SAB Draft Report Dated April 13,2006 to Assist Meeting Deliberations - Do not Cite or Quote
This draft is 3 work in progress, does not reflect consensus advice or recommendations, has not been reviewed OF approved
by the chartered SAB, and does not represent EPA policy.
1 Valuing the Protection of Ecological Systems and Services:
2 An Expanded and Integrated Approach
3 1. INTRODUCTION 2
4 1.1 EPA's Mission Regarding Ecosystem Protection 2
5 1.2 Scope of this Report and its Intended Audience 3
6 2 AN OVERVIEW OF KEY CONCEPTS 6
7 2.1 The Concept of Ecosystem Services 6
8 2.2 The Concept of Value 8
9 2.3 The Concept of Ecological Valuation 12
10 3 ECOLOGICAL VALUATION AT EPA 15
11 3.1 Policy Contexts at EPA Where Ecological Valuation Can be Important 15
12 3.2 Institutional and Other Issues Affecting Benefits Assessment at EPA 18
13 3.3 An Illustrative Example of Ecosystem Benefit Assessment at EPA 21
14 4 AN INTEGRATED AND EXPANDED APPROACH TO ECOSYSTEM
15 VALUATION 25
16 5 CONSIDERATIONS FOR IMPLEMENTING AN INTEGRATED AND
17 EXPANDED APPROACH 28
18 5.1 Policy Context and Problem Formulation 29
19 5.2 Identifying and Predicting Ecological Changes 30
20 5.3 Identifying Changes that are Socially Important 32
21 5.4 Characterizing Values 33
22 5.5 Communicating Results 35
23 6 SUMMARY AND RECOMMENDATIONS 37
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1.INTRODUCTION
1.1 EPA's Mission Regarding Ecosystem Protection
4 The Environmental Protection Agency's (EPA's) mission is to protect human
5 health and the environment. During its history, the EPA has focused decision making
6 and much of its expertise on the first part of this mission, in particular the risks to human
7 health from chemical stressors in the environment. Although protecting human health is
8 the bedrock of the EPA's traditional expertise, the broad mission of the EPA goes beyond
9 this. In fact, EPA's Strategic Plan explicitly identifies the need to ensure "healthy
10 communities and ecosystems" as one of its five major goals (U.S Environmental
i 1 Protection Agency 2003) and EPA's efforts in protecting ecological resources—and its
12 authority for doing so— have been documented in Agency publications and independent
13 historical sources (U.S. Environmental Protection Agency 1994); U.S. Environmental
14 Protection Agency Risk Assessment Forum 2003, (U.S. Environmental Protection
15 Agency Science Advisory Board 2000), (Hays 1989); (Russell III 1993).
16 EPA's mission to protect the environment requires attention to ecological systems
17 to ensure the wise and thoughtful use and protection of our environment. An
18 "ecosystem" is the term used by ecologists to describe living organisms plus their
19 physical environment working together. Trees alone make a forest, whereas trees plus
20 soil plus streams make a forest ecosystem. Ecosystems provide basic life support for
21 human and animal populations and are the source of spiritual, aesthetic and other human
22 experiences that are valued by many. EPA's mission to protect the environment includes
23 protection of ecosystems because of the services they provide and because of values held
24 by Americans to protect the environment they have inherited.
25 Given the important role that ecosystems play in supporting life on earth and
26 providing goods and services that people value, changes in the state of these systems or
27 the flow of services they provide can have important implications. Many EPA actions
28 (e.g., regulations, rules, programs, policy decisions) affect the condition of the
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environment and the flow of ecological services from it. EPA actions can lead to
improvement or deterioration of ecosystems or prevent degradation that would otherwise
have occurred. These impacts can occur both at a relatively small, local scale as well as
more broadly at a national scale.
Despite their importance, to date, ecological impacts have received relatively
limited consideration in EPA policy analyses. EPA's ecological analysis has generally
8 focused primarily on ecological endpoints such as those identified by tests required for
9 pesticide regulation (e.g., effects on survival, growth, and reproduction of aquatic
10 invertebrates, fish, birds, mammals, and both terrestrial and aquatic plants) or mortality to
11 fish, birds, and plants and, more generally, animals, wildlife, aquatic life, as required by
12 provisions of several laws' administered by the Agency (U.S. Environmental Protection
13 Agency Risk Assessment Forum 2003). However, there is a need to go beyond this when
14 considering the ecological impacts of EPA decisions and actions to consider the full
15 range of possible impacts and their implications for the condition and functioning of the
16 associated ecosystems. Failure to consider ecological impacts as fully as possible can
17 lead to distorted policy decisions. This can occur, for example, when actions are
18 evaluated based primarily on their impacts on human health, without adequate
19 recognition of potentially important ecosystem impacts.
1.2 Scope of this Report and its Intended Audience
Despite EPA's stated mission and mandates, there is a gap between the need for
protection of ecological systems and services and EPA's ability to address this need.
23 This report is a step toward filling that gap. It describes how an integrated and expanded
24 approach for valuation of ecological systems and services can help the Agency describe
25 and measure the value of protecting ecological systems and services. It was prepared by
26 the Committee on Valuing the Protection of Ecological Systems and Services (C-
27 VPESS), which was formed by EPA's Science Advisory Board (SAB). The SAB saw a
28 need to complement the Agency's ongoing work in ecological science, ecological risk
29 assessment, and ecological benefit assessment by offering advice on how EPA might
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1 better value the protection of ecological systems and services and how that information
2 might better support decision making to protect ecological resources. Toward this end, it
3 formed C-VPESS, an interdisciplinary group of experts from the following areas:
4 decision science, ecology, economics, engineering, philosophy, psychology, and social
5 sciences with emphasis on ecosystem protection.2 C-VPESS began its work in 2003 on a
6 project designed to strengthen the Agency's analysis for protecting ecological resources.
7 The purpose of science advice on ecological valuation is to strengthen the Agency's
8 knowledge and set of analytical tools to help navigate difficult trade-offs that inevitably
9 arise when regulatory or other decisions must be made to protect ecological resources. In
10 this project the SAB set the goals of: a) assessing Agency needs and the state of the art
11 and science of valuing protection of ecological systems and services and b) identifying
12 key areas for improving knowledge, methodologies, practice, and research at EPA.
13 Senior EPA managers supported the concept of this SAB project and participated in the
14 initial background workshop that launched the work of the C-VPESS.
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16 This report provides an overview of the committee's initial conclusions.3 It
17 provides initial advice for strengthening the Agency's approaches for valuing the
18 protection of ecological systems and services, facilitating their use by decision makers,
19 and identifying the key research areas needed to strengthen the science base. The
20 committee will prepare additional reports with more detailed advice at the completion of
21 the project.4 However, given the importance of the committee's charge, it felt that it
22 would be useful to the Agency to issue a report that would indicate the direction that the
23 committee's work is taking and serve as a prelude to the subsequent committee report(s).
24 These subsequent reports will further develop the concepts in this initial advisory report
25 and provide more detailed discussion of issues, methods, and application. In particular,
26 they will describe in more detail how different methods could be used to understand the
27 benefits of the protection of ecological systems and services and how results of analyses
28 could be better integrated and communicated to decision-makers.
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This initial report focuses on the need for an expanded and integrated approach
for valuing EPA's efforts to protect ecological systems and services. It provides advice to
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the Administrator, EPA managers, EPA scientists and analysts, and EPA staff across the
Agency concerned with ecological protection. It adopts a broad view of EPA's work,
which it understands to encompass national rulemaking, regional decision making, and
programs in general that protect ecological systems and services. It outlines a call for
EPA to expand and integrate its approach in important ways.
This report appears at a time when there is lively interest internationally,
8 nationally, and at EPA itself in the issue of valuing the protection of ecological systems
9 and services. Since the establishment of the SAB C-VPESS major reports have been
10 developed focusing on how to improve the characterization of the important role of
11 ecological resources (Millennium Ecosystem Assessment Board 2003; Silva and Pagiola
12 2003; National Research Council 2004; Pagiola, von Ritter et al. 2004; Millennium
13 Ecosystem Assessment 2005). The committee's work has benefited from and will build
14 upon those recent efforts. The C-VPESS distinguishes its work from those efforts,
15 however, in the following ways. The C-VPESS focuses on EPA as an audience for its
16 work. In particular, it focuses on how EPA can value its own contributions to the
17 protection of ecological systems and services, so that the agency can make better
18 decisions in its eco-protection programs. The C-VPESS is inter-disciplinary and does not
19 focus solely on economic methods or values. The committee will offer advice on several
20 approaches to characterizing or estimating values and in each case will emphasize issues
21 relevant to EPA policy and decision-making and address how the Agency could better
22 represent the value of ecological protection.
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2 AN OVERVIEW OF KEY CONCEPTS
2.1 The Concept of Ecosystem Services
The term "ecosystem" describes a dynamic complex of plant, animal, and
microorganism communities and the non-living environment, interacting as a unit. For
example, ecosystems can describe organism-physical environment interactions in a
woodlot, a watershed, or a larger landscape. Ecosystems encompass all organisms within
6 the prescribed area, including humans, who are often the dominant element. Ecosystem
7 "functions" or "processes" are the characteristic physical, chemical, and biological
8 activities that influence the flows, storage, and transformation of materials and energy
9 within and through ecosystems (U.S Environmental Protection Agency 2004). These
10 include processes that link organisms with their physical environment (e.g., primary
11 productivity and the cycling of nutrients and water) and processes that link organisms
12 with each other, indirectly influencing flows of energy, water and nutrients (e.g., such as
13 pollination, predation and parasitism). These processes in total describe the functioning
14 of ecosystems.
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16 "Ecosystem services" is an anthropocentric concept denoting the contributions that
17 ecosystems make to people either directly or indirectly. In popular terminology these
18 contributions are sometimes labeled the "benefits" that humans derive from ecosystems.5
19 The following operational categorization of ecosystem services has recently been
20 proposed by the Milfennium Ecosystem Assessment:6
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22 a) Provisioning services (products obtained from ecosystems). These include
23 food, fuelwood, fiber, biochemicals, genetic resources and fresh water. Generally these
24 services are traded in the open marketplace.
b) Regulating services (benefits received from regulation of ecosystem
processes). This category includes a host of pathways that stem from the presence and
functioning of ecosystems and influence people in positive ways, both direct and indirect.
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These include flood protection, human disease regulation, water purification, air quality
maintenance, pollination, pest control and climate control. These services are generally
not marketed but many have clear value to society and this value will increase for many
of these services as the many dimensions of global change proceed.
c) Cultural services (the nonmaterial benefits people obtain from ecosystems).
Ecosystems contribute to the cultural, spiritual and aesthetic dimensions of people's well-
being. They also contribute to establishing a sense of place.
d) Supporting services. These are the processes that maintain ecosystem
functioning such as: soil formation, primary productivity, biogeochemistry, and
provisioning of habitat. They all affect human well-being, but generally indirectly
through their support of the provisioning, regulating and cultural service functions.
This categorization suggests a very broad definition of services, limited only by
the requirement of a contribution (direct or indirect) to human well-being. This broad
approach reflects the need to recognize the myriad ways in which ecosystems support
human life and contribute to human well-being. However, in the context of ecological
valuation, the inclusion of both direct and indirect contributions creates the potential for
double-counting. For example, for an ecological change that increased pollination, it
would be double-counting to value both the improved pollination process (as an
improved ecosystem service) and the increased agricultural output that results from it (as
a separate service). Doing so would be akin to valuing both the parts that went into
production of an automobile and the final product, the automobile, itself. Thus, in
identifying ecosystem services to be valued, it is important to distinguish functions or
processes that are inputs into the production of another ecological service and avoid
double counting of the value of both the intermediate service and the final service.
Thinking in terms of ecosystem services provides an approach to evaluating the
effect of ecological changes induced by human actions in terms of the resulting effect on
human well-being. The process of listing ecosystem services helps ensure consideration
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of the myriad ways in which ecosystems contribute to human well-being. However,
ecosystems can be valued for reasons that are independent of human well-being. As
discussed below, the committee recognizes that ecosystems can be important not only
because of the services they provide directly or indirectly but also for other non-
anthropocentric reasons, including respect for nature based on moral, religious, or
spiritual beliefs and commitments.
2.2 The Concept of Value
Because only people define values, all values are anthropogenic. However, there
is disagreement about whether the ultimate goal of all values is to promote human well-
being, so there is disagreement about whether all values are anthropocentric. When
people talk about environmental values, the values of nature, or the values of ecological
systems and services, they may have different things in mind. People have moral,
economic, religious, aesthetic, and other interests, all of which can affect their thoughts,
attitudes, and actions toward nature in general and, more specifically, toward ecosystems
and the services they provide.
The most basic philosophical distinction in values is the distinction between
means and ends. To value something as a mean is to value it for its usefulness in helping
to realize or bring about some thing or state of affairs that is valued in its own right or as
an end. Things valued for their usefulness as means in this sense are said to have
instrumental value. Of course, it would not make sense to value anything instrumentally
or as a means unless there was at least one thing or state that was valued for its own sake
23 or as an end. Things valued as ends are sometimes said to have intrinsic value.7 If
24 intrinsic value applies to things other than human beings or human experiences, then this
25 conception of value is non-anthropocentric. Some people defend a non-anthropocentric
26 conception of value or goodness (Goodpaster 1978; Taylor 1986; Rolston III 1991).
27 However, others argue that only human beings or human experiences have intrinsic
28 value, thereby defending an anthropocentric conception of intrinsic value (Sidgwick
29 1901; Glover 1984; Williams 1994).
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1 Some people also claim that the very existence of a species or ecological system
2 has value in addition to any instrumental value derived from the usefulness of the
3 services it provides. This claim can mean several different things. If it means that the
4 existence of an ecological system is valuable because people derive satisfaction from its
5 existence independent of specific uses they may make of its services, then it has what
6 economists call "existence value." This concept is anthropocentric. In addition, this
7 value can been viewed as a kind of instrumental value, since it is based on the premise
8 that the existence of the species or ecological system is one of many things that generate
9 human satisfaction, and that the various things that contribute to human satisfaction are
10 potentially substitutable or commensurable. In contrast, some people claim that an
11 ecological system may have intrinsic value of its own, and hence its existence is valuable
12 for its own sake. If the explanation of this claim refers to reasons that are independent of
13 the contribution that the existence of the ecological system can make to human well-
14 being, then as noted above this is a claim that the ecosystem or one or more of its
15 components has a non-anthropocentric intrinsic value.
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17 This committee recognizes that there are many possible sources of value derived
18 from ecosystems and the services they provide. To reflect this, throughout this report, the
19 term "value" is used broadly to include values that stem from contributions to human
20 well-being as well as values that reflect other considerations, such as social and civil
21 norms {including rights) and moral, religious, and spiritual beliefs and commitments. As
22 distinct from the broader concept of value, in this report we use the term "benefit" to
23 refer more narrowly to the contribution of ecosystems and their services to human well-
24 being. As such, benefits include only anthropocentric sources of value. In addition,
25 throughout the report benefits are defined relative to changes in the state of an ecosystem
26 or the flow of services it provides stemming from an actual or proposed action by EPA.
27 Thus, the term "ecosystem benefits" refers to the positive contribution to human well-
28 being of a change in an ecological system and/or its services. A negative contribution,
29 for example from damages to an ecosystem, can be viewed as a "negative benefit" or
30 cost. Similarly, the term "valuation" will refer to the process of estimating or measuring
31 either the value of, or the value of a change in, an ecosystem, its components, or the
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I services it provides. Table 1 provides a summary of the usage of key terms throughout
2 this report.
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1 Table 1
2 Usage of Terms
3 For purposes of this report, the following terms are used as indicated:
Ecosystem: A dynamic complex of plant, animal, and microorganism communities and the non-living
environment, interacting as a unit.
Ecosystem functions or processes: The characteristic physical, chemical, and biological activities that
influence the flows, storage, and transformation of materials and energy within and through ecosystems.
These include processes that link organisms with their physical environment, (e.g., primary productivity
and the cycling of nutrients and water) and processes that link organisms with each other (e.g., pollination,
predation, and parasitism).
Ecosystem Services: Those ecological characteristics, functions or processes that directly or indirectly
contribute to the well-being of human populations or have the potential to do so in the future. |
Value: This term is used broadly to include well-being; social and civil norms, including rights; and j
moral, religious, aesthetic, and spiritual beliefs and commitments. I
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Valuation: The process of estimating or measuring either the value of, or the value of a change in, an
ecosystem, its components, or the services it provides.
Valuation Method: A methodology, based on theory and data, for estimating or measuring the value of, !
or the value of a change in, an ecosystem, its components or the services it provides.
Monetary Valuation: Valuation in which estimates are expressed in monetary units.
Non-monetary Valuation: Valuation in which estimates are expressed in non-monetary terms.
Benefits: The contribution of ecosystems and their services to human well-being and satisfaction.
Economic Valuation Methods: Methods that estimate the tradeoffs individuals are willing to make for
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improvements in, or to avoid degradation of, an ecosystem, its components, or the services it provides. j
These approaches typically focus on the amount of money an individual is willing to forgo or pay to enjoy
a particular positive change (willingness-to-pay) or the amount of monetary compensation a person would
accept in lieu of receiving that change (willingness to accept). This includes benefits derived from both
use and non-use values.
Social-Psychological Valuation Methods: Methods that focus on individuals' judgments of the relative
importance of, acceptance of or preferences for changes in ecosystems, their components, or the services
they provide, typically focusing on choices or ratings among alternatives. Individuals making the
judgments may respond on their own behalf or on behalf of others (society at large or specified sub-
groups) and the basis for judgments may be changes in individual welfare, or civic or ethical/moral
I obligations relevant to ecosystems and ecosystem services.
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1
2 There are a number of methods that can be used for estimating or measuring
3 values. In some cases, these methods lead to estimates that are expressed in monetary
4 units ("monetary' valuation"), while in other cases estimates are expressed in non-
5 monetary terms ("non-monetary valuation"). In addition, these methods differ in their
6 focus and, in some cases, their underlying premises. For example, economic valuation
7 measures benefits by estimating the tradeoffs individuals are willing to make for
8 ecological improvements or to avoid ecological degradation. These approaches typically
9 estimate values (including existence values) in monetary units that measure the amount of
10 money an individual is willing to pay to enjoy a particular positive change (willingness-
11 to-pay) or the amount of monetary compensation a person would accept in lieu of
12 receiving that change (willingness to accept). 8 Alternatively, social-psychological
13 methods for valuation focus on individuals' judgments of the relative importance of,
14 acceptance of, or preferences for ecological changes. These approaches typically focus
15 on choices or ratings among sets of alternative policies, and may include comparisons
16 with potentially competing social and economic goals. Individuals making the judgments
17 may respond on their own behalf or on behalf of others (society at large or specified sub-
18 groups) and the basis for judgments may be changes in individual well-being, or civic or
19 ethical/moral obligations relevant to ecosystems and ecosystem services. Similarly,
20 assessment methods based on voting or other group expressions of social/civic values
21 provide information about human values revealed through these processes. The
22 committee plans to discuss in a future report how these and other possible valuation
23 methods might be used by analysts and decision makers at EPA to capture different kinds
24 of ecological values.
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2.3 The Concept of Ecological Valuation
As noted above, "valuation" is the process of estimating or measuring either the
27 value of, or the value of a change in, an ecosystem, its components, or the services it
28 provides. The committee is focusing on valuation in EPA contexts where there is an
29 environmental protection decision to be made. The major components of ecological
30 valuation are depicted in Figure 1.
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Figure 1. Components of Ecological Valuation
Some of the components of ecological valuation parallel components of the
ecological risk framework the underlies the ecological risk guidelines developed by EPA
to support decision making to protect ecological resources (U.S. Environmental
Protection Agency Risk Assessment Forum 1992; U.S. Environmental Protection Agency
Risk Assessment Forum 1998). The committee views ecological valuation as a
complement to ecological risk assessment. Both begin with an EPA decision or policy
context for which information about ecological effects is needed. This leads to a
formulation of the problem and identification of the purpose and objectives of the
analysis and the policy options that will be considered. In addition, both ecological risk
assessment and ecological valuation involve prediction and estimation of possible
ecological effects of the EPA action or decision that is under consideration. However,
ecological valuation goes beyond ecological risk assessment in an important way. Risk
assessments typically focus on predicting the magnitudes and likelihoods of possible
adverse effects on species, populations, locations, etc., but do not provide information
about the societal importance or significance of these effects. In contrast, as depicted in
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1 Figure 1, ecological valuation takes the predicted ecological effects and seeks to
2 characterize their importance to society by providing information on the value society
3 places on the ecological improvements or the loss they experience from ecological
4 degradation. As noted above, these values can reflect either changes in the flow of
5 services provided by the ecosystem or values that are attached directly to the ecosystem
6 itself that are independent of its contribution to human well-being. Information about
7 these values is an important input in the evaluation of alternative decisions or policy
8 options.
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ECOLOGICAL VALUATION AT EPA
There are several different contexts in which EPA policy decisions result in
ecological impacts and hence in which the need for ecological valuation will arise. In
addition, EPA operates within a set of institutional, legal, organizational and practical
constraints that affect this process at the Agency. Thus, EPA has specific needs in this
regard that must be recognized and addressed. These needs arise in different parts of the
Agency for different purposes and for different audiences. Some of the needs present
8 structured requirements for valuing protection of ecological systems and services, while
9 needs in other contexts are less prescriptive.
3.1 Policy Contexts at EPA Where Ecological Valuation Can be Important
There are at least three policy contexts in which information about the value of
ecological systems and services could be very useful to EPA: a) national rule-making; b)
regional decision-making; and c) program assessment and evaluation.
Benefit assessments are required for national rulemaking by two of EPA's
17 governing statutes (the Toxic Substances Control Act and the Federal Insecticide,
18 Fungicide and Rodenticide Act) and by Executive Order 12866 for "significant regulatory
19 actions." The circular on "Regulatory Analysis" issued by the Office of Management and
20 Budget (OMB) in September 2003, OMB Circular A-4, identified key elements of a
21 regulatory analysis for such "economically significant rules." One of these elements is an
22 evaluation of the benefits and costs of a proposed regulatory action and the main
23 alternatives identified. The circular contains general guidance on how to provide
24 monetized, quantitative, and qualitative information to characterize benefits as fully as
25 possible, and EPA itself has developed initial guidance for ecological benefit assessment
26 (U.S. Environmental Protection Agency 2000). In developing its 2004 draft Ecological
27 Benefits Assessment Strategic Plan, EPA identified the need for improved models and
28 methods to help implement the requirements of the circular as they relate to ecological
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valuation. The Agency identified needs both to expand methods and data for economic
valuation and to explore other assessment methods to provide information on ecological
effects that are currently un-monetized and assigned an implicit value of $0. Managers
seek approaches that are "sound, credible, and scientifically supportable" as well as
flexible, affordable, and able to be implemented within the time constraints required by
rulemaking (U.S. Environmental Protection Agency Science Advisory Board 2004).
EPA's regional offices, although generally not responsible for national rule-
making, are responsible for several kinds of decisions and activities where the benefits of
ecological protection are potentially important:
• Priority setting for regional action, such as targeting projects for wetland
restoration and enhancement or identifying critical ecosystems or
ecological resources for regional attention;
• Setting Supplemental Environmental Protection (SEPs) penalties for
enforcement cases where those penalties involve protection of ecological
systems and services;
Choice of options for Superfund and Resource Conservation and Recovery
Act (RCRA) cleanups that could take ecological benefits into account;
• Review of Environmental Impact Statements prepared by other federal
agencies to comply with the National Environmental Protection Act; and
• Assisting state and local governments and other federal Agencies with
protecting lands and land uses, where assessment of the value of
protection options could help decision-makers make better-informed
decisions.
Regions also seek low-cost methods that can be implemented quickly to inform
"place-based" decisions. They seek methods that provide information on the value of
ecological services; ecological diversity; conservation opportunities and threats;
sustainability; and historical and cultural values associated with ecological systems or
parts of ecosystems at the watershed or landscape scale. Regions experience the need to
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communicate the value of ecological protection as they collaborate with other federal
agencies and with government partners at the local, state, and regional levels.
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6 Agency's decisions, including the assessment of ecological protection programs. EPA's
7 need to assess the value of its ecological protection programs has two dimensions: 1) a
8 retrospective dimension, because assessments focus on the value of EPA's current and
9 past protection efforts and 2) a prospective dimension, because such assessments are
10 meant to inform decisions about future EPA programs and priorities. Program
11 assessments are mandated for EPA, as they are for all agencies of the executive branch,
12 by the Government Performance and Results Act (GPRA) of 1993. As part of that
13 assessment, OMB requires EPA to periodically identify its strategic goals and describe
14 both the social costs and budget costs associated with them. EPA's Strategic Plan for
15 2003-2008 described the current social costs and benefits of EPA's programs and policies
16 under each strategic goal area for the year 2002 (U.S. Environmental Protection Agency
17 2003). This analysis repeatedly points out that EPA lacks data and methods to quantify
18 the ecological benefits associated with the goals in its strategic plan.
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20 In addition, the Government Performance Results Act (GPRA) of 1993
21 established requirements for assessing the effectiveness of federal programs. Part of that
22 assessment involves assessing the outcomes of programs intended to protect ecological
23 resources. EPA must report annually on its progress in meeting program objectives
24 linked to strategic plan goals and must engage periodically in an in-depth review [through
25 the Program Assessment Rating Tool (PART)] of selected programs to identify their net
26 benefits and to evaluate their effectiveness in delivering meaningful, ambitious program
27 outcomes. Characterizing ecological benefits associated with EPA programs is a
28 necessary part of the program assessment process.
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3.2 Institutional and Other Issues Affecting Benefits Assessment at EPA
The committee recognizes that ecological benefits assessment at EPA must be
conducted within a set of institutional, legal, organizational, and practical constraints that
affect what is and can be done to incorporate ecosystem values into policy evaluations. In
an effort to better understand these issues and their implications for the committee's
charge, the committee conducted a series of interviews with Agency staff.9 The
interviews were focused on the process of developing benefit analyses for Regulatory
Impact Assessment (RIA) for rulemaking and the relationship between EPA and the
Office of Management and Budget. However, many of the questions raised are equally
applicable to strategic planning, performance reviews, regional analysis, and other
situations in which the Agency is called upon to assess the value of ecosystems. Below
are some key observations made by the committee based on those interviews.
EPA program offices responsible for new rules initiate, finance, and administer
the process for developing ecological benefit assessments. The development of a new
17 rule - including the definition of the rule itself, options to be weighed, and the assessment
18 of impacts arising from the rule - involves much more than scientific assessment.
19 Political negotiations and legal analysis often dominate the process. EPA has a formal
20 rule-development process with several stages, each of which imposes demands on the
21 Agency, and the Agency also develops rules to meet court-imposed deadlines. Several
22 aspects of these imposed constraints deserve emphasis. Despite the commonality of the
23 underlying rule-development process, it is clear that there is no single way in which
24 analysts within the Agency assess the tradeoffs that people would be willing to make to
25 enhance ecosystems. Practices vary considerably across program offices, reflecting
26 differences in mission, in-house expertise, etc. Program offices have different statutory
27 and strategic missions. The organization, financing, and skills of the program offices
28 differ enormously. The National Center for Environmental Economics (NCEE) is the
29 Agency's centralized reviewer of economic analysis within the agency.10 However, the
30 primary expertise and development of the rules resides within the program offices.
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Secondly, the timing of the process largely determines the kinds of analytical
techniques that are employed. This is related to court-imposed deadlines on the rule
process, as well as intervening requirements related to the collection and analysis of new
data. The scientific community is accustomed to much longer time horizons for their
analyses. Unfortunately, collecting new data poses a significant bureaucratic problem for
the Agency. To collect original data, the Agency must submit an Information Collection
Request, which is reviewed within the Agency and by OMB. This hurdle is required by
the Paperwork Reduction Act and imposes the review responsibility on OMB. There is no
discretion under the legislation in applying this review requirement (except in cases
associated with the development of survey instruments). Nonetheless, the requirement
can add a significant amount of time to the assessment process. With perhaps a year or
two at most to conduct a study, this kind of review significantly limits the kind of
analysis the Agency can conduct.
A third issue is the role of the Office of Management and Budget (OMB) in
defining or directing ecosystem valuation exercises at EPA. OMB acts as an oversight
body that reviews EPA's benefit analyses. EPA is required to provide sufficient
justification for its claims regarding the benefits of its actions, including any ecological
benefits. As noted above, EPA has been given explicit guidance by OMB in the Circular
A-4, which the committee views as a reasonable document on its own because of its call
for a full characterization of the impacts of different policy options, including where
possible a characterization of benefits that cannot be monetized or cannot be quantified
23 (Office of Management and Budget 2003)." For a benefit or cost that cannot be
24 expressed in monetary terms, the Circular instructs Agency staff to "try to measure it in
25 terms of its physical units," or, if this is not possible either, to "describe the benefit or
26 cost qualitatively." Thus, although Circular A-4 does not require that all benefits be
27 monetized, it does require at a minimum a scientific characterization of those benefits.
28 However, little guidance is provided on how this should be done. Instead, the Circular
29 urges regulators to "exercise professional judgment in identifying the importance of non-
30 quantified factors and assess as best you can how they might change the ranking of
31 alternatives based on estimated net benefits."
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In conducting benefit assessments, EPA has an incentive to use methods that have
been accepted by OMB in the past. The thinking at EPA seems to be "if it made it
through OMB once, it will make it through again." There appears to be a pronounced
tendency to use "off-the-shelf methods to avoid problems with OMB. This creates a
6 bias toward the status quo and a disincentive to explore new or innovative approaches.
7 To this end, the committee sees the need to strike an appropriate balance between the use
8 of established methods and the possible need to innovate in an effort to conduct more
comprehensive and defensible benefit assessments for use in decision making and
evaluation.
A related issue involves review of Regulatory Impact Assessments (RIAs) by
external parties. The Agency does not take a standardized approach to R1A review. EPA
staff and managers reported that peer review was focused only on "novel" elements of an
analysis. This raises the question of how the Agency (and perhaps OMB) defines
16 "novel." Moreover, the novelty standard actually creates a clear incentive to avoid
17 conducting novel analyses (however defined). It is clearly cheaper and quicker to avoid
18 review altogether. The committee advises the Agency to consider whether there is a role
19 for a standing expert body that can bring consistency to the review of analysis, avoid
duplication of review, and be sensitive to timing and resource constraints.
Finally, the committee notes the importance of the organization of assessment
science within the Agency. Currently, the Agency relies upon a variety of offices to
develop assessments, with varying degrees of reliance on other offices (e.g., NCEE) or
outside assistance. It is not clear which approach is most effective. In addition, the
organization of assessment has implications for the availability and location of data to
27 support ecological valuation. It is important that data that are housed within individual
28 program offices be made public and readily shared with other offices.
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3.3 An Illustrative Example of Ecosystem Benefit Assessment at EPA
In an effort to better understand the current state of ecosystem valuation at EPA,
the committee examined in detail one specific case where benefit assessment was
undertaken, namely, the Environmental and Economic Benefits Analysis that EPA
prepared in support of new regulations for Concentrated Animal Feeding Operations
(CAFOs) (U.S. Environmental Protection Agency 2002).12'13 The Agency indicated that
8 this analysis was illustrative of other EPA regulatory analyses of ecological benefits in
9 form and general content.
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11 Because the proposed new CAFO rule constituted a "significant regulatory
12 action" under Executive Order 12866, EPA was required to assess the costs and benefits
13 of the rule.14 EPA identified a wide variety of potential "use" and "non-use" benefits as
14 part of its analysis.15 Using various economic valuation methods, EPA provided
15 monetary quantifications in its CAFO report for seven environmental benefits.16
16 Approximately eighty-five percent of the monetary benefits quantified by EPA were
17 attributed to recreational use and non-use of affected waterways. According to Agency
18 staff, EPA's analysis was driven by what it could monetize. EPA focused on those
19 benefits for which data were known to be available for quantification of both the baseline
20 condition and the likely changes from the proposed rule, and for translation of those
21 changes into monetary equivalents. EPA's final benefits assessment provides only a brief
22 discussion of the benefits that it could not monetize. The benefits table in the Executive
23 Summary listed a variety of non-monetized benefits17 but designated them only as "not
24 monetized." EPA represented the aggregate effect of these "substantial additional
25 environmental benefits" simply by attaching a "+B" place-holder to the estimated range
26 of total monetized benefits. Although the Executive Summary gave a brief description of
27 these "non-monetized" benefits, the remainder of the report devotes little attention to
them.
Although considerable effort was invested in the CAFO benefits assessment, the
assessment illustrates a number of limitations in the current state of ecosystem valuation
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1 at EPA. First, as noted above, in implementing the Executive Order, the CAFO analysis
2 did not provide the full characterization of ecological benefits using quantitative and
3 qualitative information, as required by the OMB Circular A-4. Instead, the report
4 focused on a limited set of environmental benefits, driven primarily by the ability to
5 monetize these benefits using generally accepted models and existing value measures
6 (benefit transfer).18 These benefits did not include all of the major ecological benefits
7 that the new CAFO rule would likely generate, nor all of the benefits that generated
8 public support for the new rule.19 The Circular requires that a benefit assessment identify
9 and characterize all of the important benefits of the proposed rule, not simply those that
10 can be monetized. By focusing only on a narrow set of benefits, the CAFO analysis and
11 report understates the benefits of the rule change and distorts the rationale supporting the
12 final rule.20 An unfortunate effect of this presentation is to suggest to readers that the
13 monetized benefits constitute the principal justification for the CAFO rule.21 Although in
14 this case the focus on monetized benefits did not affect the outcome of the regulatory
review, it is certainly possible that in a different context a benefits assessment based only
on easily monetized benefits could inadvertently undermine support for a rule that would
be justified based on a more inclusive characterization of benefits.
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Second, the monetary values for many of the emphasized benefits were estimated
through highly leveraged benefit transfers that were generally based on dated studies
conducted in contexts quite different from the CAFO rule application.22 This was
undoubtedly driven to a large extent by time, data, and resource constraints, which make
it very difficult for the Agency to conduct new surveys or studies and virtually force the
Agency to monetize benefits using existing value estimates. However, reliance on dated
studies in quite different contexts raises questions about the credibility or validity of the
monetary benefit estimates. This is particularly true when values are presented as point
estimates, without adequate recognition of the underlying limitations due to uncertainty
and data quality.
Third, EPA apparently did not engage in a sufficiently comprehensive effort at the
outset to model the rule's ecological impacts. The report presents only a simple
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1 conceptual model that traces outputs (a list of pollutants in manure - Exhibit 2-2 in the
2 CAFO report) through pathways (Exhibit 2-1) to environmental and human health
3 effects.23 This model provided useful guidance, but was not sufficiently comprehensive to
4 assure thoughout analysis of the rule's ecological impacts. As a consequence the
5 analysis was unduly directed by Agency presumptions (or discoveries) about the
6 availability of relevant data and the likely opportunities to quantify effects precisely and
7 to link and monetize associated benefits. This was undoubtedly driven in part by the time
8 pressures of putting together the regulatory impact analysis. However, without a
9 comprehensive modeling effort at the outset, EPA had insufficient insight into the
10 potential benefits that needed to be analyzed and valued. Developing integrated models
11 of relevant ecosystems at the outset of a valuation project would also help in identifying
12 important secondary effects, which frequently may be of even greater consequence or
13 value than the primary effects.24
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15 Fourth, the CAFO analysis clearly demonstrates the challenges of conducting
16 ecological benefit assessments at the national level.25 National rule-makings inevitably
17 require EPA to generalize away from geographic specifics, both in terms of ecological
18 impacts and associated values. However, it is possible (and desirable) to make use of
19 intensive case studies (e.g., individual watersheds, lakes, streams, estuaries) in support of
20 the national-scale analyses. Existing and ongoing research at local and regional scales
21 offers more detailed data and models that could be better exploited, both to fill in gaps
22 and to validate the national-scale analyses systematically. Systematically performing and
23 documenting comparisons to intensive study sites could indicate the extent to which the
national model needs to be adjusted for local/regional conditions and could provide data
for estimating the range of error and uncertainty in the projected national-scale effects.
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Fifth, although EPA invited public comment on the draft CAFO analysis as
required by Executive Order 1 2866, there is no indication in the draft CAFO report that
29 EPA consulted with the public during its analysis to help it identify, assess, and prioritize
30 the effects and values addressed in its analysis, nor is there discussion in the final CAFO
3 1 analysis of any comments received on the draft CAFO analysis. Early public
U S EPA Headquarters Library
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Washington, DC 20460
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1 involvement could play a valuable role in helping the Agency both a) identify all of the
1 systems and services impacted by the proposed regulations and b) determine the
3 regulatory effects that are likely to be of greatest value. This would ensure that the
4 benefits assessment includes the most important impacts.
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6 Sixth, while EPA in its analysis and report appropriately emphasized the
7 importance of using outside peer-reviewed data, methods, and models, EPA did not seek
8 to peer review its application of them or its integration of these components in deriving
9 benefit values for the CAFO rule. Once again, this is undoubtedly due in part to time and
10 resource constraints. However, peer review, especially early in the process, would help
11 EPA staff identify relevant and available data, models, and methods to support its
12 analysis, and provide encouragement, direction, and sanction for more vigorous and
13 effective pursuit of ecological and human wellbeing effects associated with the proposed
14 rule. The general idea is to have individual components of the analysis (e.g., watershed
15 modeling, air dispersal, human health, recreation, aesthetics) each reviewed, as well as a
16 more general review of the overall analytic scheme.
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18 Finally, EPA's analysis and report focused nearly exclusively on meeting the
19 requirements as described in Executive Order 12866. This may not be surprising since
20 the Executive Order provided the proximate reason for preparing the analysis and report.
21 However, when EPA prepares a benefit assessment specifically to comply with Executive
22 Order 12866, the Agency need not limit itself to the goals and requirements of the
23 Executive Order. The Executive Order does not preclude EPA from adopting broader
24 goals. The Executive Order provides merely that EPA shall conduct an "analysis" and
25 "assessment" of the "benefits anticipated from the regulatory action" and, "to the extent
26 feasible, a quantification of those benefits." By adopting a narrow focus, the report failed
27 to consider or reflect the broader purposes that a benefit assessment can serve.
28 Environmental benefit assessments such as the CAFO study can serve a variety of
29 important purposes, including helping to educate policy-makers and the public more
30 generally about the benefits that stem from EPA regulations, and it is important for EPA
31 to recognize and have an incentive to consider this broader purpose.
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4 AN INTEGRATED AND EXPANDED APPROACH TO ECOSYSTEM
VALUATION
The CAFO example discussed above highlights a number of limitations to the
current state of ecosystem valuation at EPA. The committee's analysis points to the need
for a comprehensive, integrated approach to valuing the ecological impacts of EPA
actions, one that focuses on the impacts of most concern to people and integrates
ecological analysis with valuation. This section describes a proposed framework, based
on the committee's deliberations to date. A more detailed discussion of the methods that
could be used to implement this framework and the issues that arise in doing so will be
provided in subsequent committee reports. The goal in this report is simply to provide an
organizing framework to guide the more detailed discussion regarding implementation.
The framework outlined here has three key features, which are interrelated: a) a
15 focus on impacts of most concern to people; b) an integration of ecological analysis and
16 valuation; and c) the use of an expanded set of valuation approaches.
The first feature reflects the committee's view that ecological valuation or benefit
assessment should focus on the impacts or benefits that are likely to be most significant
or of greatest concern to people, which might or might not be those that are most easily
measured. This requires a systematic consideration of the many possible sources of value
from ecosystem protection and an identification of the types of values that are providing
the impetus for a particular policy change. Information about the ecosystem services or
24 characteristics that are of greatest concern needs to be obtained early in the valuation
25 process so that efforts at quantification and characterization of benefits can be focused on
26 the related ecological changes. This requires a mapping of the effects of a given policy
27 change on ecologica! assessment endpoints to the corresponding effects on ecological
28 services. In addition, this focus will likely lead to an expansion of the types of services to
29 be characterized, quantified, or explicitly valued. For example, even in the context of
30 national rule-making, the inability to monetize a specific benefit should not preclude its
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inclusion; if there is evidence that it is important to people, it should be included as a key
component of total benefits and a detailed and careful (albeit non-monetized)
characterization of that benefit should be provided.
The second key feature of the framework is the integration of ecological analysis
with valuation. This integration needs to occur both at an early stage (in the
identification of the impacts that matter) and at a later stage (when estimating the value of
impacts). Thus, instead of having ecologists work independently initially to estimate
9 ecological impacts and then "pass the baton" on to economists or other social scientists to
10 value those impacts, it envisions collaborative work across disciplines to ensure that the
11 analysis focuses on the impacts that are of greatest concern to society and that the ways in
12 which these impacts are defined and measured are informative during the selection and, if
13 necessary, design of the valuation techniques/methods. This requires a committed
14 interaction among the relevant bio-physical, ecological, and social/economic scientists
15 and analysts. The various disciplines must reach out to establish useful and credible links
16 to each other. This interaction should commence at the beginning of the process and
17 continue until the completion of the analysis. Ecological models need to be developed,
modified, or extended to provide usable inputs for value assessments. Likewise,
valuation methods and models need to be developed, modified, or extended to address
important ecological/bio-physical effects that are currently underrepresented in value
assessments.
Third, the framework envisions the use of a variety of methods to characterize and
measure the importance of changes in ecosystems, including economic methods,
25 social/psychological assessments, and ecological approaches. It recognizes that different
26 approaches provide different ways of characterizing or providing information about
27 values. Different approaches could be used at different stages of the valuation process.
28 For example, some methods might be well-suited to providing information that would be
29 used early in the process to guide decisions about which ecological changes are likely to
30 be most important to people, while other methods would be well-suited to quantifying or
31 monetizing benefits that are specific to the EPA action. In addition, the suite of methods
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1 used could vary with the specific policy context, due to differences across contexts in: a)
2 information needs, b) the underlying sources of value being captured; c) data availability;
3 and d) methodological limitations. The framework should serve as a guide to EPA staff
4 as they conduct RIAs and seek to implement the provisions of Circular A-4 (including the
5 provisions relating to benefits that are not readily quantified or monetized), as well as in
6 regional decision-making and program assessment.
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CONSIDERATIONS FOR IMPLEMENTING AN INTEGRATED AND
EXPANDED APPROACH
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4 An overview of the process for implementing the proposed approach is depicted
5 in Figure 2.
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ficrtioii «fSocially
iBSwriw* Ajuanm wt
Bio-Physical Prediction of Chung!! in
Figure 2: Process for Implementing an Expanded and Integrated Approach to Ecological Valuation
The process for implementing the proposed framework would involve the
following steps:
• identifying the policy context;
• formulating the valuation problem and choosing policy options to be considered;
• identifying the significant ecological changes that could result under the different
options;
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1 • identifying the ecological changes that are socially important, i.e., choosing the
2 assessment endpoints;
3 • predicting the changes in the assessment endpoints in biophysical terms;
4 • characterizing, representing, or measuring the value of changes in the assessment
5 endpoints in monetary or non-monetary terms; and
6 • communicating results to policymakers.
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8 This process parallels the Agency's Framework for Ecological Risk Assessment
9 (U.S. Environmental Protection Agency Risk Assessment Forum 1992) and could
10 ultimately be merged with it as part of a broader framework for ecological assessment.
11 Note that, although Figure 2 depicts these steps as sequential, in practice it is likely that
12 iteration will occur at some points of the process. For example, as suggested in the
13 figure, information about the value of changes in assessment endpoints stemming from a
14 given set of policy options might cause a reformulation of the problem or identification of
15 alternative policy options that could be considered.
5.1 Policy Context and Problem Formulation
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17 As noted above, ecological benefit assessment can play a key role in a number of
18 different decision contexts, including national rule-making, local/regional decision-
19 making, and program evaluation. In general, it will be governed by a set of laws,
20 principles, mandates, and public concerns. There is a need to formulate the valuation
21 problem within the specific EPA context. These contexts differ not only in the required
22 scale for the analysis (e.g., national vs. local) but possibly also in the type of valuation
23 information that is needed. For example, in a national rule-making context where
24 benefits and costs are evaluated and compared, Circular A-4 dictates that ecological
25 benefits be: a) measured in dollar terms when possible; b) measured using other metrics
26 for impacts on humans (e.g., population affected) when monetary valuation is not
27 possible; and c) fully described in qualitative terms, when quantitative information is not
28 available. In contrast, expressing benefits in monetary terms might be of little or no
29 importance to EPA analysts involved in program evaluation or regional assessments.
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1 Therefore the policy context in which the assessment is cast is a key influence on the
2 appropriateness of data, models and methods.
5.2 Identifying and Predicting Ecological Changes
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4 Decisions about the changes in ecological systems or services to be included in
5 the analysis should be based on an assessment of the changes that are likely to be most
6 important to society, i.e., the socially important assessment endpoints. These could
7 include both changes in the ecosystem itself that people value directly, or the resulting
8 changes in the ecological services provided by those systems. The importance of a given
9 change will depend on both the magnitude and bio-physical importance of the effect and
10 the resulting importance to society.
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12 The bio-physical impacts of a given EPA action can be identified at different
13 temporal, spatial, and ecological levels. The latter include the individual level, the
14 population level, the community level, the ecosystem level (union of biological
15 populations with their surrounding physical environment), and the level of the global
16 biosphere. Living organisms supply goods and services that differ across all levels of
17 organization, from the individual to the ecosystem or global biosphere. For example, the
18 service provided by an individual animal unit is different from the service provided by a
19 given animal population. Estimating bio-physical impacts requires information about
20 relevant ecological production functions. These functions provide a basis for estimation
21 of the ecological changes that could result from a given EPA action or policy (e.g.,
22 percent reductions/avoidances of pollution in streams and lakes, reduced/avoided
23 eutrophication of estuaries, reduced risk from the introduction of hormones and
24 antibiotics into aquatic systems, improved/protected quality of community drinking water
25 sources). In identifying and predicting ecological changes, it is important to consider
26 their full range, including both primary and secondary effects, adequately accounting for
27 uncertainty, stability of the system (including the effect of random shocks and
28 management errors and the system's resilience), heterogeneity within a population or
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1 ecosystem, heterogeneity across populations or ecosystems, and dynamic changes in the
2 ecosystem over time.
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4 Numerous mathematical models of ecological production have been developed.
5 These models cover the spectrum of biological organization and ecological hierarchy.
6 Some have been developed for specific contexts (species, geographic locations, etc.)
7 while others are more general. Primers on ecological theory and modeling (e.g.,
8 Roughgarden 1998) can provide a starting point for identifying available models.
9
10 Many of these ecological models have been developed to satisfy research
11 objectives and not EPA policy or regulatory objectives. This poses at least three key
12 challenges when using these models to assess the ecological benefits of EPA actions.
13 The first challenge is to link existing models with Agency actions that are intended to
14 control chemical, physical and biological sources of stress. The valuation framework
15 outlined above requires an estimation of the bio-physical impacts that would stem from a
16 specific EPA action. To be used for this purpose, ecological models must be linked to
17 information about stressors. This link is often not a key feature of ecological models
18 developed for research purposes.
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20 Second, the outputs from the ecological models need to be linked to types of
21 ecological services that are obtained from ecosystems and their structural and functional
22 components. If adapted properly, ecological models can connect material outputs to
23 stocks and services flows, assuming that the services have been well-identified.
24 Providing the link between material outputs and services involves several steps, including
25 identifying "service providers," determining the aspects of community structure that
26 influence function, assessing the key environmental factors that influence the provision of
27 services, and measuring the spatial and temporal scales over which services are provided
28 (Kremen, 2005). Adaptation of existing models should consider alignment between: a)
29 models; b) ecological services; c) ecological service providers; d) potential injuries; and
30 e) the stressors under EPA purview.
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1 Finally, the ecological models need to be appropriately parameterized for use in
2 policy analysis. Numerous detailed ecological studies have been conducted at various
3 levels, at Long-Term Ecological Research Sites, for example (Farber, Robert Costanza et
4 al. 2006),, which could provide a starting point for parameterizing policy-driven models.
5 A key challenge is to determine whether (or to what extent) parameters estimated from a
6 given study site or population at a given point in time can be "transferred" for use in
7 evaluating ecological changes in a different location or time or at a different scale. In
8 other words, to what extent are estimated parameters adaptable to the context of interest
9 in estimating the benefits and values associated with EPA actions? In many cases, data
10 do not currently exist to parameterize existing models so they can be used in assessing
11 EPA's actions. Such data may need to be developed before the Agency can use these
12 models fully. To the extent that transferable models and parameter estimates exist, it
13 would be extremely valuable to have a central depository that EPA could draw on for this
14 information.
15
16 Despite the challenges described above, the many ecological models that now
17 exist provide a rich basis for developing particular models specialized for the various
18 rule-making and other administrative actions EPA must consider. The EPA should, as a
19 matter or ordinary practice, plan to formulate mathematical models of the systems to
20 which its actions pertain. It needs to acquire the expertise, both in house and through use
21 of consultants, to carry out this part of its mission.
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5.3 Identifying Changes that are Socially Important
For benefit assessments based on anthropocentric values, it is important to
identity early in the process what people care about, i.e., which ecological changes are
25 important to them and focus on these as assessment endpoints. For example, are
26 individuals likely to value the re-introduction of native grasses into a marshland, or
27 would they be just as happy with non-native grasses that perform similar ecological
28 functions and have similar aesthetic appeal? Is animal waste disposal a concern to
29 society primarily because of the recreational opportunities lost due to the resulting
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deterioration in water quality or is society primarily concerned about other impacts? The
range of ecological changes that are the focus of the valuation needs to include the
changes people care most about. Previous benefit assessments have often focused on
what can be measured relatively easily rather than what is most important to society.
This diminishes the relevance, usefulness and impact of the assessment.
Information about what matters to people can be obtained in a variety of ways.
Examples range from in-depth studies of people's mental models and how their
preferences are shaped by their conceptualization of ecosystems and ecological services,
to more standard survey responses from prior or purpose-specific studies. In addition,
early public involvement26 or use of focus groups or workshops comprised of
representative individuals from the affected population and relevant scientific experts can
help to identify relevant or potentially important ecological changes for the specific
context of interest.
In eliciting information about what matters to people, it is important to bear in
mind that people's preferences depend on their mental models (their understandings of
causal processes and relations), and what information is at hand to influence their
understanding, and how. Expressions of what is important (e.g., in surveys) can change
with the amount and kind of information provided, as well as how it is provided.
Collaborative interaction between analysts and public representatives can ensure that
respondents have sufficient information when expressing views and preferences.
5.4 Characterizing Values
Given predicted changes in assessment endpoints, the value of these changes
needs to be characterized and, when possible, measured or quantified. This requires that
the output from the ecological impact assessment be in a form that can be used as an
input in estimating the value of the change in ecosystems and/or ecosystem services.
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To translate bio-physical impacts into human values, it is necessary to project
how ecosystem changes will affect humans and the things that humans value. These
impacts can be measured in non-monetary terms or in monetary terms.
The extent of the impact on humans can be measured in non-monetary terms
6 using a variety of metrics, such as the number and characteristics of the
7 people/communities affected, social expressions of importance, the number of people
8 significantly affected, the likely symptoms avoided or reduced, and the duration of the
9 impact. Estimation of impact on humans in terms of the extent of exposure, expressions
10 of concern in survey or political venues or similar measures is crucial in three possible
11 ways. First, in some contexts, decisions based on social expectations (e.g., protection of
12 children's health) may look directly to these measures as indicators of the appropriate
13 policy choice. Second, in contexts where monetary measures of value are sought, the
14 human benefits captured by information on exposure or symptoms may help in
15 translating benefits into their monetary equivalents. This requires an understanding of
16 those impacts on humans before this translation can occur. Third, in some cases even
17 where monetary values are required by regulations or executive orders, using methods
that defensibly report the magnitude and human significance of such effects, rather than
ignoring them, would allow the policymakers to draw their own conclusions regarding
the associated potential value or benefit. Thus, in all of these cases, estimates of the
impact of the ecosystem change on human populations are needed.
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In contexts where monetary metrics are required or desired and the necessary data
and methods exist, the impact of the ecological change on the provision of some services
to human populations may be translated into a monetary equivalent of that change using
standard economic valuation techniques. For some valuation contexts economic or
27 monetary methods for valuing changes are relatively well-developed. They are designed
28 to estimate the benefit or cost of a given ecological change using a willingness-to-pay or
29 willingness-to-accept measure of the utility equivalent of that change. These methods
30 have been applied to the valuation of ecosystem services in a number of studies that have
31 produced results that are useful for policy evaluation. However, as in the CAFO study,
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1 monetary valuation methods have generally been applied to a relatively narrow set of
2 services. In some cases, these might not have been the services that people are most
3 concerned about protecting. There is a need to expand the range of services to which
4 economic valuation is applied.
5
6 As with ecological impacts, in estimating the values of impact on humans in
7 either monetary or non-monetary terms, it is necessary to address cross-cutting issues
8 such as uncertainty (inherent randomness and imperfect information), dynamics, scale
9 (temporal and geographic), and heterogeneity (spatial variability and heterogeneity across
10 people). In subsequent reports, the committee will assess the challenges of uncertainty
11 arising out of data limitations, theory limitations, and randomness, and will recommend
12 approaches for handling uncertainty and conveying the magnitude and nature of
13 uncertainty to policymakers.
5.5 Communicating Results
Information regarding the value of ecological changes stemming from EPA
actions will only be useful in improving decision-making if it is communicated
17 effectively to policymakers and integrated with other information used in policy
18 decisions. In addition to policymakers, information about the value of ecological changes
is likely to be of interest to community members and scientists alike.
Communicating the value of protecting ecological systems and services requires
conveying not only value information, but also information about the nature and state of
the ecological systems and services to which they apply and the ecological processes
involved. Information can be and is often conveyed using mapped ecological
information, other visualizations including photographs and graphs, ecological indicators
and narratives. Integrated models with a geospatial interface, such as those developed by
Costanza (Costanza and Farber 1986; Costanza, Sklar et al. 1990; Costanza 1993;
Bockstael, Costanza et al. 1995; Fitz, DeBellevue et al. 1996; Cowling and Costanza
1997; Higgins, Turpie et al. 1997; Costanza 2002; Binder 2003; Costanza and Voinov
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2003; Costanza 2004) are another approach to depicting the state of ecological systems
and services. The SAB has proposed a framework for reporting on the condition of
ecological resources (EPA, 2003). The EPA's draft Report on the Environment (U.S
Environmental Protection Agency 2002) and reports of the Regional Environmental
Monitoring and Assessment Program (REMAP) illustrate a range of approaches that can
be used.
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1 6 SUMMARY AND RECOMMENDATIONS
2
3 Ecosystems play a crucial role in defining the world as we know it. They provide
4 a wide array of services that directly or indirectly support or enhance human populations.
5 In addition, they can be valued in their own right, for non-anthropocentric reasons
6 stemming from ethical, religious, cultural or biocentric principles. Part of EPA's broad
7 mission to protect human health and the environment includes the protection of
8 ecosystems.
9
10 Many EPA actions affect the state of ecosystems and the services derived from
11 them. However, to date ecosystem impacts have received relatively limited consideration
12 in EPA policy analysis. It is imperative that EPA improve its ability to value ecosystems
13 and their services to ensure that ecological impacts are adequately considered in the
14 evaluation of EPA actions at both the national and regional levels and to provide accurate
15 assessments of EPA programs.
16
17 To date, ecological valuation at EPA has focused primarily on a limited set of
18 ecological benefits. This stems primarily from the difficulty of predicting the impact of
19 EPA actions on ecological systems and the services derived from them and the difficulty
20 of quantifying, measuring, or characterizing the resulting benefits. The perception that
21 benefits need to be monetized in order to be carefully characterized restricts the range of
22 ecological impacts that are typically considered in EPA analyses, particularly at the
23 national level.
24
25 The Committee views EPA's efforts to improve its ability to value ecological
26 systems and services as very important and timely. As EPA continues these efforts, the
27 Committee encourages the Agency to move toward covering an expanded range of
28 important ecological effects and human considerations using an integrated approach.
29 Such an approach would:
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• Recognize the many sources of value derived from ecosystems, including both
instrumental and intrinsic values;
• Highlight the concept of ecosystem services and provide a mapping from changes
in ecological systems to changes in services using the concept of an ecological
production function;
• Expand the range of ecological changes that are valued, focusing on those
changes in ecosystems and their services that are likely to be of greatest concern
to people;
• Explore and expand the use of different methods for characterizing or measuring
the value associated with these changes;
• Involve from the beginning an interdisciplinary collaboration among
physical/biological and social scientists; and
• Solicit from the beginning input from the public or representatives of individuals
affected by the ecological changes.
Through the use of an expanded and integrated valuation framework of this type,
17 EPA can move toward more greater recognition and consideration of the effects that its
18 actions have on ecosystems and the services they provide. In addition, it will allow EPA
19 to improve environmental decision-making at the national, regional and local levels and
20 contribute to EPA's overall mission regarding ecosystem protection.
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Costanza, R. (2004). Value Theory and Energy. Encyclopedia of Energy.
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Costanza, R. and S. Farber (1986). The Economic Value of Coastal Louisiana Wetlands.
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ENDNOTES
'Laws include: the Clean Air Act, Clean Water Act, Comprehensive Environmental Response,
Compensation, and Liability Act, Federal Insecticide, Fungicide and Rodenticide Act, Toxic Substances
Control Act, and Resource Conservation and Recovery Act
2 The SAB Staff Office published a Federal Register Notice on March 7,2003 (68 FR 11082-11084)
announcing the project and called for the public to nominate experts in the following areas: decision
science; ecology; economics; engineering; psychology; and social sciences with emphasis in ecosystem
protection. The SAB Staff Office published a memorandum on August 11, 2003 documenting the steps
involved in forming the new committee and finalizing its membership.
The committee developed the conclusions in this report after multiple public meetings and workshops: a)
an Initial Background Workshop on October 27,2003 to learn the range of EPA's needs for science-based
information on valuing the protection of ecological systems and services from managers of EPA
Headquarters and Regional Offices; b) a Workshop on Different Approaches and Methods for Valuing the
Protection of Ecological Systems and Services, held on April 13-14, 2004; c) an advisory meeting focused
on support documents for national rulemakings held on June 14-15,2004; d) an advisory meeting focused
on regional science needs, in EPA's Region 9 (San Francisco) Office on Sept. 13,14, and 15,2004; e)
advisory meetings held on January 26-26,2005 and April 12-13,2005 to review EPA's draft Ecological
Benefits Assessment Strategic Plan; said f) a Workshop on Science for Valuation of EPA's Ecological
Protection Decisions and Programs, held on December 13-14,2005 to discuss the integrated and expanded
approach described in this paper. The also committee discussed a draft version of this report at public
meetings on October 25 2005 and May 9, 2006.
The Committee has already issued a related advisory report on the Agency's draft Ecological Benefits
Assessment Strategic Plan (EPA SAB, EPA-SAB-ADV-05-004). This report complements that Advisory,
and provides a discussion of an integrated framework alluded to in that report.
5 It is important to acknowledge that they are many different specific definitions for the term "benefits".
When used in these technical discussions, each makes a different set of accompanying assumptions that can
be important to how it is interpreted. In short, not all technical concepts for benefits are equivalent.
Throughout this report, we use the term "benefits" to refer to the general concept of contributions to people.
Economists generally use the term to refer more specifically to compensating or equivalent variations (see
Freeman, 2003). Despite these differences, the term services and the listing of types of services here
directs attention to a process of keeping track of changes in ecosystem services exclusively because of their
contributions to human well being. This is an anthropocentric perspective on the benefits provided by
enhancing ecosystem services.
6 The self-discipline of explicitly listing the services derived from an ecosystem, and the enterprise
involved in using the best available methods in the ecological, social, and behavioral sciences to help
develop that list is very important. At a basic level, listing ecosystem services can help us "know where we
stand" in relation to the ecosystem. It can help make the analysis of ecological science more transparent
and accessible and can help inform decision makers of the relative merits of different options before them.
7 There is controversy over the meaning of intrinsic value that we will not try to resolve here (Korsgaard,
C. 1996). . Many people take intrinsic value to mean that the value of something is inherent in that thing.
Some philosophers have argued that value or goodness is a simple non-natural property of things (see
Moore 1903 for the classical statement of this position), and others have argued that value or goodness is
not a simple property of things but one that supervenes on the natural properties to which we appeal to
explain a thing's goodness (this view is defended by, among others, contemporary moral realists; see
McDowell, J. 1985, Sturgeon, N. 1985, Sayre-McCord, G.1988, Brink, D. O. 1989)
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8 A large literature exists on the use of economic valuation methods to estimate the value of changes in
environmental quality. For a comprehensive description of these methods, see Freeman (2003).
9 These interviews were conducted by one committee member, Dr. James Boyd, in conjunction with the
Designated Federal Officer, Dr. Angela Nugent, over the period September 22, 2004 through November 23,
2005. In seven sets of interviews, Dr. Boyd spoke with staff from the Office of Policy, Economics and
Innovation, Office of Water, Office of Air and Radiation, and the Office of Solid Waste and Emergency
Response.
10 NCEE is typically brought in by the program offices to both help design and review RIAs. NCEE can
be thought to provide a centralized "screening" function for rules and analysis before they go to OMB.
NCEE is actively involved in discussions with OMB as rules and supporting analysis are developed and
advanced.
11 eg., see pp.27 "If monetization is impossible, explain why and present all available quantitative
information" and. pp "If you are not able to quantify the effects, you should present any relevant
quantitative information along with a description of the unquantified effects, such as ecological gains,
improvements in quality of life, and aesthetic beauty."
The Committee reviewed and critically evaluated the CAFO Environmental and Economic Benefits
Analysis at its June 15, 2004 meeting. As stated in the Background Document for SAB Committee on
Valuing the Protection of Ecological Systems and Services for its Session on June 15,2004, the purpose of
this exercise was "to provide a vehicle to help the Committee identify approaches, methods, and data for
characterizing the full suite of ecological 'values' affected by key types of Agency actions and appropriate
assumptions regarding those approaches, methods, and data for these types of decisions." The Committee
based its review on EPA's final benefits report (EPA 2002) and a briefing provided by the EPA Office of
Water staff. During the June meeting, members of the Committee divided into two workgroups. The
workgroups each worked independently and reported their findings to the combined Committee. The
leaders of the two working groups then prepared a consolidated summary of comments from the two
workgroups.
13 In December 2000, EPA proposed a new CAFO rule under the federal Clean Water Act to replace 25-
year-old technology requirements and permit regulations (66FR 2959). EPA published its final rule in
December 2003 (68 FR 7176). The new CAFO regulations, which cover over 15,000 large CAFO
operations, reduce manure and wastewater pollutants from feedlots and land applications of manure and
remove exemptions for stormwater-only discharges.
U Prior to publishing the draft CAFO rule in December 2000, EPA spent two years preparing an initial
assessment of the costs and benefits of the major options. After releasing the draft rule, EPA spent another
year collecting data, taking public comments, and preparing assessments of new options. EPA published
its final assessment in 2003. An intra-agency team at EPA, including economists and environmental
scientists in the Office of Water, Office of Air and Radiation, Office of Policy Economics and Innovation,
and Office of Research and Development, worked on the benefit assessment. EPA also worked with the
U.S. Department of Agriculture in developing the assessment. Dr. Christopher Miller of EPA's Office of
Water estimated that EPA spent approximately $1 million in overall contract support to develop the benefit
assessment. EPA spent approximately S250,000-$300,000 on water quality modeling as part of the
assessment.
15 The potential "use" benefits included in-stream uses (commercial fisheries, navigation, recreation,
subsistence, and human health risk), near-stream uses (non-contact recreation, such as camping, and
nonconsumptive, such as wildlife viewing), off-stream consumptive uses (drinking water,
agricultural/irrigation uses, and industrial/commercial uses), aesthetic value (for people residing, working,
or traveling near water), and the option value of future services. The potential "non-use" values included
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SAB Draft Report Dated April 13,2006 to Assist Meeting Deliberations - Do not Cite or Quote
This draft is a work in progress, does not reflect consensus advice or recommendations, has not been reviewed or approved
by the chartered SAB, and does not represent EPA policy.
ecological values (reduced mortality /morbidity of certain species, improved reproductive success, increased
diversity, and improved habitafsustainability), bequest values, and existence values.
16 These benefits were recreational use and non-use of affected waterways, protection of drinking water
wells, protection of animal water supplies, avoidance of public water treatment, improved shellfish harvest,
improved recreational fishing in estuaries, and reduced fish kills.
17 These include reduced eutrophication of estuaries; reduced pathogen contamination of drinking water
supplies; reduced human and ecological risks from hormones, antibiotics, metals, and salts; improved soil
properties from reduced over-application of manure; and "other benefits".
18 EPA apparently conducted no new economic valuation studies (although a limited amount of new
ecological research was conducted) and did not consider the possible benefits of developing new
information where important benefits could not be valued in monetary terms based on existing data.
19 For example, while the report notes the potential effects of discharging hormones and other
Pharmaceuticals commonly used in CAFOs into drinking water sources and aquatic ecosystems, the nature
and possible ecological significance of these effects is not adequately developed or presented. Similarly,
the report does not adequately address the well-known consequences of discharging Trihalomethane
precursors into drinking-water sources.
20 One of the benefits of monetary benefit estimates obviously is the ease of aggregating them by simple
arithmetic. However, the Committee does not believe that reporting that a rule produced a total of "218.9
million dollars in annual benefits" is necessarily more useful, meaningful, or defensible for environmental
policy than reporting, for example, the achievement of a "10% reduction in the pollution of over 129,000
miles of streams and rivers, 3.2 million acres of lakes and ponds, and 2,800 square miles of estuaries."
21 In the case of this CAFO rule, 97% of the monetized benefits arise from recreation (boating, swimming
and fishing) and from private well owners' willingness to pay for water quality, estimated using contingent
valuation or travel cost methods.
22 EPA used estimates based on a variety of public surveys in its benefit transfer efforts, including: a
national survey (1983) that determined individuals' willingness to pay for changes in surface water quality
relating to water-based recreational activities (Section 4 of the CAFO Report); a series of surveys (1992,
1995, 1997) of willingness to pay for reduced/avoided nitrate (or unspecified) contamination of drinking
water supplies (Section 7); and several studies (1988,1995) of recreational fishers' values (travel cost,
random utility model) for improved/protected fishing success related to nitrate pollution levels in a North
Carolina estuary (Section 9).
23 Although EPA later prepared more detailed conceptual models of the CAFO rule's impact on various
ecological systems and services, EPA did not prepare these models until after the Agency finished its
analysis.
24 Contamination of estuaries, for example, might negatively affect fisheries in the estuary (a primary
effect) but might have an even greater impact on offshore fisheries that have their nurseries in the estuary (a
secondary effect).
25 The goal of EPA's analysis was a national level assessment of the effects of the CAFO rule. This
involved the effects of approximately 15,000 individual facilities, each contributing pollutants across local
watersheds into local and regional aquatic ecosystems. A few intensive case studies were mentioned in the
report and used to calibrate the national scale models (e.g., NWPCAM, GLEAMS), but there was no
indication that these more intensive data sets were strategically selected or used systematically for formal
sensitivity tests or validations of the national-scale model results.
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SAB Draft Report Dated April 13,2006 to Assist Meeting Deliberations - Do not Cite or Quote
This draft is a work in progress, does not reflect consensus advice or recommendations, has not been reviewed or approved
by the chartered SAB, and does not represent EPA policy.
26 This could include either a robust public involvement process following Administrative Procedures Act
requirements (e.g., FR publication), or some other public involvement process [see EPA's public
involvement policy, U.S. Environmental Protection Agency Office of Policy, Economics and Innovation
2003 and the SAB report on science and stakeholder involvement U.S. Environmental Protection Agency
(Science Advisory Board 2001).
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