The National Center for
Environmental Innovation
    Report on Progress
        2005-2006

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                NCE
n  *
                NATIONAL  CENTER  FOR
                ENVIRONMENTAL INNOVATION
About the Cover
To innovate means to introduce something new. At EPA, the National Center
for Environmental Innovation (NCEI) is often involved in introducing new ideas
for improving environmental results. When we find ideas that prove worthy,
we focus on helping others apply them in ways that improve environmental
programs and policies. And so, just as the dandelion spreads seeds for the next
generation of plants, NCEI plays a key role in spreading new ideas for the next
generation of environmental protection.

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Contents
Introduction
Strong Environmental Stewardship	3
A Perform a nee-Based Regulatory System	9
A Culture of Creative Environmental
Problem-Solving	
13
Looking Ahead	16

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"Meeting today's environmental challenges
requires new approaches. Together with our state,
local, tribal, and private sector partners, EPA
will identify and foster approaches that promote
environmental stewardship and produce results
though innovation and collaboration."
                  — EPA Administrator Stephen L. Johnson
                                  2006 Action Plan


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How can EPA inspire self-motivated environmental action by businesses, communities,
and individuals?

Can environmental agencies develop regulations that provide better results and more
flexibility and accountability?

How do we spur new ideas that will lead to the next generation of environmental
progress?

Such questions are key to continuously improving our nation's environmental protec-
tion system, and they are the kinds of questions that shape our work everyday in EPA's
National Center for Environmental  Innovation (NCEI).

NCEI was created in 2003 to serve as a focal point for innovation at EPA. In addition to pro-
viding leadership on a number of management issues, like evaluating results from innovative
initiatives, we also run several innovative programs
that are designed to improve environmental results
in businesses, communities, and other institutions.
NCEI issued its first progress report in 2004, and
this latest report describes achievements over the
past two years.
Our  Goals
      Strong environmental stewardship across
      society that supports sustainable develop-
      ment and pollution prevention.
      A performance-oriented regulatory system
      that allows flexibility to achieve environ-
      mental goals.
      A culture of creative environmental prob-
      lem-solving that has a high capacity for
      collaborative, results-oriented work and the
      organizational systems needed to support it.
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NCEI plays a unique role within EPA.With our multimedia focus, we engage in a wide variety
of environmental issues. We also typically approach our work through partnerships—with
our colleagues in other parts of the Agency and with public and private sector organizations
externally.These collaborations enable us to leverage our resources and benefit from the
experiences and expertise that others can bring to environmental problem-solving.

From pilot projects that test new environmental protection strategies, to special  programs
that are designed to promote environmental leadership, to grants that help states explore
innovative policy ideas, NCEI is finding new ways to achieve better environmental results.
This  report highlights how NCEI is enhancing environmental programs and making progress
toward our long-term goals.

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Strong   Environme
Innovation has never been more important for environmental programs, for the very nature
of environmental protection is evolving. In EPA's earliest years, the Agency focused primar-
ily on developing national standards to protect public health and the environment from the
most visible and egregious sources of pollution. Regulations still represent one of EPA's most
important tools, but today we recognize that regulations are not enough. Controlling pol-
luted runoff and stemming the loss of habitat and biodiversity, for example, require a more
inclusive strategy, one that engages the millions of Americans whose everyday choices affect
our environment. In short, such challenges require a greater degree of environmental stew-
ardship—where everyone takes responsibi ity to improve environmental quality and achieve
sustainable results. Over the past two years, NCEI has taken a number of steps to promote
environmental stewardship—in our own operations and by others.

Recognizing the Importance of "Everyday  Choices"
In November 2005, NCEI led the Agency in completing a report to the Administrator that
provides an overview of the many ways  EPA supports environmental stewardship and the
opportunities that are available to do even more. Everyday Choices: Opportunities for  Envi-
ronmental Stewardship acknowledged—in a way EPA had never done before—the need to
focus not just on pollution control and pollution prevention, but on the  long-term sustain-
ability of our natural resources.The report  highlighted a number of existing environmental
stewardship activities that can move us toward sustainability and identified ways EPA could
be more effective in advancing environmental stewardship in the future. Since its release,
a number of organizations have expressed their interest in this topic and their excitement
about what creative and innovative environmental stewardship strategies might enable us to
achieve.
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Meanwhile, EPA has shown its commitment to environmental stewardship through our
own operations. For example, in 2006, we became the first federal agency to meet  00
percent of our electricity needs with green power We also "walked the talk" with green
buildings—two new EPA facilities were built to achieve a gold rating under the internation-
ally recognized "LEED" (Leadership in Energy and
Environmental Design) green building standard.
Other significant initiatives EPA designed to sup-
port environmental stewardship include the launch
of a national water conservation program,
WaterSense, modeled after the highly success-
ful ENERGY STAR program for energy efficiency;
a voluntary agreement with the nanotechnology
industry that will enable us to better understand
the environmental implications of this emerging
technology; and a grant competition for colleges
and universities to support sustainability research.

Rewarding Environmental  Leaders
The National  Environmental Performance Track is  EPA's premiere program for recognizing
environmental stewardship. Performance Track is based on the premise that government
should complement existing programs with new tools and strategies that not only protect
people and the environment, but also capture opportunities for reducing cost and spurring
technological innovation. EPA provides exclusive regulatory and administrative benefits to
Performance Track members, places them at low priority for routine inspections, and offers
public recognition, networking opportunities, and other benefits.To qualify, a facility must
consistently comply with environmental  requirements and put a high-quality environmental
management system in place.They are also required to set three-year goals for continuously
improving environmental performance and to work with their employees and local com-
munities to pursue those goals. Currently, 470 facilities from 46 states and Puerto Rico have
earned membership in this distinctive program.They include manufacturing facilities as well
as such diverse sectors as airports and wastewater treatment plants.

To date, Performance Track members are making significant gains for the environment.
Since 2000, members have collectively reduced water use by 3.5 billion gallons, eliminated
97,000 metric tons of carbon dioxide equivalent, and conserved more than 14,000 acres
of land while helping to protect their local and national environment. But the  results don't
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stop there. Performance Track is having another positive effect—helping to transform EPA's
reationship with the regulated community. Members now report a more collaborative and
constructive dynamic with EPA.This significant development was recognized in 2006 when
Performance Track was named a finalist for the prestigious Excellence in Government awards.
Meanwhile, several companies followed the lead  of KLD  Research & Analytics in using Per-
formance Track's selection criteria to inform the financial analyses and ratings they provide
for investors.

Partnering With Key Economic Sectors
While recognizing the goals and accomplishments of individual facilities is important in
encouraging environmental stewardship, there is  also much to be  gained by encouraging
improvement across whole industry sectors.That is the focus of NCEI's Sector Strategies
program, which works with specific industries through partnerships with their national trade
associations.Together, we are working to address regulatory barriers that can inadvertently
hinder environmental improvements, promoting the use of environmental management
systems (EMSs) that can be used to address environmental issues more strategically, and
measuring and reporting on each  sector's environmental progress.

Our work with participating sectors is tailored to meet their specific  interests and needs. For
example, together with our partners, we are:

•  Identifying incentives that would encourage more diesel retrofitting around ports and
   construction sites.
•  Analyzing paint disposal trends as a first step toward developing a national recycling
   program for leftover paint.
•  Promoting recycling of millions of tons of sand that are used by foundry operations each
   year and that typically wind up in landfills.
•  Supporting development of a national environmental compliance  assistance center for
   colleges and universities.
•  Exploring a fundamentally different approach  to regulating emissions from  pulp and
   paper companies.

In 2005, NCEI  issued a comprehensive report on each sector's environmental performance.
In addition to providing the public with clear information about each  sector's challenges and
accomplishments, this report also  gave the sectors a better understanding of the opportuni-
ties for improved environmental stewardship. In 2006, NCEI issued a  second performance
assessment, which broke new ground by providing a first-time look at how Toxics Release
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Inventory data can be used to target the greatest hazard reduction opportunities when
managing chemicals.This assessment was accomplished by using toxicity-weighted scores for
chemicals used in each sector rather than just the number of pounds released.The  resulting
information provides a valuable tool for future strategic  planning.

Encouraging Smart Growth
Environmental stewardship is important at the community level, too.Today a growing num-
ber of communities are recognizing how smart growth can align with their environmental
stewardship interests, and  NCEI is providing tools and programs to support them. For ex-
ample, we provide technical assistance awarded  on  a competitive basis to help communities
address growth challenges. Over the past two years, we've funded over $750,000 to help  5
communities in urban, rural, and coastal  areas.Through this assistance, we've enabled com-
munities to pursue their own unique visions and aspirations while creating models for other
communities around the country.

NCEI also produces technical tools to help communities address specific growth challenges.
For example, more than I 7,000 printed copies of Protecting Water Resources with Higher
Density Development and Protecting Water Resources with Smart Growth have been distributed.
These reports help communities understand the impacts that density can have on water
quality and identify some of the best tools for reducing them. NCEI's assistance was also
extended to states through the launch of a Governors' Institute on Community Design.This
partnership, which grew out of a similar initiative launched 20 years ago for mayors, provides
state officials with the information they need to lead on growth issues.

                       NCEI's smart growth expertise is now widely recognized. As an
                       indicator; we are often asked to work on standards that will shape
                       smart growth policies and practices around the country and the
                       world. For example, we have recently contributed to standards
                       for school sitings and road design. And working with U.S.  Green
                       Building Council, we just helped complete a new rating system for
                       Green Neighborhoods.

                       Each year NCEI also announces the National Awards for Smart
                       Growth. By recognizing accomplishments, we are identifying
                       models that can help other communities pursue their own  smart
                       growth goals.
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Promoting Environmental Management Systems
One of the leading tools for managing environmental issues more strategically is an envi-
ronmental management system (EMS). Increasingly, businesses, government agencies, and
other organizations are finding these tools provide a comprehensive framework for reducing
environmental impacts and increasing operating efficiency.
In  999, EPA issued a position statement in support of EMSs.
This statement was the first in a series of actions that EPA
has taken to promote EMSs, such as making EMSs part of
the criteria for membership in Performance Track. In 2005,
NCEI led EPA in updating its EMS position to reaffirm sup-
port of these important tools. In addition, we launched are-
search project to examine how financial incentives are used
by investment, insurance, and other finance-related industries
to promote EMS use and the influence they might have on
increasing EMS use in the future.

NCEI's support of EMS was also evident in its work with
specific industry sectors. For example, we are currently in
the midst of a multi-year effort to develop and implement
EMSs at port facilities.These tools are still relatively new to
ports.The industry's focus on EMSs comes  at an opportune
time, as ports look for strategic ways to enhance security
and expand their operations to accommodate increased
trade and  globalization.
National  Awards for
Smart  Growth
Recognizing Progress Around

the Country
  Wichita, Kansas
  Pennsylvania
  Winooski, Vermont
  Chicago, Illinois
  Denver, Colorado
   akewood, Colorado
  Pasadena, California
  Redding, Connecticut
  Orlando, Florida
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Seeking Environmental Gains Through "Lean" Manufacturing
Our growing partnerships with industry revealed another opportunity for environmental
improvement—"lean" manufacturing."Lean" is a widely-used business strategy for cutting
costs and improving competitiveness by eliminating waste in the production process.While
increased efficiency is the primary driver behind lean, NCEI recognized  how lean techniques
can open the door to environmental improvement. In 2006, we issued a "Lean and Environ-
ment Toolkit" to help companies recognize and maximize the environmental benefits of lean.
To help raise awareness among manufacturers, we have developed working reationships
                              with organizations such as the Association for Manufac-
                              turing Excellence and the Department of Commerce's
                              Manufacturing Extension  Partnership,  as well as manufac-
                              turing-oriented programs in the states and EPA. For ex-
                              ample, EPA's Green Suppliers Network  is using lean tools
                              we developed to help companies work  with their suppliers
                              on waste minimization and process improvements.We are
                              also working with Performance Track companies to publi-
                              cize their successes in linking environmental and business
                              goals through lean.

                              While many NCEI efforts focus on  supporting voluntary
                              environmental stewardship, we also understand the impor-
                              tance of enhancing how regulatory  programs can protect
                              our environment. Working with others who design and
                              operate regulatory programs, we are  looking for ways to
                              improve results and public accountability while increasing
                              flexibility and predictability for the regulated community.
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Testing Flexible Permits
Each year; EPA and state agencies issue thousands of permits to control air emissions from
many diverse sources. In an effort to make the process less burdensome and more effective,
we have worked with the national air program to pilot test flexible air permits.These per-
mits  can take different forms, but in general they allow facilities to make certain operational
changes more rapidly while meeting all environmental standards. For example, companies
that agree to a fixed cap on their overall air emissions can  make operational changes that
would otherwise require a permit modification.This saves the  company time and money with
no increase in overall emissions. In many cases, emissions are reduced due to the incentive
companies have to create room under the cap and allow for future expansion.

The lessons learned from these pilots are now being reflected in the national  rules on air
permitting. Some of these rules have already taken effect; further changes will  be proposed in
the near future. If past experience holds true, facilities across the country will be able to operate
more efficiently while the environment benefits as well.

Another strategy for improving permitting is to combine numerous requirements into a
single permit. Most large facilities have a wide variety of environmental impacts  in different
media (i.e., air; water; land). Current practice in the United  States regulates these impacts
separately, often with multiple permits even within one medium. Some countries are mov-
ing toward the use of "integrated" permits which provide a more comprehensive approach
to controlling overall emissions while addressing a wider range of impacts. NCEI is leading a
study of integrated  permitting in the United Kingdom.The results, which are being summa-
rized now, are expected to lead to recommendations for how we might use this approach
to improve  permitting in the United States.
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               Offering Regulatory Incentives for
               Environmental Improvement
                                                         National
                                                         Environmental
                                                         PerformanceTrack
                                                   U.S. Environmental Protection Agency
               In an effort to motivate more facilities to become
               environmental leaders, we worked to create ad-
               ditional incentives for EPA's flagship leadership
               program, PerformanceTrack. In 2005, NCEI met with the Agency's national waste and water
               programs to discuss additional incentives that might be offered to top performing facilities.
               This year; we issued a rule that will reduce their regulatory burden under the Resource Con-
               servation and  Recovery Act.This rule allows certain facilities that generate, treat, store, or
               dispose of hazardous waste to reduce the frequency of self-inspections in some areas from
               once per day or week to once per month. We  estimate this single action could collectively
               save Performance Track facilities more than three-quarters of a million  dollars a year

               Three PerformanceTrack members—a Baxter  Healthcare facility in Arkansas and 3M
               facilities in  Nevada and Texas—also benefited from the flexible permits described above.
               Currently, these permits are only available on a pilot basis, and based on their proven track
               record, EPA gives preference to PerformanceTrack members in selecting its  pilot candidates.

               Considering All the Options
               Technology-based standards for controlling pollution are an essential tool for protecting pub-
               lic health and the environment. But sometimes  technology isn't the best option. For example,
               over the past two years, we worked with other parts of EPA, several industry sectors, states,
               and environmental groups on reducing mercury emissions from steel mills. Rather than
               relying on unproven and expensive technology, we focused  on  removing the source of the
                                       mercury—the mercury-containing light switches  in older cars
                                      that are crushed and melted during steel recycling.This alterna-
                                      tive approach required working with the affected industries and
                                       stakeholders to understand their concerns and the incentives
                                      that would be important for gaining their support of a voluntary
                                       approach to  recovering the switches earlier in the process.While
                                      this collaboration was neither fast nor easy,  ultimately it  paid off in
                                       a program that will  provide better environmental protection than
                                      would have been possible through conventional regulation.
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Addressing the Needs of Small Business
Finding a better way to regulate thousands of small businesses has driven our interest—and
state interest—in an innovative program first tested by the state of Massachusetts. Known
as the Environmental Results Program, or ERP it uses an integrated system of compliance
assistance, self-certification procedures, and statistically based performance measurement
to provide a more efficient and less burdensome alternative to conventional permitting.
NCEI has provided leadership in helping other states learn about and develop their own
ERP programs. Sixteen states now use ERP to
improve environmental performance across  0
different small business sectors. Evidence of the
increasing interest in this approach was seen in
2006 when a number of states came together
to create their own ERP consortium.
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              Supporting Regulatory Innovation in States
              Recognizing that states are often in the best position to see what's working and what might
              be improved, NCEI runs a national grant program to support state environmental innova-
              tion. Since inception in 2002, the State Innovation Grant Program has awarded nearly $5
              million for 28 projects in 23 states to support innovations related to environmental permit-
              ting. Many of these states have used their grants to develop ERPs or environmental  leader-
              ship programs that complement EPA's National Environmental Performance Track. Others
              have explored how incorporating EMS into permits can improve results. Projects  initiated
              by states in the first rounds of the State Innovation Grant Competition  are now coming to
              completion and are showing very promising results. In Delaware, for example, an  ERP for the
              auto body repair sector increased compli-
              ance rates for this small business sector by
              nearly 20 percent. Similarly, an innovative
              approach to stormwater permitting in Ari-
              zona allowed the state to begin to address
              a two-fold increase in permit applications
              from developers while making the process
              less costly for the state and providing a
              substantially reduced application review
              time for the applicants. Arizona accom-
              plished this by streamlining the permit ap-
              plication process with aWeb-based portal,
              enhanced with an  automated analysis of
              state geographic information.
                                          State Innovation
                                          Grants  2005-2006
                                           •  Arizona
                                           •  Georgia
                                           •  Indiana
                                             Kentucky
                                            toi
                                             Massachusetts
                                             Nevada
                                             New Hampshire
                                             New Jersey
                                             Rhode Island
                                                          •  Washin
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As EPA's champion for innovation, NCEI works in a variety of ways to support and promote
new methods of achieving environmental goals. As the previous sections highlight, many of
those innovations are developed in partnership with outside partners. However, NCEI also
works to create a culture of environmental problem-solving within EPA.

Strengthening  Decision-Making
With a number of national programs in Washington, D.C., and I 0 regional offices around
the country, EPA has many opportunities to pursue innovative approaches to environmental
protection. Several times a year; NCEI brings the Agency's senior career leadership together
to share results and discuss common innovation challenges and priorities.This  dialogue  clears
the way for progress on prescient issues and also  provides the EPA Administrator with  a
valuable resource for assisting with  policy development and  analysis. For example, in 2006,
EPA's Innovation Action Council (IAC), as it is known, focused on identifying innovations that
could be helpfu in cleaning up diesel emissions, addressing environmental impacts of agri-
culture, and achieving greater energy efficiency.The ideas generated  from those discussions
will be informing the action EPA takes in each area.The IAC also provides a valuable forum
for addressing innovation issues with states, which have representatives at the table. In 2005,
for example, we worked with states on a process for expediting EPA decision-making when
they approach  the Agency with novel ideas. And in 2006, we joined  several states and the
Council  for Excellence in Government in hosting a national symposium on innovation and
results for state and federal environmental agency personnel.
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               Promoting Collaboration
               One trait that is common to many innovations is collaboration by multiple parties. Col-
               laboration on shared objectives enables people to bring more resources, experience, and
               expertise to bear than would otherwise be available, enriching the final outcome.Today's
               increasingly complex environmental challenges underscore the need for collaboration as well
               as innovation.To that end, NCEI provides collaborative problem-solving resources to our
               colleagues in other parts of EPA.These resources are shared through a newly established
                                               Collaboration Practitioner's Network that enables staff
                                               to share information and experiences with each other
                                               To further recognize the importance of collaboration,
                                               in 2006, NCEI worked to establish a new EPA award to
                                               honor those that demonstrate collaborative skills. As a
                                               result of these and  other efforts, NCEI was also asked
                                               to represent EPA on a federal interagency task force
                                               charged with implementing an Executive Order on
                                               Cooperative Conservation that, as the name suggests,
                                               recognizes the importance of working effectively with
                                               others to achieve environmental goals. Much of this
                                               work builds upon NCEI's expertise on public involve-
                                               ment in environmental protection. NCEI continues to be
                                               recognized as a  leader in providing public involvement
                                               tools and information.

               Enhancing Partnership Programs
               As the preceding example acknowledges, EPA is increasingly relying on collaborative part-
               nerships to accomplish our mission. Often  these collaborations occur through partnership
               programs that offer benefits to members who want to  work with EPA on shared interests,
               such as improving energy efficiency and reducing waste.These programs can be a highly
               useful tool for achieving environmental results and a strong complement to regulatory
               programs.Today EPA offers membership in more than 50 national partnership programs and
               more than 20 at the regional level, and NCEI  plays an important role in coordinating them
               for the Agency. We have  developed training and guidelines to help programs enhance the
               design, measurement, and marketing of partnership programs.To enhance information shar-
               ing, we also launched a partnership program network within EPA that enables programs to
               learn from one  another and discuss common issues.
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Building Evaluation Skills
Evaluating environmental programs and developing sound measures of performance are
essential to continuously improving results. As we explore innovative approaches to envi-
ronmental protection, NCEI has emerged as a leader in promoting evaluation and perfor-
mance measurement within EPA and across the federal government,  nternally, we support
an annual competition whereby programs apply for assistance in conducting evaluations and
developing performance measures. Over the past two years, NCEI has also provided train-
ing on evaluation and performance measurement to nearly  ,700  managers and staff. Our
expertise in this area is now recognized among the federal family,  so much so that we have
been asked to assist with training for some of the federal government's most demanding
evaluators in the Office of Management and Budget. NCEI also has been instrumental in es-
tablishing a federal Environmental Evaluation Network that brings  agencies together to share
information and tools on how to better assess the results of environmental programs.
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                 ookinq  Ahead
                                   ^-/
              Innovation is now a guiding principle at EPA.This is evident in EPA's Strategic Plan, in the
              Administrator's Action Plan, and in the many examples of creative environmental problem-
              solving that can be found around the Agency.These examples include a community-based
              program for reducing toxic pollution at the local level; smart growth initiatives for addressing
              air and water quality; life-cycle analyses aimed at eliminating waste and conserving natural
              resources; new research to inform our understanding of sustainability; and the "greening" of
              EPA's own buildings and operations.

              One of NCEI's key roles is to support EPA programs and regions as they pursue innovative
              approaches for improving environmental results. So what have we learned in that role that
              can enhance future innovations? How do we improve EPA's ability to craft creative solutions
              to today's environmental challenges? Our experiences, to date, have yielded a number of
              important lessons.They include:

              •  Being realistic about the time and resources required. Many successful innovations at
                EPA have taken 5-  0 years to move from the initial idea stage to a mainstream business
                practice.
              •  Finding ways to work across organizational  boundaries. Some promising ideas do not
                have a natural home at EPA, which is still largely organized around specific environmental
                media. Addressing multi-media challenges requires looking across the Agency and bring-
                ing relevant resources together for collaborative problem-solving.
              •  Committing to the full innovation cycle. New ideas generally follow a predictable pat-
                tern—initial testing at a small scae; some form of evaluation that results in refinement
                (and in some cases, a whole new concept); and broader application of those concepts
                that prove successful. Innovation is a process—one that requires strategic planning, man-
                agement, and support at every stage.
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   For  more  information
   about  NCEI,  please visit
   www.epa.gov/innovation.
Highlighting lessons learned is just one way NCEI supports our fellow innovators around
EPA. Looking ahead, we will continue to provide leadership in a number of other areas that
are just as important to EPA's long term innovation success.They include:

•  Promoting collaboration as a vital innovation skill. Working with others brings more
   resources, experiences and perspectives to solving environmental challenges. Using a
   number of tools, NCEI will support the Agency in effectively designing and managing col-
   laborative initiatives.
•  Engaging senior management on cross-cutting issues.Today's environmental
   challenges are often complex, multi-media, and involve multiple stakeholders.
   Through EPA's Innovation Action Council, NCEI will work with  EPA's senior
   leaders to explore innovative approaches, to set priorities, and to assure timely,
   informed decision-making.
•  Tracking and measuring results from innovative initiatives. Measuring results
   enables you to see how well an innovation is working and to then make any
   necessary improvements—a necessary feedback loop when trying something
   new. NCEI will continue to offer training and other tools to strengthen EPA's
   measurement and evaluation skills.

As we begin our fifth year; the mission of NCEI has never seemed  more exciting.
From state capitals to board rooms to civic meetings, we see a growing number
of individuals and organizations that share our interest in innovative approaches for improv-
ing environmental results. We look forward to collaborating with committed partners on
strategies that can lead the nation to a stronger system of environmental protection and a
safer; cleaner; more economically vibrant future.
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NCE

NATIONAL  CENTER FOR
ENVIRONMENTAL INNOVATION

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