Section 1 described the current "state of the sectors" for programs involving co-implementers, a promising but relatively modest set of initiatives, with voluntary programs and compliance assistance predominant. Section 2 outlined an ambitious suite of possible developments, building on but extending well beyond programs already in place. Given the current landscape, what realistically accessible paths might lead from the present promising beginnings to realized potential?
This section discusses three objectives whose achievement would mark important stages along the way:
It should be noted that these objectives will not be accomplished by one person or one office working alone. This illustrates an important distinction between a roadmap suitable for the private sector and one such as this involving the general public and their government representatives and agencies, as well as industry. With an industry roadmap, the journey may be profitably undertaken by a single company or a small group (in fact, the smaller the group, the greater their competitive edge). Here is what you have to do, here are the resources you will need, here is the anticipated return on investment, go to it. End of story. But a roadmap for the kinds of public-private partnerships described here must envision movements more akin to mass migrations than to solo pioneering. The overall objectives described in this section will require the gradual aligning of the individual objectives of many players. And while progress toward the objectives will advance the cause of sector-based programs, they will benefit a wide variety of other activities as well.
Therefore, the following pathways do not refer to single programs or initiatives, but to elements which can be advantageously integrated into many programs. They cannot be implemented by fiat. Patient advocacy, and continual nurturing of a sense of shared purpose involving a wide variety of programs, will guide the general trends in environmental protection along these paths.
Industry participation forms the cornerstone of many sector-based programs (and many programs based on other approaches as well). The premise of this objective is that industry will respond best to incentives that translate directly into economic benefit. It follows that programs which include identifying and documenting cost savings and other advantages associated with environmental improvement will pay dividends in the form of more extensive and enthusiastic participation by industry in subsequent programs. Several programs have already demonstrated results of this type.
Thus the pursuit of this objective would not involve a radical departure from current practice. It would, however, elevate the documentation of economic benefits from a useful by-product to a primary deliverable for projects involving environmental upgrades to industry facilities and processes.
There is a potential paradox associated with this objective. Even if the environmental benefits and the economic benefits associated with a process improvement are mutually reinforcing, it may not be consistent to maximize both at the same time. Given two process changes requiring a comparable level of investment, one may reduce emissions substantially with a modest productivity improvement, while the other may be considerably more efficient, but offer a smaller environmental improvement. If a government program were to offer assistance to companies, for example with a low cost loan program, which of the two possible changes should be given preference? Since public policy is presumably directed toward maximizing environmental protection, the choice should be clear. But if only a handful of facilities could realistically implement the environmentally more beneficial change, while most of the facilities in a sector could implement the other, which choice would result in the greatest overall environmental benefit? The need to address questions of this type points up the importance of bringing a sector-wide point of view even into programs which are primarily process or facility-based.
The above discussion implicitly assumes that both environmental and economic benefits are unambiguously measurable. The assumption is probably safe for economic benefits, at least as far as "actual" costs and savings are concerned. ("Potential" savings, such as avoided liability, still present measurement problems, even for economic transactions.) However, the measurement of environmental benefits is a more difficult proposition altogether. Some remarks are offered in the next section, in the context of a cost-benefit approach to environmental protection.
The Government Performance and Results Act (GPRA) of 1993 emphasizes results. In the spirit of GPRA, agencies are held accountable, not for instituting programs, but for accomplishing their missions. Developing meaningful performance measures is an integral part of the process. The act pertains directly to federal agencies, but many state and local governments have developed their own performance measures.
Measuring the effectiveness of environmental protection activities presents profound challenges. On the federal level, the EPA has addressed the requirements of GPRA by creating an integrated planning, budgeting, analysis and accountability (PBAA) system to comply with the basic GPRA requirements for a long range strategic plan, annual performance plans, and annual performance reports. The system explicitly recognizes the importance of establishing a cost accounting system, to determine "the full costs" of the agency's programs.
In this section, we examine some of the prerequisites for applying a cost-benefit analysis to the evaluation of environmental results, and indicate how sector-based programs can contribute essential information to the analysis. The cost-benefit framework can in turn provide a valuable tool for designing and implementing future sector-based programs.
The measurement problem for a cost-benefit analysis divides into two distinct sub-problems: measuring the cost, and measuring the benefit. Typically, the latter presents the thornier issues. Costs are, on the surface at least, easier to quantify. We have a convenient, well-tracked, conserved, and universal unit of measure (the dollar), and there are generally accepted conventions determining when and where the dollar has been spent. There is no such universal measure for benefit.
Environmental benefits are particularly slippery. To be sure, some quantitative measures exist, at least in a negative sense. If a process has been emitting N pounds per year, and the emission is abated to N minus delta pounds per year, the environment is presumably better off by the impact attributable to delta pounds per year. But typically the environmental impact per pound is not known (or even necessarily well-defined), making it difficult to compare the relative merits of abating this process by delta versus that process by epsilon. The situation is even more difficult for non-point sources, where even "N" and "delta" are unknown. Surrogate impact measures are generally the only available option, and are rarely satisfactory. Furthermore, even if direct impacts (changes in material concentrations or physical conditions) or indirect impacts (effects on human health or other consequences of degradation) could be known precisely, it would be difficult to compare different types of environmental improvement, since a comparison of benefits involves combining inherently incommensurate measures. Is it better to avoid a thousand predicted hospital admissions due to respiratory problems per year, or to avoid postponing the creation of a thousand jobs (and medical benefits) for a year while a pollution control system gets redesigned and installed? Even in cases where disinterested parties might agree on an answer, making a case convincing enough to win the voluntary compliance, or to compel the enforced compliance, of interested parties can be challenging, with no generally accepted standards for evaluating environmental impacts and benefits to draw upon.
Some progress has been made in finding ways to assign dollars to environmental impacts, and by implication to measure in dollars the benefits of abating those impacts. For example, predicted hospital admissions can be associated with the cost to the public of the consequent medical care, deteriorating air quality can be associated with the predicted loss of tourist revenues, etc. However, this discussion will not attempt to present additional detail on measuring environmental benefits, beyond noting that it remains an issue for evaluating sector-based programs, and indeed for evaluating any environmental programs. It is not apparent how a sector-based approach would significantly illuminate the benefits measurement problem.
On the other hand, sector-based approaches may be very relevant to the problem of measuring the costs -- the full costs -- of environmental policies and programs. Internal costs are not the issue: most organizations (companies and government agencies alike) can determine what has been spent to implement a project or a program. While, in the absence of a good environmental cost accounting system, it may be inconvenient to identify specifically environmental costs, the raw information is generally available, and needs only to be disentangled from other costs. There is another category of costs which is just as "real", but is typically not accessible to or recorded by the organization responsible for their being incurred.
The costs in question are referred to as externalities (or more specifically, as negative externalities) by economists. Environmental pollution is the canonical example of a negative externality. When companies were free to emit air pollution or dump solid waste without regulation or penalty, the burden created by the waste was born by the public, or by individuals outside the company, and the associated costs did not appear in the company's financial statements. Environmental regulation may be considered a mechanism for internalizing these otherwise external costs. By shifting the consequences of decisions back to their source, not only are the costs reimbursed more equitably -- they also stand a chance of being mitigated more efficiently.
Does the same argument routinely applied to industry apply also to the consequences of decisions made by government agencies? Should external costs which do not appear in an agency's budget, but which nonetheless follow from its policies, be included in reckoning the "full costs" of its activities?
Of course, government regulators are not "the same as" private companies in this regard. Companies are undertaking activities in expectation of return, and will seek to minimize costs (and thus would not be expected to volunteer to be responsible for costs that no one is demanding of them). Regulators are stepping in to assume a proprietary role for common resources for which no single proprietor exists (such as the air, or a river), a very different role, to which different rules might well apply. The question is not whether agencies should be held responsible for their externalities in the interest of fairness. The question intended here is whether the environmental protection mission is better served when all externalities, including those resulting from government policies, are taken into account in calculating the cost side of the cost-benefit ledger.
The question would not arise -- would not make sense -- in a "command and control" milieu. An agency is given a budget, and is charged with the most effective use of it. An adversarial relationship is presumed between regulator and regulated. If the object is to compel behavior change, and in particular to stop behavior deemed objectionable, then raising the costs to the regulated entity of persisting in that behavior seems entirely reasonable. It would seem perverse to charge those costs back to the agency.
That strategy made sense in the early days of the modern regulatory era. A relatively small number of point sources were responsible for much of the problem. Liability was a secondary concern. Environmental problems were acute, and the major sources were generally hostile to outside interference. There would have been little basis for cooperation.
The situation today is different in several key respects. Environmental regulation is an established fact of life. Most of the worst point sources have been dealt with. Companies are at least motivated to clean up proactively (whether or not they choose to do so). Further improvement is desirable, but the task is to climb a learning curve, not to break a cultural paradigm.
Most significantly, environmental improvement is now a subset of process improvement. In many cases, switching to environmentally preferable alternative processes, and implementing waste reduction for existing processes, can lower operating costs sufficiently to justify the capital costs needed for manufacturers to make the improvements. The technical expertise and creativity which would make these changes possible resides for the most part within industry. The environmental protection mission is now in many cases best accomplished by helping industry decide to make use of it.
Environmental protection now operates in a world of continuous improvement opportunities and trade-offs. Imposing costs on industry for relatively minor problems can be counterproductive. Yet there remain situations where an adversarial approach is still called for, and where costs and penalties will do the job better than incentives and recognition. Sound environmental regulatory policy requires a clear understanding of the magnitude of the imposed costs resulting from a policy choice, and of the consequences of those costs. In some cases, collection of information on such costs is mandated. For example, the Regulatory Flexibility Act of 1980 (RFA), and the Small Business Regulatory Enforcement Fairness Act of 1996 (SBREFA) call for a consideration of the economic impact of environmental rules on small businesses. However, the focus in this discussion is not the impact of the rules and their associated costs on the economic viability of the regulated entities, but is rather the effect of the rules and costs on the environmental performance of those entities. No matter where the blame lies, if the effect of a policy is to cause a set of companies to circle the wagons and to replace proactive improvement with minimal compliance, the policy failed.
Better information on the costs and probable outcomes of regulatory policy choices as played out in the regulated community will promote successful choices. It is here that the sector approach may have the most to contribute. Sectors are by definition collections of entities performing similar operations under similar economic and technical constraints. A given policy choice is likely to affect the businesses within a sector in similar ways, and the businesses will have a similar range of options for dealing with the policy. Even if the policy is not itself based on a sector approach, its effect on regulated entities is likely to shake out along sector lines. The sector is the logical grouping for gathering and interpreting data on the costs associated with policy choices, and on their effects on behavior.
Thus just as the documentation of economic benefits for participating companies, as discussed in the preceding section, would represent valuable primary deliverables from future sector-based projects, documentation of the costs of compliance and consequences on company behavior of regulatory policies would have a cumulative effect extending beyond the individual projects, and would serve to support the environmental protection enterprise as a whole.
Ideas may be useful in the abstract, but projects are only effective if they are actually carried out. To create the deliverables described in the two previous sections, programs must involve real people interacting in the real world. In such interactions, co-implementers have played key roles in the past, and are the individuals best placed to carry the ball in the future. This section discusses partnership with co-implementers in putting these ideas into practice.
Partnerships form and thrive because of the expectation of, and the realization of, a two-way flow of benefits. Contributions that co-implementers can make to sector-based programs have been described in several contexts above. This section will deal with the complementary question: what can sector-based programs offer co-implementers? What features of sector-based programs will stimulate their continuing participation? Building co-implementer benefits into the programs, and thereby building enthusiasm for subsequent programs, will provide momentum down the path toward the "Point B" destinations.
Many of the co-implementers who provided input for this document mentioned flexibility as the key to program success, and as the benefit representing the most useful outcome of a sector-based activity. One person spoke of creating national goals, but "allowing flexibility for locals to regionalize the goals to meet the particular needs of the community". Others cited the promise of regulatory flexibility as the main incentive leading them to undertake sector programs in their areas. (Several expressed frustration at the persistent lack of flexibility on the part of various national program offices.)
The issue is generally not the flexibility of the sector-based programs themselves. It is, of course, important to design sector-based programs with sufficient flexibility that their implementation at a local level be responsive to and adaptable to local conditions. But the co-implementers do not seem concerned about any undue rigidity in those sector-based programs in which they have participated. Instead, the problems seem to arise most often when state and local agencies are called upon to implement national priorities which do not correspond to local priorities.
Co-implementers tend to feel that they have at present essentially no role in determining national regulatory and enforcement policy, and that their interests are not represented even by proxy when policy is shaped. While sector-based programs may not have contributed significantly to the perceived problem, they may present an opportunity to contribute to developing methods of addressing the solution.
The opportunity falls under the general heading of communications. Even if policy makers were culturally inclined to treat the viewpoints of co-implementers as primary inputs, the fact that co-implementers are geographically (and politically) dispersed makes the logistics of collecting and filtering their ideas and distilling them into guidance a challenging proposition. Sector-based programs (including the preparation of this document) face the same challenge. With their multi-stakeholder orientation and their reliance on co-implementers to pull together interest groups in localities where sectors are clustered, sector-based programs have historically pulled together networks of co-implementers, and have fostered their interaction. The suggestion proposed here is to take advantage of the new possibilities opened by recent developments in electronic communications tools to make it easier for scattered groups of co-implementers to pull their ideas together into a common viewpoint, and to present their views directly where and when they will be most effective in influencing policy discussions. As with the development of incentives discussed above, this does not involve adding anything that would not be occurring anyway. It is simply the recognition that the networks of co-implementers, and the electronic infrastructure that sector-based programs develops to help bind them together and focus their efforts, are more than by-products. They represent program deliverables which can be passed along to policy makers and promoted as useful tools in the policy-making process.
Two caveats are associated with this suggestion:
Co-implementers, if their input for this document is any guide, would tend to characterize environmental regulatory policy on the national level as all too often rigid and insular. The assumption underlying this suggestion is that sector-based programs, by developing and promoting easier and more effective communications, can help with the insularity. The hope is that help with the rigidity will follow.
Another class of interim benefit that sector-based programs could offer co-implementers includes program deliverables that are of immediate use to state and local government as tools or information resources.
In many cases, deliverables of this type would be natural extensions of work typically undertaken in sector-based programs. Environmental performance improvement programs (such as the Metal Finishing Strategic Goals Program and other sector-based initiatives) already involve measuring progress in waste and emissions reduction. The value of such measurements for co-implementers could be enhanced by translating the numbers into impacts on local environmentally sensitive receptors (watersheds, air quality). This kind of information would be valuable for public education, so that residents of a locality or region could directly appreciate the value of the program.
[examples from existing programs]