulatory relief for voluntary compliance, especially if it goes beyond what might be required. Typically, incentive approaches leave the potential or actual polluter to respond as he or she chooses - that is, to decide whether to seek out and use assistance, or to decide whether the amount of reimbursement for costs of pollution-reducing actions is worth it. The conduct of research and development, to develop information and techniques, might be seen as an indispensable antecedent to governmental incentive programs. Market Mechanisms. This set of approaches shifts as much as possible of the decisionmaking on environmental protection away from the government to the private sector:
What distinguishes all of these alternatives is the reliance on marketplace-type processes to affect decisions with respect to their environmental implications. A potential or actual polluter can decide what action is best, given his or her circumstances, based on emission allowances (e.g., in a banking/trading program); cost signals (e.g., from a pollution tax); liability from imposed risks (e.g., from harm resulting from waste disposal practices); or liability from violating private property rights (e.g., when pollution crosses property lines). For these alternatives, the role of government lies primarily in setting the rules and boundaries on the market, and/or establishing the courts and rules of evidence for determining legal redress. In contrast to the regulatory approach, the government does relatively less specking of environmental requirements that designated sources would have to meet, although a standards-setting role may be maintained. Management Principles. A fifth group of approaches relies on defining management processes or values that proponents believe would result in good environmental outcomes:
Where the privatizing approach would affect decisions concerning the environment by modifying market signals, the management process approach proposes to affect decisions by promoting and reinforcing environmentally oriented values. Generally, "good management" approaches have entailed moral suasion, sometimes backed with incentives; they are often seen as a "voluntary" alternative to regulatory mandates. A key issue is who can and should define such standards; typical options include governmental bodies (international, federal, state, local), professional societies, and private sector consortia. Experience suggests that translating general values of environmental protection into practical decisionmaking is not always easy, however. In a regulatory setting, incentives may be contingent on complying with the standards; in other contexts, compliance may be largely or entirely voluntary. Selecting and Implementing New Approaches What is striking about these proposals for complementing, supplementing, or replacing environmental regulation is how few of them are really new, and how even fewer represent radically new approaches. In part, this may simply reflect the truth that there is nothing new under the sun; but even more, it may reflect the fact the environmental protection system that has grown up over the past 40 years in the U.S., while dominated by a federal regulatory approach, consists of complex, multifaceted, and interlocking institutions, laws, regulations, and programs involving all levels of government. Some aspects of virtually every approach proposed have found at least some niche for trial, and some are, in fact, widely accepted as practical for particular applications. (For example, the market approach of the acid rain program under the Clean Air Act is widely viewed as greatly successful and as a potential model for additional programs; but it is not widely viewed as a model for comprehensively replacing the existing environmental regulatory regimen. Likewise, the Toxic Release Inventory is widely viewed as a greatly successful informational mechanism, but whether it should be expanded is highly contentious.) For those proposing different environmental protection approaches, the quest for alternatives is often driven by a conviction that the existing system is piecemeal, unduly complex, inefficient, and too costly. Implicitly, this view suggests that a new approach would be simpler, neater, more efficient, and hence less costly - and surely more (cost-)effective. This search for more efficient, less costly approaches has focused on market alternatives because traditional economic analysis suggests that market-based alternatives are usually more efficient. However, empirically, the relative efficiencies may not always be clear-cut.4 Moreover, while the ideas for "new alternatives" to regulation have attracted much attention and considerable theoretical analysis, assessments of the actual costs to develop and implement them are often lacking. Even where alternatives may in the long run save money - for example in private sector compliance costs- they may require substantial up-front investments, often by government at some level. 5 One recent effort to examine program and policy alternatives was the Enterprise for the Environment (E4E) project, headed by former EPA Administrator William Ruckelshaus. Basically, the E4E project concluded that there was no single new environmental protection approach; rather, the participants concluded that the "existing system must be improved" through an iterative, "deliberate, step-by-step process" that involves better information, flexibility, best-available scientific and economic information, and a "broad set of policy tools. "6 As Ruckelshaus said in his preface -
Further impetus for the quest for a new approach arises from the recognition that the present system seems ill-equipped to deal with some important environmental problems - some of long standing concern, like nonpoint source pollution, others more newly recognized, such as global climate change. These problems have proved extremely difficult, especially where they involve individual behaviors on the one hand, and where they involve global actions on the other. The E4E project concluded that tackling these issues was beyond its capabilities.8 A second major effort to examine program and policy alternatives was a series of studies by the National Academy of Public Administration (NAPA), culminating in a report environment.gov: Transforming Environmental Protection for the 21st Century.9 In many respects, the NAPA report comes to similar conclusions as the E4E project (not so surprisingly, as Ruckelshaus was on the Panel that prepared it). The report begins by defining three high-priority environmental protection problems for which the existing regulatory system is proving inadequate and for which the report recommends innovative, alternative approaches. These three problems are:
The NAPA report directly discusses the need for statutory changes, particularly to allow innovation, to increase flexibility among media-focused programs, and to develop better information on environmental quality. The report analyzes the successes and failures of efforts to make environmental protection programs more efficient and effective.10 It assessed the respective roles of all levels of government, business and industry, the public, and the Congress. The report concludes that the nation will continue to need a strong national environmental regulatory agency; that the agency needs both to adopt innovations to achieve more efficient environmental protection and to take a leadership role in developing alternatives (especially market mechanisms) and in mobilizing public and congressional support for them; and that the federal government needs to be a leader in providing credible, authoritative environmental information. While E4E and the NAPA Report focus on environmental protection, the development of the concept "sustainability," originating in global concerns, subsumes environmental protection issues within a broader framework of long-term resource management. The term "sustainable development" emerged in its current form in 1987m the final report of the United Nations World Commission on Environment and Development (WCED).11 The definition most widely quoted in the WCED report is: "Development that meets the needs of the present without compromising the ability of future generations to meet their own needs." The importance of the concept is that traditional economic analysis often treats growth in economic activity without taking into account possible deterioration of the resource base; sustainability analysis focuses on the ability of resources to sustain economic activity over the long-run. In this context, pollution becomes viewed as a degrader of the resource base. Finally, concerns about the federal role itself can drive the search for a new environmental protection approach. For some, the federal government is simply too big and too powerful. They would cut down the federal environmental role, typically relying on state programs, the marketplace, and/or tort and common law to resolve environmental problems. For some others, the federal regulatory process has been captured by one or another set of stakeholders - for some, the polluters, for others, environmentalists. Their response often involves radical restructuring not just of environmental protection programs, but of all governing institutions. The existing system is embedded in law, institutions, and expectations. Its inertia must be overcome to accomplish change, modification, or even improvement. Overall, while each "approach" could contribute to protecting the environment, none seems to command an essential breadth of political and technical respect to be seen as a single viable "new direction" for the 21st Century. Each "approach" seems to have some useful application. Each has some disciplinary, ideological, or institutional proponent; indeed, many of the approaches have become virtually inseparable from the institutions and/or group of individuals promoting them. While many have contributed to the conceptual development of alternative approaches, the largest share has come from the work of academics and think tanks. Institutions involved in international development issues have also contributed, such as the Organization for Economic Co-operation and Development (OECD). Business and industry interests have more commonly reacted to regulatory issues than taken the lead in conceptualizing new approaches.12 Environmental and health public interest groups have more commonly focused on the need to address environmental problems than on the development of new approaches. The White House's Council on Environmental Quality- a dynamic force in environmental policy development in the early 1970s - has been allowed to atrophy. And the Environmental Protection Agency - whose Administrator the NAPA report suggests might spearhead the transformation of environmental policy in the 21st Century -has tended to focus on finetuning the existing system. Indeed, it was Congress through the appropriations process that directed the Agency to contract with NAPA to prepare the analyses that led to environment, corn: Transforming Environmental Protection for the 21st Century. What it would take to prompt additional innovation is the question: it could be a crisis - perhaps a critical environmental threat for which regulation seems powerless or some fundamental environmental regulatory mistake that threatens economic disaster. Alternatively, it might be, as the NAPA report urges, a sustained initiative by the future head of EPA, the new President, and/or the Congress. Absent a crisis or this kind of initiative, it is hard to see how the regulatory "approach" will be supplanted generally until amore comprehensive, interdisciplinary, multi-stakeholder commitment to some alternative emerges. That, indeed, would seem to be the final lesson of the E4E and the NAPA projects: there maybe consensus that environmental protection programs could and should be improved, but beyond modest iterative steps, there is as yet no consensus on what that would entail nor on how to achieve those steps. Building toward that consensus would appear to be the next necessary step if environmental policy is to be transformed. Inhibiting the formation of consensus is a split in the way proponents tend to see new approaches: for some they are primarily ways to solve the inefficiencies of the existing regulatory problem; for others they are primarily ways to address unresolved or new environmental problems. Those focused on inefficiency fear that expanding environmental protections to new problems would make the burdens of compliance worse; while those focused on environmental insults fear that efforts to reduce inefficiencies would be accomplished by retreating from environmental protections and ignoring new problems. These divergent motives inhibit joint recognition of opportunities for new approaches to contribute both to efficiency and to effectiveness. Selected New Approaches to Environmental Protection The remainder of this report consists of brief introductions to selected new approaches to environmental protection. Each identifies a tool, or set of related tools, describes its basic characteristics, notes "pros" and "cons" associated with the tool, provides some background, summarizes current developments, and concludes with a list of readings for further research. These introductions are necessarily brief and incomplete; their purpose is to expose the reader to these alternatives and to provide sources through which the reader can pursue ideas that he or she finds promising. Making environmental decisions requires an understanding of the problem at hand and the ability to predict outcomes from alternative actions. Common criticisms of the existing regulatory approach to environmental management are that decisionmakers may lack sufficient, reliable information to make a sound decision; that they may rely on invalid data or findings or selectively choose only data supporting preferred outcomes (i.e., "junk science"); or that they may rely overmuch on nontechnical determinants at the expense of sound scientific information. A presumption that sufficient, robust information will be brought to bear objectively on environmental decisions underlies all conceptions of an improved or alternative approach. What this presumption means in general is often subsumed in calls for "sound science"; particular applications include risk analysis and cost-benefit analysis, among other methods of generating and organizing information. "Sound Science".13 The idea of "sound science" encompasses at least two parts of the policy decisionmaking process. The first part is establishing the technical knowledge underlying the issue and assessing possible solutions. This involves many activities, including development, validation, and application of research methods; environmental monitoring; epidemiological studies; data collection, storage, and evaluation; laboratory experiments; integration of disciplinary knowledge; and assessment of the robustness of the data, experimental results, and interpretive findings. The second part of science-in-policy is applying the scientific understanding to the policy issue. At this intersection of science and policy, of scientists and decisionmakers, the question about the science moves from "What do we know?" to "What do these findings mean (in terms of the policy options faced by the decisionmaker)?" To illustrate, science can address the question, "At a 95% confidence level, what is the no-effect level of arsenic in drinking water?"; the policy question might be, "What level of exposure to arsenic in drinking water will we consider safe?" Or, scientifically, "What do we know about the effects of emissions of mercury from fossil fuel combustion?", where the policy question might be, "Should emissions of mercury be regulated?" While sound science may necessarily underlie a good policy decision, it is not sufficient: statutory and administrative requirements and social and cultural values are also determinative. Validating and Applying Science. Because policy issues by definition involve conflicting viewpoints, both the validity of the science base as well as its interpretation may be challenged. Scientists have developed processes for ensuring robust results - that is, scientific information that is widely perceived as reliable. Crucial components of these processes include publication of both data and results so experiments can be independently repeated to verify results, and peer review through which colleagues assess and, at times, challenge findings and interpretations. Science is not static: new observations and understandings may raise questions about the findings of earlier studies, and peer review and the self-correcting nature of science help ensure that scientific knowledge is updated to reflect the most current and widely-accepted thinking in the scientific community. Thus scientific knowledge is always subject to some degree of uncertainty, especially in frontier areas such as ecology and the environment. Even widely agreed-upon scientific findings may be accompanied by "loose ends": incomplete data as well as some data that do not fit, uncertainties, probabilistic findings, ranges in results, incomplete studies, and not infrequently, some contradictory findings and even an occasional reputable scientist who contends in favor of an alternative conclusion. The policymaker - usually not a scientist - must meld the technical information with the other factors involved in his or her decision. Even if the science indicates a problem, it may not indicate a solution. The EPA Administrator's 1998 decision to set a very fine particulate matter (PM,,) National Ambient Air Quality Standard is illustrative: while 19 out of 21 members of the Clean Air Scientific Advisory Committee recommended that EPA regulate PM the body fragmented on what level would be appropriate for the standard. Thus, in setting a standard, the Administrator must not only make decisions about the "loose ends" of the scientific findings, but also must incorporate appropriate policy determinants - from the statutory guidelines to social ethos. Claims of "junk science" can stem both from disagreements concerning a decisionmaker's handling of uncertainties and any persisting scientific "loose ends" and from disagreements about the need for and effectiveness of alternative solutions. Uncertainty. Perhaps the single biggest challenge to the decisionmaker is deciding when the robustness of the science outweighs remaining uncertainties. The question of when enough reliable information is available to act is, in the end, a policy call. As an emerging arena of scientific attention, environmental issues have regularly been bedeviled by that question: notable examples include DDT and its effects on birds, PCBs and their persistence in the environment, emissions causing acid rain, and the hypothesis that chlorofluorocarbons deteriorate stratospheric ozone; and it continues at the center of the climate change debate. For scientists, uncertainty can be an opportunity for further research; for policymakers, uncertainty is a void that makes assessing options more difficult. But more research takes time - and during that time further damages may occur. This raises the policy question. In the face of potential but uncertain hazards, should one defer action until better information is at hand, or should one act quickly to forestall possible future damages? In part, the answer depends on the risks and costs involved, but there are other considerations, as well. A key concern is who will generate the better information - Should that be a government responsibility, or should it be the responsibility of the producer of the hazard, if identifiable? One management principle for dealing with uncertainty is the "Precautionary Principle," discussed below. Federal Procedures. Congress and the Administration have developed a number of procedures and processes to ensure that the scientific underpinnings of environmental, health, and safety decisions are robust, and that policy decisions are sound. These include:
Both improvements to environmental regulatory programs and the development of alternative environmental management techniques presume continued enhancement of the science underpinning decisions. How to ensure sound science has attracted congressional attention, notably in the context of various controversial EPA regulatory actions, and most particularly with respect to oversight of EPA's 1998 ozone and fine particulates National Ambient Air Quality Standards.15 Most proposals to reform and improve EPA's regulations would mandate cost-benefit analysis and/or risk assessment procedures - which themselves depend on good scientific information - to enhance the information base for decisions. Some regulatory reform bills also specifically provide for new mechanisms to enhance the science underlying regulatory decisionmaking-e.g., in the 106th Congress, H.R. 574, introduced by Rep. Pombo, would require peer review of scientific data used in support of federal regulations through establishment of a list of impartial peer reviewers from which agency heads would select reviewers for comment on proposed regulations; H.R.5195, introduced by Rep. Ehlers, would provide for the establishment of a position of Deputy Administrator for Science and Technology of the Environmental Protection Agency. For additional reading, see:
Risk Analysis.16 Risk analysis is a tool for setting priorities among programs and evaluating management options. In the context of environmental issues, "risk" is defined as the probability of occurrence of a particular adverse effect on human health or the environment as a result of exposure to a "hazard," which may be a chemical, some other technology, or a natural hazard, such as flooding. "Risk assessment" refers to a formal or informal procedure producing a quantitative estimate of environmental risk. For example, risk assessment is often used to estimate the expected rate of illness or death in a population exposed to a hazardous chemical. "Risk analysis" is used more broadly to include quantitative and qualitative evaluation of all relevant attributes of environmental hazards, risks, adverse effects, events and conditions that lead to or modify adverse effects, and populations or environments that influence or experience adverse effects. Comparative (or relative) risk analysis and cost-benefit analysis are aids to risk management, the process of deciding what should be done about hazards, for example, to reduce risk. Thus, risk analysis is a tool for risk management, and Environmental Protection Agency risk managers increasingly have relied on it, to the extent permitted by law. In setting priorities across or within program offices, EPA sometimes has compared risks or risk reduction potential of different regulatory targets. In developing regulations, EPA has used the results of risk analysis to set standards, to compare the effectiveness of various control measures, and to evaluate risks relative to costs. Risks avoided (i.e., the difference between risks before and risks after a regulation is implemented) are the usual measure of benefits for environmental or health and safety regulations. Reports by the Commission on Risk Assessment and Risk Management 17 and the National Academy of Public Administration 18 recommend an expanded role for risk analysis in risk management. Benefits and costs of risk analysis. Environmental risk analysis assists decisionmakers by summarizing available data about hazards and potential effects of exposure. At its best, when reliable data are available, scientific understanding is relatively advanced, methods are reliable (i.e., when the underlying science is sound), and interested stakeholders are involved in the process, risk analysis can facilitate decisions. Quantified, robust information about alternative regulatory strategies and their potential consequences - implementation and compliance costs, risks avoided, and other benefits - help policymakers and the general public set priorities, allocate resources, assess options, and evaluate existing federal laws and programs. Also, it is a critical component of cost-benefit analysis. Risk assessment is not always at its best, however: the scientific understanding of a risk may be undeveloped, data incomplete, and experiments unfruitful; practitioners and stakeholders may disagree on methods and interpretations. Ensuring that the underlying science for risk assessment is sound requires resources - time, effort, and money - to collect data, conduct experiments, run computer models, analyze findings, and write reports. Agency resources expended on analysis may not be available for enforcement, program evaluation, or research. Some costs, for example, collection of data, maybe shifted to those regulated; for example, the Clean Air Act requires large emitters of certain air pollutants to monitor emissions. Another concern has been that the time required to conduct risk analysis may make difficult the meeting of deadlines for implementation of provisions of major environmental statutes. Finally, quantitative risk assessment, by focusing on the data that do exist and on risks that are best understood, may thereby ignore or insufficiently account for other risk parameters. For example, many environmentalists, among others, have long been concerned that risk assessment often over-weighs cancer endpoints compared to other health risks; and it often over-weighs health endpoints generally compared to ecological risks. Executive and legislative interest in risk analysis. The potential value of risk assessment has both stimulated research in its development and made its use a focus of policy debates. Presidents have attempted to encourage more consistent use of risk and economic analysis by federal agencies through executive orders. Most recently, President Clinton's Executive Order 12866 requires EPA to analyze risks, costs, and benefits for "significant" rules, including all proposed and final rules expected to cost at least $100 million in a year. Congress also has issued general mandates to federal agencies to encourage greater use of risk and cost-benefit analysis. The Unfunded Mandates Reform Act (P.L. 104-4), Title II, requires all federal agencies to quantitatively assess benefits, including the effect of a federal mandate on health, safety, and the natural environment, and to compare benefits to costs for all rules with an expected cost of $100 million or more in a year. However, of 110 economically significant rules promulgated in the first 2 years since enactment, 78 did not require assessments due to specific exemptions allowed by the Act, according to the U. S. General Accounting Office. The 104th Congress added mandates for considering risks to two environmental statutes authorizing EPA's regulatory activities, the Federal Insecticide, Fungicide, and Rodenticide Act and the Safe Drinking Water Act. The 105th and 106th Congresses have continued working on legislation that would foster and in some cases require more rigorous use of risk assessment by regulatory agencies. For example, S. 746 (Levin-Thompson), the Regulatory Improvement Act of 1999 [106th Congress] would codify the requirements for cost-benefit analysis and risk assessment for major rules, and executive oversight of the rulemaking process. Among its major provisions, the bill would have required regulatory agencies to prepare a risk assessment if rule involves a risk to health, safety, or the environment; provide for independent peer review of risk assessments and cost-benefit analyses for rules costing $500 million; and include cost-benefit analysis, cost-benefit determinants, and risk assessment in the rulemaking record. The Office of Information and Regulatory Affairs, in consultation with the Office of Science and Technology Policy, would issue guidelines for risk assessments. For further reading, see:
Cost-Benefit Analysis.19 Cost-benefit analysis is one way to organize, evaluate, and present information about the actions that governments take to improve public well-being. With respect to environmental and health issues, risk assessment, which presents information in such terms as morbidity and mortality for humans or animals, is a prerequisite for cost-benefit analysis, which places monetary values on attributes of human well-being.20 And like risk assessment, its use can be complicated, expensive, and controversial. As a set of procedures to measure the merit of some public sector actions in dollar terms, cost-benefit analysis is a counterpart to private-sector profitability accounting. The difference is that most public actions to improve public well-being do not have established private markets which generate price information on which to judge their value or benefits. To compare the public benefit of such actions to their costs, benefits (and sometimes costs) are indirectly estimated in dollar terms. The objective is to determine the alternative for public action that produces the largest net gain to the society. In this case, gain is not in terms of private sector profit, but rather as an estimated surplus of monetized benefits over estimated costs. Based on this criterion, cost-benefit analysis attempts to identify the most economically efficient way of meeting a public objective. Other goals of public management are not focused on in this process, but in some cases they may be subsumed in the analysis. The debate over cost-benefit analysis focuses on its possible value in reducing the perceived economic burden and complexity of traditional regulatory approaches. Greater use of cost-benefit analysis is part of the broader regulatory reform effort calling for increased flexibility in regulatory approaches and increased accountability and scrutiny of regulatory decisions. Complexities. Formal cost-benefit analysis often demands costly and sometimes disputed expertise and data. Done carefully, it provides an array of information that can inform the decision process. Done poorly or taken out of context, the results can create a false sense of clarity and precision. Methods, data, expense, and prospects for court challenges on use and abuse are concerns driving debate on how greater use of this tool may figure in regulatory reform. The tensions in regulatory reform and the role of cost-benefit analysis touch on many complex issues. These include: scientific capabilities in measuring and characterizing long-term and often uncertain health, safety, and environmental phenomena; agency capacity for collecting and using data; methods to characterize positive and negative effects of regulations; equity in protecting the public against health, safety, and environmental risks; burdens on lower levels of government and the private sector in achieving public goals; and fundamental questions of regulatory design such as flexibility and location of implementing and decisionmaking authority. The role and application of cost-benefit analysis by agencies are important focuses of the evolving process of regulatory reform. Disagreements typically revolve around the practicality and usefulness of strict application of the tool. The conflicts involve more questions of "how much" and "to what end" than "whether," since these techniques are already used by federal agencies to differing degrees in assessing many of their regulatory activities. Application of cost-benefit analysis: support and criticism. Cost-benefit can be applied to public actions using varying degrees of formality (how far analysts go in trying to compare monetized benefits with costs). At one level, some believe that the only regulations that should be maintained or adopted are those that clearly pass the cost-benefit test - namely, benefits must demonstrably exceed the costs. Proponents of this position argue that promulgating only those regulations where benefits outweigh or justify costs (presumably in monetary terms) can help rationalize the regulatory process and improve priority setting. In this view, such reform would increase the likelihood that regulations will not place burdens on businesses and consumers that are out of proportion to gains in health, safety, or environmental protection. Such a change, it is maintained, could lead to more systematic consideration of more efficient ways to achieve desirable health, safety, and environmental protection goals. Excessive regulations would be minimized, eliminating rules and enforcement where goals are ill defined and measurement of costs or benefits is uncertain. Others argue that cost-benefit analysis can be an important and useful exercise in assessing the impacts of regulatory actions, but the resources demanded for full and rigorous cost-benefit analysis can be excessively costly and time consuming with the result that cost-benefit analysis can impede legitimate protection. Proponents of this position fear that efforts to use cost-benefit comparisons for establishing regulatory priorities will end up emphasizing only those aspects of health, safety, and environmental protection which can be easily translated to dollar terms. Such an outcome would weigh heavily against intangible or nonmonetary aspects of health, safety, and environmental protection, which is often what these types of regulations are intended to protect or enhance in the first place. In this view, the effort to make such comparisons could impede the legitimate government role of protecting and enhancing public well-being. As a practical matter, expanding the use of cost-benefit analysis would imply committing additional agency resources in research, monitoring, and analysis. Finally, many argue that cost-benefit analysis is an incomplete tool for regulatory impact analysis, particularly with respect to non-quantitative values, and that related methods of analysis such as risk assessment and cost-effectiveness are more appropriate. Proponents of this view argue that no one opposes the use of cost- benefit in a quantitative or qualitative sense in assessing regulatory impacts in instances where it is feasible. However, there is a wide range of opinion regarding how rigorously the method should be used, given that costs and benefits in many instances are so difficult or perhaps impossible to measure, even in an approximate way. Cost-benefit analysis, despite its widespread application, is still a developing art. Much of the policy dispute is really about the rigorous use of cost-benefit analysis versus the use of other related methods of regulatory impact assessment, such as the less rigorous use of cost-benefit (based on a combination of qualitative and quantitative assessment); risk analysis or risk assessment; and cost-effectiveness. Executive and legislative interest in cost-benefit analysis. From the beginning of federal environmental programs, costs imposed on industry and business, state and local governments, and consumers and taxpayers have generated concern. As a tool for identifying those costs and comparing them to environmental and health improvements, cost-benefit analysis has been a subject of research and a focus of policy debates. In many respects, the development and application of cost-benefit analysis and of risk assessment have gone hand-in-hand. President Clinton's Executive Order 12866, the most recent of several E.O.'s on analyzing regulatory costs and benefits, sets forth criteria for the application of both risk assessment and of cost-benefit analysis in preparing major regulations. In meeting its obligations under this directive, EPA has created an "EPA economy and environment program" which carries out "research and analyses of the interactions and relationships between the economy and environmental pollution control as well as other aspects of environmental economics." A key task of the office is "developing and applying improved methods to produce economic benefit information used in benefit-cost analyses of environmental programs, policies and regulations.21 Likewise, in the Unfunded Mandates Reform Act (P.L. 104-4), Title II, Congress requires federal agencies to quantitatively assess benefits, including the effect of a federal mandate on health, safety, and the natural environment, and to compare benefits to costs for all rules with an expected cost of$ 100 million or more in a year. As noted in the risk assessment section above, recent Congresses have worked on legislation that would foster and in some cases require more rigorous application of cost-benefit analysis by regulatory agencies. For example, S. 746 (Levin-Thompson), the Regulatory Improvement Act of 1999 [106th Congress] would codify the requirements for cost-benefit analysis and risk assessment for major rules. For further reading, see the citations under risk assessment, above, especially
Informing Public Choices.22 One widely used tool today is making environmentally-relevant data available to consumers, voters, corporations, and policy and program administrations so they can make environmentally-informed choices among competing products or programs. (Conceptually, there is a parallel with energy or pollution taxes, which convey price signals to consumers, corporate officials, and others.) Various public laws mandate public dissemination of information such as the environmental impacts of alternative federal programs, relative energy efficiency of products, and emissions of pollutants:
Criticism and support for information provision. Industries targeted by information provision strategies usually are required to generate and report to government the requisite data which the governmental agency then makes available to the general public. As reporting requirements escalate, some industries have objected to the cost, not only for data gathering and reporting, but also for producing and presenting to the public other information to "provide context" for the data which otherwise may be misleading. Some businesses have been concerned about the public release of data that might reveal confidential business information and compromise economic competitiveness. In a few cases, chemical companies and other facilities that handle dangerous chemicals have argued that there are risks of terrorism that could be exacerbated if certain information were easily accessible, for example information about the potential consequences of accidents at various facilities. Environmental and consumer advocacy groups have championed these tools. They argue that citizens have a "right to know" about potential environmental risks to which they maybe exposed, and that information approaches such as the TRI have been successful in the past in promoting more environmentally responsible corporate behavior. TRI is credited by right-to-know advocates with reducing releases of many toxic chemicals from manufacturers by more than 50%. On occasion, manufacturers also have promoted use of these tools, especially as an alternative to federal regulation of emissions or manufacturing practices. Proponents argue that providing information works with a free economic market rather than against it, facilitates pollution prevention and creative pollution reduction strategies, and encourages stakeholder involvement in decisionmaking and enforcement. It facilitates voluntary efforts to protect the environment, and may be one of the few options for reducing pollution that is the cumulative effect of numerous daily individual decisions. On the other hand, the tool is only as good as the information; information that is inaccurate, confusing, misleading, out-of-date, irrelevant, or incomplete could distort rather than improve decisions. Similarly, there may be little benefit, or greater environmental harm could result, if the selection of reporting parameters (for example, under TRI) encourages industry to use alternative substances or processes which may pose even greater risk than the reported or regulated substance or process. Under the Clinton Administration, EPA worked vigorously to expand public access to information, especially electronically. EPA has promised to "make 100 percent of EPA's non-confidential environmental data available and accessible to the public in a user-friendly manner" by 2003.23 For additional information about tools that manage the environment by providing information, see:
Reforming the federal role in environmental protection has attracted much attention. One group of such proposals would mandate risk assessment and/or cost- benefit analysis (which have been discussed previously), with varying institutional overseers. Another related set of proposals would constrain the federal regulatory scope, for example by establishing a regulatory budget, which would be based on costs imposed. But by far the most attention to the federal role has focused on its relation to state (and local) roles. Environmental Federalism.24 Giving states more responsibility or a larger role in environmental management is one of the oldest new ideas in environmental policymaking and implementation. Variously termed environmental federalism, devolution, decentralization, defederalization, or civic environmentalism-all of these terms have been used in recent years - the concept involves returning some decisionmaking authority from the federal to state and local governments. Environmental federalism, or devolution (or accountable devolution, as it has most recently been termed), is based in part on returning to intergovernmental relationships that predominated before enactment of today's federal environmental laws. In the intervening 30 years, however, both federal and state environmental programs have evolved considerably. Notably, states have enacted laws and developed management capacity to a much greater extent than was the case before 1970. Development of the federal role in environmental policy. Regulation and management of pollution was almost entirely the province of state and local governments before the 1970s. States had virtually unlimited discretion to protect local environmental quality, yet most failed to act. During the late 1960s and early 1970s, many environmental concerns previously seen as local issues became federal issues, and the proper role of each level of government in implementing policies has been debated continuously since then. The primary impetus for the major federal environmental statutes was the perceived need for a national response to states' inaction, by providing a minimum level of environmental quality throughout the country. Historically, environmental policymakers justified a strong federal role on the basis of several considerations: (1) the implications of interstate or transboundary pollution which individual states could not effectively control; (2) fear that states competing for economic development will engage in a "race to the bottom," if left to their own devices; (3) concern that a hodgepodge of separate state regulation will impose financial costs on out-of-state producers operating in national markets; and (4) belief that administrative efficiency and economies of scale can be achieved by developing complex technical standards at the national level. The organizing principle of federal environmental laws is that policy is developed at the national level, and programs are implemented at the state level. For 30 years, federal environmental policy was characterized by command-and-control strategies with states acting primarily through a system of delegated authority administered by EPA. Issues of day-to-day program management often strain the state-EPA relationships. There have been a number of thorny issues, which are now driving the agenda for change in intergovernmental relationships in environmental policy. The most contentious are costs (program costs and unfunded federal mandates) and federal micromanagement of states. Current support for increased state responsibility. The numerous advocates of increased state responsibility in environmental management reflect a spectrum of views on the issue. Some see the debate in terms of needing to strengthen the existing EPA-state partnership, while others argue for more complete shifting of responsibilities. On one end are those in state agencies, governors' offices, and top levels of EPA itself who believe that states should have more discretionary authority (flexibility) to implement federal laws, so that states can address their highest environmental priorities and establish resource allocations based on those priorities. Concurrently, these advocates believe that EPA should lighten the burden of oversight where states are willing to take on added responsibility. They cite several reasons for changing the EPA-state relationship and increasing state responsibility. First, the issue of state capacity to manage programs has changed. Unlike 30 years ago, states today have working environmental programs, and the federal government is not forcing states to create programs. Second, relying on traditional command-and- control methods derived from nationally uniform requirements is less effective in meeting today's changed environmental protection needs. The current generation of environmental problems (ranging from sprawl to nonpoint source pollution to watershed management and pollution impacts from people rather than companies) points to the need for state and local governments to wield the policy lever, they say, and points to the need to move beyond "one-size-fits-all" regulatory approaches established centrally. On the other end of the spectrum of environmental federalism proponents are views represented by some academics and economists, who may bring a more ideological approach to the debate. Some argue, for example, that the command-and- control regulatory strategy that dominates environmental policy has proved inadequate, because it has not set intelligent priorities, has squandered resources, has discouraged environmentally superior technologies, and has imposed unnecessary penalties on innovation and investment. They maintain that centralized decisionmaking ignores local preferences for varying levels of environmental quality, reduces the ability of citizens to monitor government, and stifles experiments with policy options that are alternatives to one-size-fits-all. The goal of devolution, they say, is to reverse the rising power of the national government, which they see as bloated and ineffective, and to return authority to states and individuals. Some economists view these issues in terms of the implications that alternative divisions of decisionmaking responsibility have on efficiency. They are interested in questions such as which level of government might best determine the extent of environmental protection and which is most likely to select the least costly methods of control. In many cases, they believe, the answers will dictate moving the locus of decisionmaking to states and localities. Between those who are advocating primarily an enhanced federal-state partnership and those seeking a more complete shifting of roles are other groups who support many of these arguments, including some federal legislators who advance policy and budgetary initiatives to restrict or curtail the federal role and those in industry who want less stringent federal regulation. A federal role would continue, all agree, but would be restricted to setting national standards, monitoring and enforcing compliance, providing technical assistance, and addressing transboundary pollution problems. Policy literature on this topic has continued to grow, with reports and recommendations from a number of non-partisan or stakeholder groups (such as the National Academy of Public Administration and the National Environmental Policy Institute), as well as advocacy groups (e.g., the American Enterprise Institute, Cato Institute, and the Progressive Policy Institute). These studies have advocated and endorsed devolving existing environmental management responsibilities to capable state and local governments to tailor regulatory solutions to local problems and concerns, while leaving the federal government to address cross-boundary and international issues. Opposition to increased state responsibility. While there is considerable support for environmental federalism, there is significant opposition, as well. Environmentalists, in particular, who have traditionally supported a strong federal role that provides a core level of environmental protection for all citizens and a level playing field across the country, believe that a federal programmatic baseline is an important counterbalance to potential state backsliding that could result from devolution. For these groups, concern persists that state capacity to shoulder the responsibility of devolution is less robust than state regulators say, although it is hard to either prove or disprove this assertion. Given flexibility, they say, states fail to meet high-priority program requirements, such as monitoring, permitting, and enforcement. States may set lax standards in order to lure industry or succumb to pressure by industry to adopt weak standards. Some environmentalists are concerned that states will shift away from enforcement towards compliance assistance and also reduce public involvement and participation. Environmental federalism today. Devolution, or environmental federalism, is occurring today, and the basic issue is one of timing and extent. Debate continues over the degree of oversight that EPA exercises and degrees of responsibility, authority, and accountability that it gives to states. In May 1995, EPA and states took a major step towards devolution when they entered into a commitment to an improved partnership called the National Environmental Performance Partnership System (NEPPS). In it, EPA and states agreed that states should establish their own comprehensive environmental plans and identify environmental priorities. National minimum standards will remain, but EPA will allow more flexible approaches to achieve national goals. EPA oversight will focus on ensuring that states achieve environmental results, not on process. As of May 2000, 34 states have developed Performance Partnership Agreements with EPA under NEPPS. In return for the autonomy and flexibility that states seek, all of the advocates of environmental federalism acknowledge that accountability for environmental performance is key - thus, the source of the phrase often used today to describe these developments, "accountable devolution." Accountability is necessary to address concerns of critics such as environmentalists who fear that devolution will lead to disintegration of national programs. The largest challenge for EPA and states is to build a foundation of meaningful indicators for a transformed performance-based system. The success of such a system depends on the ability to measure environmental progress in lieu of measuring traditional programmatic outputs (such as number of enforcement actions). For further reading, see:
|
CRS Reports Home
|
||
 |
National Council for Science and the Environment 1725 K Street, Suite 212 - Washington, DC 20006 202-530-5810 - info@NCSEonline.org |
 |
