Federal Programs To Improve Corporate Environmental Performance Are Largely Ineffective, RFF Report Finds

November 12, 1996

WASHINGTON, DC -- Researchers at Resources for the Future (RFF) have found that leading federal programs that rely on incentives to improve the environmental performance of businesses are doing little to improve the environment or regulatory system, and without legislative reforms and better management, there is little enticement for companies to participate.

The first-time evaluation of five programs -- the Environmental Protection Agency's (EPA) Common Sense Initiative, Project XL, 33/50, and sulfur dioxide emissions trading program (part of the Clean Air Act); and the Occupational Safety and Health Administration's Star program -- appears in the report "Industry Incentives for Environmental Improvement," authored by RFF's Terry Davies and Jan Mazurek, with assistance from Kieran McCarthy and Nicole Darnall. It is one of three reports on incentive-based programs commissioned by the Global Environmental Management Initiative (GEMI), an organization of 25 United States based companies that strive to help businesses achieve environmental, health and safety excellence.

RFF's report identifies three major concerns that have hampered the success of many of the voluntary programs: the lack of a statutory basis; poor management by EPA; and mistrust amongst the parties involved.

"We found that there is no short-cut around the difficult task of trying to legislate a better pollution control system," says Davies, director of RFF's Center for Risk Management and a former EPA assistant administrator. "This system, to an even greater degree than most government programs, is driven by legislative mandates. What gets done, when it gets done, and how it gets done are all determined by statutes and the litigation that follows. It is therefore very difficult to make any non-statutory program work."

The statutory base of the sulfur dioxide trading program is an important factor in its success, according to researchers.

"Further, there is evidence that the EPA did not adequately plan in advance for these programs," says Davies. "The agency seemed uncertain about what it wanted to accomplish or how it planned to execute the programs."

"Finally, pollution control efforts are generally characterized by mistrust and paranoia," says Davies. "Each of the participants_businesses, environmental organizations, the EPA, the states, and Congress_tend to have adversarial attitudes toward each other. Programs that depend for their success on cooperation, volunteerism, and trust do not fare well in this climate."

The report concludes with lessons learned from the five programs: simple and clearly stated goals and procedures are important incentives for business participation; and regular evaluation of program accomplishments and progress is needed.

"There is a distinct possibility that the only incentives powerful enough to change business behavior are outside the legal authority of executive branch agencies," adds Davies. "Significant regulatory relief and consequential financial incentives may only be able to come from Congress or from the state governments."

The other two reports issued by GEMI are "Corporate Environmental Health and Safety Practices in Transition: Management System Responses to Changing Public Expectations, Regulatory Requirements and Incentives," by Terry Yosie and Timothy Herbst of E. Bruce Harrison/Ruder Finn, Inc.; and "Incentives for Environmental Improvement: An Assessment of Selected Innovative Programs in the States and Europe," by Daniel Beardsley of Albers & Company.

The three reports are the first project for IDEA 21, a GEMI work group formed in January that contracted with leading environmental policy specialists to research and author reports about the role of incentives in voluntary environmental programs and the benefits of such programs. IDEA 21 is an acronym for Incentives, Disincentives, Environmental Performance, and Accountability for the 21st Century, and refers to the four primary elements needed for a new collaborative environmental system.
Copies of the three reports can be obtained through GEMI's publications office at (202) 296-7449.

EPA's Common Sense Initiative. Begun in 1995 and designed to achieve "cleaner, cheaper, and smarter" results, the Common Sense Initiative (CSI) was conceived as a unique forum for groups that typically are at odds to jointly identify problems and craft common solutions. The program involves six sectors: auto manufacturing, computers and electronics, iron and steel, metal finishing and plating, petroleum refining, and printing. Its goal is to remove barriers to innovation and promote strategic environmental protection by reducing duplicative reporting requirements, streamlining the permits process, improving community involvement in environmental decisionmaking, and finding incentives for and eliminating barriers to pollution prevention.

EPA's Project XL. Introduced by President Clinton in late 1995, Project XL seeks to entice industries to find cleaner, more cost-effective methods of environmental management by providing EPA waivers for certain requirements to facilities that can demonstrate superior environmental results. The program is based on the belief that self-monitoring and intense public scrutiny will lead to better environmental results, as all involved in a specific project -- industry, regulators, and citizens who live near the plant -- will share a common interest in how the project is designed as well as what outcomes it achieves.

EPA's 33/50. Launched in 1989, the 33/50 program sought voluntary cooperation from large manufacturers that emit and transfer large amounts of toxic emissions. The program monitored the emissions of 17 chemicals that posed the most serious threat to the environment and public health, were the highest in production and release volume, and held the greatest potential for pollution reduction and prevention. It sought to achieve a 33 percent reduction of the 17 chemicals by 1992, and aimed for a 50 percent reduction by 1995. The program gave participants great flexibility in reducing their emissions and required few prerequisites to join, thereby minimizing the administrative burden and allowing firms to decide their most cost-effective method of pollution control.

EPA's sulfur dioxide emissions trading program. Title IV of the Clean Air Act aims to reduce annual SO2 emissions, one of the primary precursors of acid rain, by 10 million tons below 1980 levels. As part of Title IV, EPA established an innovative, market-based trading program based on emissions allowances to achieve reductions, provide incentives for industry self-regulation, and reduce the need for government intervention.

Under this system, fossil fuel-fired power plants, the principal emitters of SO2, are allotted tradable allowances based on their past fuel usage and statutory emission limitations. Each allowance entitles a firm to emit one ton of SO2 during or after the year. At the end of the year, the number of allowances a firm holds must equal or exceed total emissions at that unit; otherwise, penalties will apply. After the year 2000, the total number of allowances allocated each year will be half of what the utility industry emitted in 1980.

Allowances may be bought, sold, or banked like any other commodity. If a utility holds surplus allowances, it may sell them to units whose emissions levels exceed their allowance supply, or it may save them for use in future years. EPA envisions the emergence of an active allowance market in the coming years, where brokers, environmental groups, and utilities alike will participate in allowance transactions. EPA helps secure the allowance supply by sponsoring auctions and direct sales of allowances. The auctions and sales began in 1993.

OSHA's Star program. One of three Occupational Safety and Health Administration's (OSHA) Voluntary Protection Programs adopted in 1982, the Star program recognizes leaders in injury and illness prevention programs who have been successful in reducing workplace hazards and injuries in an effort to encourage others to such success.

To qualify, a site's safety and health program must satisfactorily address the following areas: management commitment and planning, hazard assessment, hazard construction and control, safety and health training, employee participation, and safety and health program evaluation. By addressing these areas, employers have the opportunity to go beyond standards set by OSHA to provide the best possible safety and health protection at a site. Employers who are approved for participation are removed from routine inspection lists. This frees OSHA's inspection resources for visits to establishments that are less likely to meet the requirements of the OSHA standards.

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Resources for the Future (RFF)

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