What's Ahead in Environmental Policy?

Dec. 21, 2004
After nearly 30 years of

April 22, 1970. Bright spring sunshine was smiling symbolically on most of the U.S. Daffodils were blooming, trees leafing out, meadows greening. And throughout the nation, citizens were rising up in protest against the despoiling of the planet. It was the first Earth Day -- the '60s-style event that ushered in a new era of environmental consciousness. From it flowed the Environmental Protection Agency (EPA) later that year and a proliferation of laws and regulations that -- ever since -- has been a fact of business life for industry. But all that was almost 30 years ago. Isn't it time for a new generation of environmental policy? Many think tanks and academicians advocate a new approach. A wave of reports from such groups as the National Academy of Public Administration, the President's Council on Sustainable Development, Yale University's Center for Environmental Law & Policy, the Brookings Institution, and the Enterprise for the Environment (a panel chaired by William D. Ruckelshaus, EPA's original administrator and now chairman of Browning-Ferris Industries Inc.) have produced remarkably similar conclusions. The first generation of environmental policy, the reports agree, has enabled a dramatic cleanup of the U.S.' air and water. But they also agree that the current system is flawed. Among other things, they suggest, it is too:

  • Fragmented. Individual pollution problems -- air, water, and waste -- are addressed separately rather than as a "system."
  • Narrow. Regulations aim at large industrial "point sources" of pollution, but pay insufficient attention to the service sector, agriculture, and nonpoint sources.
  • Costly and inefficient. Environmental compliance costs U.S. industry as much as $185 billion annually, estimates a Johns Hopkins University study. But is the payback worth it? Cost-benefit analyses of regulations have been lacking.
  • Misdirected. The U.S. spends heavily on preventing oil spills, for example, but a much larger problem -- indoor-air pollution -- gets relatively little budget money. Greater use of comparative-risk analysis would help ensure that the most pressing problems are addressed.
The reports urge that environmental policy move away from the traditional "command-and-control" approach toward a market-oriented system. Regulations should feature greater use of incentives. And they should be more performance-based, providing companies greater flexibility in achieving standards in the most cost-efficient manner. To industry, which has long bristled under the current system, such phrases as "cost-benefit analysis," "market-oriented," "incentives," "flexibility," and "performance-based" -- are sweet music. "Absolutely, we [in business] support these concepts," declares William Stavropoulos, Dow Chemical Co. president and CEO. If they were applied more broadly, environmental goals would be achieved "faster, better, and more economically," he insists. "When environmental regulations were first put in, they probably were necessary. But now we've reached a level of sophistication in the U.S. that we can get away from command-and-control and build off that base." Agrees Mark Whitenton, vice president for resources, environment, and regulation at the National Assn. of Manufacturers (NAM): "Manufacturers don't want to say 'no' to regulation, and regulation has made some sense. But there hasn't been enough attention to costs-vs-benefits or to the need for flexibility." NAM is so excited about the "next-generation" concepts, as they're called, that it has formed a task force to speed their acceptance. "The intellectual work is done," asserts the panel's chairman, Richard D. Otis, director of federal-government affairs at the American Plastics Council, Washington, D.C. "Now is the time to build political consensus for the ideas." Unfortunately for industry, that is more easily said than done. Attesting to the difficulty is J. Clarence Davies, a former EPA assistant administrator who now directs the Center for Risk Analysis at Resources for the Future, a nonpartisan Washington, D.C., think tank. Any enthusiasm for change, he observes, "is limited to think tanks and academia and the business community and, to some extent, state-and-local government employees and some federal career bureaucrats. Significantly, the consensus does not include the environmental community." Indeed, environmentalists are thinly represented on the committees that authored the reports. In some cases, it's said, environmentalists refused invitations to join the panels; those who did serve sometimes refused to sign the final reports. Even within the business community, adds Davies, there's disagreement on specifics -- for example, on how much regulatory flexibility should be permitted and whether states should bear greater responsibility for environmental regulation. Another barrier is political. During the last six years, both environmentalists and the Clinton Administration have shown a "tactical reluctance," in Davies' words, to support legislative changes necessary to implement next-generation concepts. Their fear: that the Republican-controlled Congress, once it starts dealing with environmental laws, will use the opening to roll them back. In contrast, many environmentalists would like to see existing laws made even tougher. "Virtually every existing law protecting health and the environment has been ineffective," says Rick Hind, lobbyist for Greenpeace U.S.A., the Washington, D.C., based-arm of the Netherlands-based group that is considered one of the most leftist environmental groups. "We don't think the laws are strong enough." As for all those reports urging next-generation policies, Hind points out that in many cases they were funded by corporations. Industry's call for reforms, he says, is a "thinly veiled attempt to eliminate environmental protection." Only slightly less negative is a doyen of the environmental movement -- Michael McCloskey, chairman of the Sierra Club (from which he will retire May 1 after a 30-year career). A former member of the President's Council on Sustainable Development, McCloskey terms the recommendations "interesting and audacious, but not necessarily viable." The concepts, he contends, "reflect a belief that the current system by which our country regulates pollution is fundamentally broken and needs to be fixed. We do not share that belief. "The reports," he says, "are produced by groups that represent a rather limited portion of the political spectrum. They reflect a moderate Republican point of view." He indicates that many environmentalists "are to the left" of the recommendations, urging -- as Greenpeace does -- stepped-up regulation. But other parties, he says, are to the right. Among these he includes many business executives who "seek a regulatory rollback." Despite the polarity of positions, there does seem to be potential for common ground. Environmentalists aren't blindly married to the status quo. McCloskey, for one, acknowledges that "it is timely to think" about next-generation ideas. He and the Sierra Club are promoting what he calls "green excellence," a notion gaining acceptance in industry that goes by such other labels as "beyond compliance," "design-for-environment," and "industrial ecology." Basically, the concept emphasizes pollution prevention rather than mere abatement -- and making it a bottom-line payoff for companies. "Many companies are exploring the potential of this approach and are finding it profitable. As more of them wake up to the opportunities of green excellence, there will be a focus away from regulation," McCloskey predicts. To help speed industry acceptance of the idea, he believes that greater use of regulatory incentives -- a common theme of the next-generation reports -- "may be worth considering," although the club is on record as opposing them. Even Greenpeace, despite its embrace of tougher regulation, endorses the green-excellence concept. Environmental policy, contends Hind, should focus more on "upstream regulation" rather than the current "end-of-the-pipe" approach. "We're happy to work with industry on pollution prevention," he adds. Another environmental group, the Washington, D.C.-based Worldwatch Institute, advocates a different nonregulatory emphasis. Although seeing a continued need for regulation in areas such as disposal of radioactive waste and protection of ocean fisheries, Lester Brown, the organization's president, calls for greater use of fiscal policy to achieve environmental goals. "We need to get rid of current subsidies to environmentally destructive activities," he argues. "And we need to get the market to 'tell the truth.' Gasoline prices, for example, should reflect the costs of air pollution." Moreover, Brown would like to see a restructuring of the tax system by cutting income taxes and offsetting them with higher levies on such activities as burning fossil fuel and generating garbage. Still another environmental group, the Environmental Defense Fund, pioneered the market-oriented emissions-trading credit program, an emerging regulatory approach that industry applauds. The New York-based organization also works closely with companies on environmental projects. So does the Natural Resources Defense Council (NRDC), New York. So it's obvious that environmental organizations don't reject new regulatory ideas outright or shun cooperation with industry. "Environmentalists are keeping an open mind on policy changes," assesses Debra Knopman, director of the Center for Innovation & the Environment at the Progressive Policy Institute, the think tank for Democratic Leadership Council, an organization of centrist Democrats. "They do have concerns about any kind of environmental legislation in this [Republican] Congress. But they also -- just like industry -- have concerns about the cost of regulation." Knopman is uniquely positioned to gauge the attitude of environmentalists; she has been talking extensively with them, as well as industry representatives, in the Center's year-long project of crafting bipartisan environmental-reform legislation. The legislation, which is expected to be introduced this spring, was initiated by the "Second Generation Environmental Stewardship" coalition of 20 centrist House members evenly split between Democrats and Republicans. Co-chairs of the coalition are Rep. Cal Dooley (D, Calif.) and Rep. Jim Greenwood (R, Pa.). The bill adopts several of the next-generation ideas, including provisions that would improve environmental information and grant "unambiguous authority" to EPA to conduct pilot programs for regulatory experiments. In drafting the bill, Knopman has been encouraged by the cooperation of both environmentalists and industry groups. Also sensing dtente between the two oft-warring parties is Robert C. Weber, president of ENSR Corp., Acton, Mass., an international engineering and construction consulting firm with a large environmental practice. A former EPA official, Weber is impressed by the way environmental and industry representatives were able to reach common ground as members of a stakeholder panel to help EPA draft a regulation on gasoline additives. "If that type of panel had been used earlier in the history of regulatory development, it would have saved all parties a lot of wasted time and energy," he says. Environmentalists, however, largely remain leery of cooperation with industry. The Sierra Club's McCloskey, for instance, last year told an environmental conference in Washington, D.C., that as a result of industry's "hard-line attitude" against EPA's proposed changes in the Clean Air Act, "we have lost our appetite for collaboration." Yet collaboration is essential if the U.S. is to move to a new generation of environmental policy, insists Dow Chemical's Stavropoulos. Dow's work with NRDC in achieving cost-effective reductions in the company's emissions, he says, has convinced him that industry and environmentalists can reach consensus. "Environmentalists are not opposed a priori to new concepts," he comments. "They feel they have a job to do, and they don't want to sacrifice their independence and judgment. "There will always be a dynamic tension between environmentalists, the private sector, and government. That's not unhealthy. Out of it can come better answers." But the answers won't come, he emphasizes, unless all interested parties collaborate.

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