REGION Ill's SUMMARY OF THE NAPA REPORT
Environment.gov:
Transforming Environmental
Protection for the 21stCentury
NOVEMBER 2OOO
-------
REGION Ill's SUMMARY OF THE NAPA REPORT
Environment. go v:
Transforming Environmental
Protection for the 21stCentury
NOVEMBER 2OOO
The following is a November 17, 2000, news article by Robert White from Plantgov.com
"Report Calls for Welfare Reform Approach to EPA - The EPA
i must change its conservative culture and work with the states and private
businesses to tackle the nation's toughest environmental problems, an outside
review said this week.
While not suggesting the EPA abandon its regulatory role, the nonprofit National
Academy of Public Administration (NAPA), recommended the agency focus less
on things like overseeing environmental permits and more on controlling such
big-picture problems as smog, sediment build-up in water and global warming.
The best way to accomplish those goals, the study concluded, is to give the states
more freedom to experiment with regulations-including using market-based
solutions such as tradable pollution credits-and hold them to measurable
standards on reducing pollution.
Pivotal to measuring those standards would be a central Bureau of Environmental
Information, which the study recommends creating as a source of objective data.
A presidential appointee, subject to Senate confirmation, would head the bureau."
-------
EPA Region III recognizes the significance of this report to the evolution of EPA and the
importance of ensuring that EPA staff and managers understand its findings and
recommendations. Consequently, we have condensed the report in this document by
paraphrasing the critical elements.
Overall the NAPA report recommends that the EPA focus on climate change, smog, and polluted
runoff as strategic environmental priorities, while enhancing various innovative approaches for
the 21st century (web, monitoring, public involvement, etc.).
The NAPA report will probably provide useful direction for the next EPA Administrator,
Congress, State regulators and legislatures, business leaders, NGOs, and foundations. Further
innovations and comprehensive problem-solving will be key to success on environmental issues.
However, as NAPA points out, the challenge will be to select the right tools for the job.
Innovative use of information, market incentives, and place-based strategies all hold promise as
new tools to supplement regulation and enforcement.
The following are direct excerpts from the NAPA Report:
• Table of Contents (if you need to follow-up on specific studies)
• Forward
• Executive Summary-, including recommendations.
Each chapter's findings and recommendations (note: Chapter 5 focuses on issues
involving a regional office).
Also, we have italicized some of the following text for highlighting purposes only.
The foil report can be found on the web at http://www.napawash.org/napa/index.html.
-------
Table of Contents
Original Report This Summary
FOREWORD 9 1
EXECUTIVE SUMMARY 11 2
Summary Recommendations 12
CHAPTER 1: INNOVATE FOR THE ENVIRONMENT 17 6
The Case for Change 18
Drivers of Change 21
The Leadership Challenge 26
Report Structure 28
CHAPTER 2: TRANSFORMING REGULATION 31 9
Self-Certification: Expanding the Universe 34
A Private Transformation: Firms Adopt EMSs and
Third-Party Certification 40
StarTrack: EPA's EMS experiment 43
Oregon and Wisconsin: Building a Performance Track 47
New Jersey's Facility-Wide Permitting Project 53
The Proliferation of "Caps" 56
Findings 58
Recommendations 62
CHAPTERS: USING THE MARKET 65 13
Cap-and-Trade Systems 67
Reducing Water Pollution Through Allowance Trading 67
Reducing Air Pollution Through Allowance Trading 71
Open-Market Systems and Offsets 74
Exploiting Competition 79
Greenhouse Gas Emissions 82
Delivering Results • 82
Findings 87
Recommendations 90
CHAPTER 4: PROTECTING
WATERSHEDS: A NEW CONFLUENCE 93 16
The Problem of Nonpoint Water Pollution 94
Two New Tools: Collaboration and TMDLs 97
Comparing TMDLs and SIPs , 99
Civic Approaches to Watershed Protection 104
Civic Watershed Efforts Can Improve the Environment 112
Making Watershed Approaches Work 119
TMDLs and Watershed Protection 129
Findings 130
Recommendations 132
RCOION Ill's SUMMARY or THE NAPA REPORT
-------
CHAPTER 5: FOCUSING THE EPA-STATE RELATIONSHIP ON ENVIRONMENTAL
RESULTS 135 18
Defining and Measuring Environmental Performance 136
Performance-Based Management in the States 142
Re-negotiating the EPA-State Partnership 145
Transforming an EPA Regional Office ] 53
Findings 158
Recommendations 160
CHAPTER 6: TRANSFORMING EPA 163 21
Reinventing Superfund 164
Enforcement 167
Information and Evaluation: Tools for Performance Mgt 170
The Management Agenda at EPA 177
Findings 180
Recommendations 181
CHAPTER 7: TRANSFORMING
ENVIRONMENTAL GOVERNANCE 183 23
Summary Findings 184
For the 21st Century , 186
Summary Recommendations 190
APPENDIX A: THE RESEARCH PAPERS 195
APPENDIX B: A GUIDE TO EPA'S STATUTES 197
APPENDIX C: GLOSSARY 199
APPENDIX D: THE PANEL AND STAFF 201
SELECTED BIBLIOGRAPHY 203
ENDNOTES 207
TABLE 2-1: Number of Firms Known to the Massachusetts DEP .. 35
TABLE 2-2: Arguments For/Against ERP Dry Cleaners Record-Retention Flexibility.. 39
FIGURE 2-3: Summary of StarTrack Requirements 45
TABLE 2-3: States Developing a "Performance Track" 48
FIGURE 3-1: Summary of Selenium Discharges 70
TABLE 3-1: Summary of RECLAIM Trading, 1994-1997 71
TABLE 3-2: VOC Trading Activity Under Open-Market & Offset Systems .. 75
TABLE 3-3: The Bureau of Reclamation's Salinity Control Projects ... 80
TABLE 4-1: Primary Causes of Failure to Meet Water-Quality Stds 95
TABLE 4-2. TMDLs: A Primer 98
TABLE 4-3: A Comparison of the SIPs and TMDL Processes 99
TABLE 4-4: Common Features of Collaborative Watershed Planning ... 107
TABLE 4-5: Summary of Case Studies 113
FIGURE 4-1: Bernie Fowler Sneaker Index 123
TABLE 4-6: Funding for EPA's Section 319 Program 128
TABLE 5-1: Number of States with Delegated Program Authority ... 137
TABLE 5-2: Percentage of Output & Outcome Measures of Enforcement.. 143
TABLE 5-3: The Impacts of NEPPS on States 147
FIGURE 5-1: States with NEPPS agreements 152
Ream* Ill's SUMMARY OF THE NAPA RCPOFTT
-------
Foreword
With this report, Environment.gov, the NAPA completes its 1993 charge from the Congress of the
United States: to analyze trends and efforts in environmental protection, and to provide advice,
strategies, and insights for the future. As did the first two volumes of our work, Setting Priori-ties,
Getting Results: a New Direction for EPA., and Resolving the Paradox of Environmental Protection: An Agenda
for Congress, EPA and the States, this report challenges national, regional, state, local, business, and
community leaders to come together to address the remaining environmental challenges facing
the country. Furthermore, it offers specific approaches those individuals and groups can
undertake, both immediately and in the future.
In 1993, Congress asked NAPA whether EPA was investing its own energies and encouraging
the nation to invest its resources in addressing the most important environmental issues. The
1995 report examined risk management, EPA's organization and management, and the agency's
relationship with states, local governments and regulated entities. In 1995, Congress asked
whether EPA had implemented NAPA's recommendations and whether environmental
protection had improved as a result. In 1997, Congress asked for this report, assessing innovative
efforts by EPA and others to improve environmental protection.
We commend this report and its strategies to the nation's environmental leaders—elected,
appointed, career, and volunteer—and to all its citizens as well. There is much for all of us to do.
Robert O'Neill, Jr.
President
National Academy of Public Administration
RCOION IH'a SUMMARY or -me NAPA REPORT
-------
Executive Summary
The nation's current environmental protection system cannot deliver the healthy and sustaining world
that Americans want. Absent significant change in America's environmental governance, the
accumulation of greenhouse gases will continue to threaten the stability of the global climate and all the
systems that depend on it; the uncontrolled runoff of fertilizers and other pollutants will continue to
choke rivers, lakes, and estuaries with oxygen-depleting algae; smog will continue to degrade the health
of millions of Americans. The regulatory programs in place in this country simply cannot address those
problems at a price America can afford. A different kind of program can, however.
That "program" is a transformation of the nation's environmental governance. From the EPA through
states and communities, from regulatory agencies to businesses, individuals and organizations with an
impact on the environment need to adopt new roles and accept new responsibilities. Furthermore, they
will need to use 21st Century tools to address the problems of the 21st Century. Innovators throughout
that system of governance have already demonstrated the effectiveness of many of those new tools, but
the overall system has proved resistant to change.
This report, a product of the NAPA's Center for the Economy and the Environment, examines those
attempts to innovate, and recommends the best approaches for broader implementation. The report
considers not only specific policy tools, but also the respective roles that public and private institutions,
as well as individuals, must play. The report also calls for organizational change and management
improvement at both EPA and its state counterparts.
The Academy panel responsible for the report directs its recommendations to the next administrator of
EPA, the next commissioners of the 50 states' environmental regulatory agencies, to Congress and the
state legislatures, to environmental activists and business leaders, to all Americans committed to
providing a healthy environment for their children's children.
Summary Recommendations
The next EPA administrator should:
1. Tackle the big environmental problems
a. Select two or three of the most difficult remaining environmental challenges and engage the nation and
Congress in developing strategies to address them. By necessity, such an undertaking will require the
administrator to adopt innovative tools to address those problems. The panel suggests three
environmental issues as worthy of a national commitment of energy, resources, and innovation:
• reducing nutrients in watersheds
• reducing smog
• preparing to reverse the accumulation of greenhouse gases
b. Define the challenges in terms of measurable environmental improvements.
c. Commit the agency to deploy the most cost-effective tools to achieve those results.
RCOION Ill's SUMMARY OF THE NAPA REPORT
-------
d. Build the nation's familiarity with the market-based tools that will eventually reduce greenhouse gas
emissions.
e. Encourage states to experiment with bold forms of regulatory and non-regulatory management, such
as facility-wide permits, performance-based management contracts, cap-and-trade systems, pollution
taxes or fees, information requirements, collaborative approaches to setting goals and designing
strategies for protecting watersheds, and compliance-assistance tools of various kinds.
f. Work with Congress to secure the authority and appropriations necessary to make those innovations
work. The administrator should seek explicit congressional authorization to use cap-and-trade systems to
reduce nutrients in watersheds and the components of smog in air. That authorization should enable EPA
to issue group permits in airsheds and watersheds where states or EPA regions are capping pollution
allowances, and using trading systems rather than traditional permits.
2. Invest in information and assessment
a. The administrator should work with Congress to create an independent, well-funded bureau of
environmental information. In the meantime, the administrator should strengthen the existing Office of
Environmental Information by leading efforts to integrate and rationalize the data systems of the media
programs, and to develop other objective data of high quality. In addition, the administrator should
strongly support the office's efforts to work with the states to create a cooperative federal-state data
system based on uniform definitions and comparable scientific methods.
b. The administrator should invest money and political capital in building a credible and comprehensive
system to monitor the quality of the nation's surface waters. That could be done by insisting that all the
states have delegated authority to implement federal water-quality standards, and that they bring their
monitoring networks and report protocols up to high, consistent standards that would provide sufficiently
detailed water-quality data to make sound management decisions.
c. The administrator should use environmental data in decision making at the national level, and when
negotiating with states on National Environmental Performance Partnership System (NEPPS)
agreements. The administrator should hold political and career managers accountable for achieving
measurable environmental improvements.
d. The administrator should build the agency's capacity to improve federal and state programs by
investing in an external, peer-reviewed evaluation network.
3. Hold states accountable for results
a. The administrator should redefine EPA's expectations of states in terms of environmental results,
rather than only of process.
b. The administrator and the state commissioners should revitalize NEPPS, requiring that states and
regional offices base priorities and work plans on serious self-assessments informed by public
participation. EPA should provide to those states with effective environmental programs substantial
discretion in how they manage and deploy those programs. Regional offices should audit the
effectiveness of such state programs, rather than review individual permits or activities.
RCOION Ill's SUMMARY or rue NAPA REPORT
-------
c. The administrator should also complete the transfer of routine regulatory functions from regional
offices to the states.
4. Use all the tools available to change management cultures and practices to focus on achieving
critical environmental goals
a. Revamp EPA's planning and budgeting systems to move the agency towards strategic, performance-
based management consistent with the intent of the Government Performance and Results Act (GPRA),
eliminating those practices that reinforce fragmented programs and relationships.
b. Develop and implement a strategy for addressing the outdated organizational structure of the agency,
starting with reorganization of the regional offices. If necessary, EPA should seek statutory changes to
allow reorganization that would end the fragmentation of the agency into separate media offices. In the
meantime, the administrator should delegate more decision making authority and management flexibility
to those offices, while holding regional administrators responsible for achieving environmental progress.
The administrator should give regional administrators budget-implementation authority to facilitate
regional accountability and flexibility.
c. Delegate decision making authority clearly and demand expeditious, thoughtful decisions. Ensure
that disagreements among program offices or among regions and head-quarters are identified promptly
and resolved. Replace the agency's casual demand for "consensus" with an explicit bias for action. Make
certain, however, that actions are coupled with evaluation and accountability.
d. Build EPA's management skills now to avoid a crisis as senior employees retire. The next cadre of
managers will need new skills: expertise in place-based, cross-media management; economics and
business; information technologies and communication; biotechnology; and international trade.
Congress should:
5. Authorize EPA and the states to use the tools they need to tackle the big problems
a. Authorize EPA and the states to implement allowance-trading systems to reduce pollution in air and
water, explicitly liberating such systems from the constraints of traditional facility-based permitting,
provided that trades would not result in unacceptable risks in local areas.
b. Empower EPA to let states try new approaches to address water quality and related problems in
watersheds, including alternatives to total maximum daily loads (TMDLs) where those alternatives
appear likely to improve the environment more effectively or efficiently than TMDLs could.
c. Authorize and encourage state experiments with performance-track systems that replace traditional
permits with whole-facility agreements or "beyond-compliance" strategies.
d. Work with the administrator to create a statutory basis for continued experimentation and innovation
in the nation's environmental system. Support innovation through the appropriations process.
6. Invest in information
RCOION Ill's SUMMARY or THE NAPA RCPOKT
-------
a. Appropriate sufficient funds for major improvements in environmental data and in program
assessments.
b. Authorize establishment of an independent bureau of environmental information and assessment.
c. Direct EPA to redesign its implementation of GPRA to provide more information about the nation's
overall progress toward meeting critical environmental goals.
7. Put aside partisanship because America wants Congress to solve serious problems
a. Members should use the environment to demonstrate that political parties can come together to set
aggressive public-policy goals and provide the means to achieve them.
b. Share with EPA a willingness to try new approaches that hold promise of better performance, and
must refrain from unfair criticism of EPA if some innovations fail.
c. Become an environmental leader. Members of Congress should join the administrator and the state
commissioners in explaining to Americans why action on the big environmental problems is necessary
and why innovation is essential in making progress. Members should help business leaders,
environmental advocates, and governors find common ground on approaches that will achieve the
nation's environmental goals at the lowest possible social cost.
State regulators and legislatures should:
8. Challenge EPA, Congress, and one another to transform environmental governance
a. Continue to develop and deploy approaches to environmental protection that can deliver measurable
results more effectively or efficiently, and be models for implementation across the nation. States should
build evaluation into the design of innovative programs.
b. Commit to environmental improvement, reject a rollback of environmental standards, and increase the
political pressure on one another to deliver environmental results as well as efficient programs. Accept
the challenge of reporting on a meaningful set of core performance measures, and being judged in
relation to comparable states.
c. Commit to build adequate environmental monitoring systems.
d. Make the next iteration of NEPPS work by investing in better self-assessments, expanding public
participation in setting priorities, and vigorously negotiating roles and responsibilities with the regional
offices, particularly on problems of interstate significance.
e. Equip communities and regions within the states with the tools and incentives to make land-use
decisions that protect or enhance environmental values.
Business leaders, NGOs, and foundations should:
9. Embrace more effective and efficient policies for environmental protection
RCOION Ill's SUMMARY or THE NAP A REPORT
-------
a. Reject calls for a rollback in environmental protection at the state or federal level.
b. Work with EPA and states on trading networks; building credible environmental management systems
(EMSs) and International Organization for Standards (ISO) 14001 registration.
10. Help build a national system for gathering, disseminating, and using environmental
information.
a. Provide better information about firms' environmental performance to the public: both local
communities and regulatory agencies.
b. Nongovernmental organizations (NGOs) and foundations should support efforts to use environmental
data and to evaluate environmental programs.
c. The leaders in the information-technology revolution should lend their support and resources to help
EPA and the nation build a dynamic information system. Their technical, financial, and political support
could accelerate the transformation of EPA by a decade.
The next EPA administrator will have much good work to build on within the agency and among the
states. Individuals, companies, communities, NGOs, and states have been testing new methods for
making environmental progress. They are ready—even eager—for thoughtful, committed, consistent
leadership to help them make even more progress.
CHAPTER!
Innovate for the Environment
Using innovative tools, and imaginative leadership, the United States could achieve three enormously
important environmental goals within the decade:
• freeing America's rivers, lakes, and estuaries from the oxygen-depleting nutrients that
overwhelm them through runoff from farm fields, city streets, and suburban lawns
• enabling America's cities to breathe easier and its mountains to stay greener by finally bringing
under control many of the dispersed sources of ground-level ozone and smog
• preparing America, and perhaps other nations of the world, to make choices about how best to
increase energy efficiency and reduce production of carbon dioxide and other greenhouse gases
The nation can accomplish those aims if it commits to transforming its approach to pollution control and
environmental management. This report tells how.
Key elements of such a new approach are already being used: a shift away from end-of-the-pipe
technology requirements and toward whole-facility environmental management and permitting; cap-and-
trade systems to drive down pollution-prevention costs; and performance requirements for facilities,
whole watersheds, and even states. Their hallmark is the creation of incentives for technological
innovation, for civic involvement and collaboration, and for place-specific solutions. As a result, the
REQION lira SUMMARY or THE NAPA REPORT D
-------
approaches tend to achieve environmental results at lower costs than traditional regulation.
The Case for Change
This report, lays out a strategy for reform at the federal, state, and local levels of government, as well as
in the private sector. The panel concludes that EPA and Congress should:
* focus aggressively on reducing nutrients in surface waters, using cap-and-trade systems, targeted
public spending, and collaborative watershed processes to achieve state, local, and national goals
* focus aggressively on reducing ground-level ozone and smog, using a combination of market-
based tools to reduce emissions of several of its chemical precursors: nitrogen oxides (NO x),
particulates, and, where adequate safeguards are in place, volatile organic compounds (VOCs)
* enable states to experiment with bold new regulatory approaches designed to encourage
companies to achieve higher levels of environmental performance and to develop innovative
control technologies and techniques
* establish a credible, authoritative source of environmental information that will support a
performance-management system geared toward the most-effective use of techniques to reduce
pollution, as well as harm to ecosystems
* strengthen the management of EPA, focusing on speeding up decision making and developing
more effective structures at headquarters and the regions for managing problems in specific
places
' re-frame EPA's critical relationships with states, other federal agencies, and non-governmental
institutions, to enhance their collective capacity to address complex environmental problems
Tomorrow's Problems and Opportunities
Nevertheless, making thoughtful decisions today requires critical thinking about the future. In this
section, the panel presents a few assumptions about environmental trends, and then a more extended
discussion of changes in institutional roles that have occurred over the last decade. Within that context,
the panel then offers three "scenarios, " short, provocative narratives about the future intended not to
predict events but to stimulate critical thinking about near-term decisions. The scenarios share some
basic assumptions about the circumstances that will shape the environment, the economy, and society,
but they diverge in several ways that illustrate that very different systems of governance—each with its
own strengths and weaknesses—are possible.
To help readers imagine how a new system of environmental governance might evolve over the next two
or three decades, the Academy Panel framed three scenarios of the future: the Green Web, Old Glory,
and Local Option. They illustrated how choices made by Congress, EPA, states, businesses, and
ultimately, by American voters and consumers, could influence the future of the nation's entire
environmental protection efforts.
The Green Web imagined a world where businesses, consumers, and NGOs used the power of the
Reoio,, ill's SUMMARY or THE NAPA Rs«wr '
-------
Internet to generate environmental gains. The highly desirable features of the scenario—its reliance on
information and individual choice—were tempered by the lack of a stabilizing rudder: EPA had lost
much of its authority, both as a regulator and as a provider of reliable information. The resulting system
was so volatile that it appeared at risk of degenerating: information could become mere noise; individual
choice could become anarchy. Without a strong national regulatory program, environmental protection
would be a game of chance.
Old Glory described a world in which Americans vested their trust and authority in federal institutions.
Those institutions had developed sophisticated tools to maximize their capacity to achieve public
purposes with minimal direct control. Instead of inflexible technical standards and complex regulations,
EPA relied more on financial incentives, market drivers, and the power of information to ensure that
individuals, companies, and communities did their part to protect the environment. The scenario
described a world less chaotic than the Green Web, but also one less connected to the American people,
the real source of national authority. The scenario described a technocracy—well meaning and
effective—but at increasing risk of losing its public mandate by creating a citizenry without the
environmental understanding it would need to respond to a crisis.
Local Option presented America as a nation of committed citizens acting through local and state
institutions—both public and private. Communities of interests fought for their values, which were
increasingly measured in environmental terms. Some communities and states achieved their
environmental and economic goals and celebrated their ability to use local democracy to connect people,
action, and results; others, however, remained victims of circumstance: of depleted natural resources,
cross-border pollution, and a downward cycle of poverty. The federal government provided a valuable
service—good information and research—but it neither sought nor assumed a national consensus on
environmental quality. National NGOs focused their actions locally as well. Some businesses flourished
in those conditions; others found it difficult to manage national operations under such varied
circumstances.
Three visions of the future of environmental governance: three worlds somewhere between Utopia and
dystopia. The panel's preferred vision of the future diverges from each of those scenarios. The strategy
outlined below is intended to foster an environmental protection system that can address environmental
problems—including those caused by many small sources—effectively and at the lowest possible cost to
society, one that can exploit the power of new information technologies, particularly in ways that will
help strengthen informed connections among voters, the environment, government agencies, and
businesses.
In the panel's vision, which we might call environment.gov, EPA or another federal agency will be a
trusted and reliable source of information about the environment, enabling citizens, companies and
public agencies to make informed choices about the environment. EPA will remain a strong regulatory
force, the agency that guides nationwide action on problems of national or global significance. The
agency will be using a broader range of tools to mobilize action than it uses today, however. Market-
based mechanisms, such as allowance-trading systems, will drive companies, communities, and
individuals to innovate, to find their own best ways to meet the public's environmental targets. States
with aggressive, successful environmental programs will lead the way in many areas, and EPA will
respond with appropriate technical support, even working for change on the states' behalf in Congress
when authorizing statutes inhibit state innovation. In environment.gov, systems are in place to monitor
the impacts of experimental efforts, and to modify them if they fail to work as planned. Thus
REOION Hi's SUMMARY or TMB MAPA REPORT
8
-------
experimentation and change will not be forced to wait for "consensus" among bureaucrats or
stakeholders.
Report Structure
The NAPA report explains the Academy's research into innovative environmental management and
develops recommendations for applying some of those techniques to outstanding environmental
problems. Chapters 2 through 6 draw from the Academy's own research as well as from the 17 studies
completed by independent research teams for this project. (The full research reports are available in
separate volumes and on-line at the Academy's website.) Each of those chapters concludes with findings
and detailed recommendations. Chapter 7 synthesizes the reports' findings and recommendations and
presents them as a plan for action.
Appendix A lists the research teams that prepared papers for this project. Appendix B presents a
summary of the major statutes that EPA administers. Appendix C is a glossary of the terms used in this
report. The panel members and Academy staff responsible for the report are listed in Appendix D.
CHAPTER!
Transforming Regulation
This chapter examines several of the most promising efforts to change how government agencies—or
society at large—coerce or entice sources of pollution to reduce their environmental impacts. The
innovations described in this chapter contribute to the transformation of environmental protection
because they reduce environmental probJems without adding more layers of unduly expensive or static
regulation.
* The Massachusetts Environmental Results Program engages business sectors in negotiating
comprehensive environmental requirements and practices for firms, then uses self-
certification,coupled with the threat of inspections, to achieve broad compliance.
* New Jersey's facility-wide permitting pilot demonstrated that firms and regulators could
improve environmental performance by treating a firm as a whole. In some cases, consolidating
the participating facilities' air permits under a single performance cap achieved environmental
and financial gains over stack-by-stack technology permits, particularly when the permits
allowed facilities.to change their manufacturing processes without prior approval.
' Larger firms committed to maintaining a leadership position on environmental performance have
demonstrated through participation in EPA New England's StarTrack program that third-party
auditors can produce reliable critiques of facilities' environmental management systems. A
strong audit report, or third-party certification, can signal to regulators that their inspection
resources can be better deployed elsewhere.
* States are now experimenting with whole-facility compacts in which the regulator and a
company agree on a set of broad environmental performance goals (generally extending beyond
mere compliance with standards). In return for that commitment, the regulator provides the firm
with the freedom to achieve those goals through nontraditional means.
Finding 1: Many individuals within EPA have struggled over the years to innovate, to improve the
efficiency and effectiveness of core EPA programs and those delegated to the states. The studies
completed for this report illustrate numerous cases where those efforts have been stifled by EPA's
RtOtQM Ill's SUMMARY or THE NAPA REPORT "
-------
conservative interpretation of its mandate. In addition, specific statutory requirements sharply limit
EPA's authority to experiment with some new approaches. EPA has invested so much effort in
establishing and protecting the legal precedents for regulations that it is now unable or unwilling to
authorize significant experiments with alternative approaches. That the innovations the Academy studied
could not produce significant environmental gains, is due in large part to those federal constraints.
Finding 2: EPA's commitment to compliance assurance—to systems in which requirements can be
precisely defined and in which violations can be clearly detected and prosecuted—has succeeded in
establishing "compliance" as the norm. But because so many of the causes of environmental harm are
outside EPA's regulatory authority, even universal compliance with existing standards will not deliver
the environmental improvements Americans profess to want. Neither can the rigid compliance model,
with its emphasis on the uniform application of technology standards, achieve most environmental goals
at the lowest possible costs.
Finding 3: At the heart of many innovations designed to improve both the effectiveness and efficiency
of regulatory systems is a degree of flexibility not present in many regulations today. Such flexibility
allows individual firms to find their own best ways to meet an environmental requirement, and thus
encourages technological innovation and experimentation. There is inescapable tension between
providing flexibility to firms and preserving tight accountability over firms. Flexible approaches,
including the performance-track systems, may appear—or actually prove to be—less certain to produce
their desired results than the status quo approach. Regulators must insist on accountability and
enforceability in all programs, because both are essential to continued environmental progress.
Regulators and policymakers must also recognize, however, that no system is perfect, and that the gains
from flexibility may outweigh the risks of less control.
Finding 4: In the past few years, EPA and the states have made concerted efforts to involve the public
and stakeholders more fully in environmental decision making. Those efforts have been motivated by
several goals, each of them laudable: to ensure that decisions reflect public values; to build public
understanding of environmental challenges and management options; to attain public "buy-in" on
otherwise controversial decisions; and to mobilize public support for actions not strictly part of the
regulatory process.
Finding 5: The Massachusetts Environmental Results Program (ERP) extended the reach of state
regulatory programs into the domain of small business. The program encouraged small firms to create
appropriate environmental management systems by linking carefully framed technical assistance with the
threat of enforcement. ERP is an effective model for dealing with smaller firms subject to state permits.
The experiment is silent, however, on the potential utility of the approach for managing problems
permitted by EPA-delegated programs. EPA's inability or unwillingness to sign off on the state's
request for shorter record-retention requirements for dry cleaners underscores the tenacity with which
EPA clings to the enforcement model, even when engaged in a formal Project XL agreement.
Finding 6: The emergence of ISO 14001 and other voluntary, private efforts by firms to identify and
manage their environmental responsibilities is likely to raise the level of compliance and create some
opportunities for pollution prevention. A well-designed EMS should provide the same kinds of insights
into a firm's operation as the New Jersey materials accounting reports. Although third-party certification
to ISO 14001 is not a guarantee of a firm's compliance, state and federal regulators are justified in
presuming that certified firms are less likely to pose compliance problems than uncertified firms, and
REOION Ill's SUMMARY or Twe NAPA REPORT
10
-------
thus less desirable as targets for inspection. That conclusion could change if the integrity of the third-
party registration process were to be compromised.
Finding 7: EPA Region 1 's "StarTrack" program added a degree of public accountability to ISO 14001
by requiring participating firms to publish environmental reports, and by opening the audit process to
some external observation. It is not clear that those requirements strengthened the environmental
performance of the participants, however. Indeed, StarTrack does not appear to provide sufficient
incentives to firms to change their environmental performance. In order to make its new performance-
track program work, EPA will need to extend more flexibility to high-performing companies.
Finding 8: State efforts to create performance-track regulatory programs will demonstrate the potential
value of rewarding higher-performing firms with greater permit flexibility, such as facility-level or
process-level emissions caps, faster service, or fewer inspections, but only to the extent that EPA allows
such experiments.
Finding 9: Process-level and facility-level emissions caps work; and, if set at appropriate levels, they
offer a desirable alternative to stack-by-stack regulation, especially if the caps permit process changes
without prior approval or lengthy permitting processes. Caps encourage firms to find their own best
ways to control emissions, and thus may remove disincentives to pollution prevention or provide
opportunities for firms to "raise the bar" for their competitors. Used in conjunction with other
performance-track tools (e.g. enhanced public accountability, third-party certification of EMSs, the
incorporation of unregulated environmental aspects), caps may be a regulator's most valuable
negotiating chip: a reward regulators can offer in exchange for beyond-compliance performance.
Finding 10: Today's proliferation of facility-level emissions caps lays the groundwork for building cap-
and-trade regulatory systems in the near future. Instead of negotiating customized caps with individual
firms, regulators will be able to apply a performance-enhancing cap on a whole group of facilities and let
those firms determine—through the market—how best to achieve the net emissions reductions.
Recommendations
1- Transform regulation
The next EPA administrator should pursue innovations that hold promise for solving particular
environmental problems, such as nonpoint pollution, and for increasing the overall efficiency and
effectiveness of the regulatory process. The administrator should make it EPA's explicit policy to find
the least costly ways to meet environmental goals.
a. The administrator should make full use of her/his discretionary authority to promote innovation; to
reduce internal institutional barriers to innovative approaches; and to encourage the states and private
businesses to lead the way.
b. The administrator should make it clear to the agency, states, regulated entities, and the general public
that s/he is willing to take risks to develop better systems. EPA should end its practice of permitting
°nly those experiments that pose no possibility of increasing some pollution or decreasing some measure
ofenforceability.
REGIO
N Ill's SUMMARY or THE NAPA RCCOPTT
-------
c. Congress should authorize EPA and the states to take bold new steps to transform regulation,
providing the administrator with the discretion to authorize site-specific performance agreements and a
wide range of new approaches to environmental protection, provided the approaches remain reasonably
transparent to the public, verifiable, and facilitate accountability.
2. Use the "new tools."
Recent pilot projects have demonstrated the value of several new approaches to environmental
management. EPA and the states should build many of those approaches into their programs.
Specifically:
a. States should adopt and adapt the Massachusetts Environmental Results Program to their own small-
business problems. Wherever possible, EPA and the states should standardize the compliance-
assistance/facility-level requirements to reduce the cost of program design, and to speed the rapid
introduction of the self-certification approach. EPA should signal its support for the program by yielding
on the record-retention issue.
b. EPA and the states should regard ISO 14001-certification as an indicator of a firm's commitment to
improved environmental performance and, all else being equal, target enforcement resources at firms that
have not certified.
c. EPA and the states should expand their use of facility-wide emission caps, enabling firms to make
rapid process changes without pre-approval, provided their net emissions stay below a fixed cap.
d. EPA and the states should continue to exploit the capacity of new monitoring and information
technologies to strengthen or replace traditional accountability systems.
3. Make the "performance-track" work.
EPA and the states should collaborate on creating a system that will encourage firms to keep raising the
bar on environmental performance,
a. EPA should give Oregon and Wisconsin the greatest possible freedom to implement their green
permits and cooperative environmental agreement pilots. In addition to clarifying the extent of the states'
inherent flexibility to implement the programs, EPA should ask Congress for authorization to protect
firms that volunteer to experiment with new approaches to environmental management.
b. EPA and several states should make it clear that participants in performance-track systems should be
eligible for facility-level emissions caps requiring no prior notification of process changes, including
under Title V air permits.
c. EPA and several states should allow firms to use means other than BACT or MACT to achieve their
emissions caps or overall environmental performance goals.
d. EPA and the states should develop front-line permit writers with the capacity to make and explain
judgments about facility-level environmental management strategies.
REGION Ill's SUMMARY or THE NAPA REPORT
12
-------
CHAPTERS
Using the Market
This chapter explains how EPA, some states, and some other federal programs are successfully using
market forces to extend the reach or increase the efficiency of their regulatory programs. It focuses on
the potential and the limitations of market tools to address two of the nation's most serious and
intractable environmental problems: nutrients in surface waters; and urban smog, the combination of
ground-level ozone and fine particles. The chapter draws on new analysis of trading systems designed to
reduce nutrients in surface waters, as well as various pollutants in air.
Findings
The market-based mechanisms for reducing pollution described in this chapter are likely to be among the
most effective and efficient the United States will deploy in this decade. The potential for allowance-
trading systems within watersheds to spur significant reductions in nonpoint runoff of nutrients is clear
and imminently practical. If EPA and Congress provide only some assurances to states with programs in
the works, tests will soon get under way. EPA is currently sending a contradictory message, however, by
both encouraging and frustrating innovation.
A Regional Market for NO x Allowances
Finding 1: Nitrogen oxides, particularly from older coal-burning power plants, are a major cause of
smog throughout the eastern half of the United States, and are overdue for reduction. A cap-and-trade
system encompassing most of the Midwest and East could create market incentives for efficient NO x
reductions, as well as a better alignment of national environmental and energy policies. Creating and
managing such a market is an appropriate job for EPA, which could devise and implement uniform
trading rules across the region more effectively than could individual states or partnerships of states.
Now that the courts have upheld EPA's NO x SIP call, EPA should expedite the development of such a
system. Explicit authorization from Congress would help that process. The framework adopted for the
regional NO x trading system may be applicable to fine particles such as sulfates.
Trading in Watersheds Has Great Potential
Finding 2: There is ample evidence to conclude that trading of allowances for nutrients could be used to
reduce point and nonpoint pollution in many of the nation's watersheds at costs far lower than could be
attained through traditional point-source controls alone.
Finding 3: Allowance trading in watersheds can improve water quality because it is a form of
regulatory action. Making the transition from facility-by-facility permitting to the more dynamic market-
based controls requires new ways of thinking and acting by both regulators and the entities they regulate.
Finding 4: Experience from Rahr Malting, the Tar-Pamlico and San Joaquin River trading systems, and
the Colorado River salinity-reduction program, illustrates the range of approaches to trading within
watersheds. Offsets and open-market systems can deliver some value; cap-and-trade systems are more
certain to produce a desired environmental result. The latter is likely to work particularly well as a tool
to allocate reductions under a TMDL.
|||>s SUMMARY or THE NAPA REPORT ' •>
-------
Finding 5: Trading among point and nonpoint sources of nutrients in a watershed will be productive
only if transaction costs are low and the system is dynamic. States, EPA, and Congress will need to
establish new systems to enforce agreements among trading parties. Requiring NPDES permit
modifications for each trade is unworkable and unnecessary. EPA can use its grant-making authorities
and its negotiations for performance partnership agreements to press states to tighten their management
of trading programs, if necessary.
EPA's Ambivalence
Finding 6: EPA's indecision on state plans for allowance-trading systems is unfortunate and counter-
productive. That regional offices have divergent opinions about which innovations to encourage, or
even interpret EPA policy differently in different parts of the country, is both reasonable and acceptable.
It is unacceptable, however, for disagreements among the regions and programs to go unresolved.
Headquarters has the responsibility of resolving internal debates and making decisions accordingly.
State officials trying to establish market-based programs complain that they do not know what EPA
wants-or will accept. They make the same point about numerous other proposed innovations. The
authors of several of the Academy's research reports conclude that EPA should be more specific in its
guidance, setting clearer national specifications for state-led innovations. The Academy panel, however,
disagrees. In many areas, including the design of trading systems, increased specificity would lock in a
narrow set of solutions, precluding good ideas and the possibility of productive variation among the
states. The panel believes that faster, crisper decisions from EPA—not more specifications or more
predictable pronouncements—would encourage innovation.
Finding 7: VOC trading programs, because of the potential of some air toxics to create localized health
risks, create particular technical and political challenges. Several states have shown considerable
ingenuity in addressing those challenges. They have imposed higher trading ratios to discourage trades
across long distances, and required on-site review of credit uses to protect against hot spots. The states,
with EPA's encouragement and careful oversight, could continue to develop effective and responsible
approaches for reducing VOC emissions through trading. EPA is justified in being cautious with VOC
trading. The agency has the responsibility to guard against environmental injustice. And it has a
secondary interest in preventing the tool of allowance trading from becoming even more politicized than
it is today. Poorly conceived or implemented VOC trading systems could heighten public and agency
apprehension about trading systems in general, and thus make it more difficult and expensive to address
those environmental problems for which trading is an especially appropriate tool.
Finding 8: EPA is quick to remind critics that most of its "technology standards" are really
"performance standards"—requirements that firms reduce emissions to certain levels. Yet the Clean
Water Act and air-pollution trading policies prevent firms from buying credits to attain the same net-
performance levels. In cases where control technology prevents harmful local exposures or undue risks
to employees, then insisting on such technology is sound public policy. When such risks are not likely,
however, allowing trades may accomplish more environmental good than a rigid application of
technology standards.
Finding 9: Market-based strategies that allow firms to sell emissions credits will provide a financial
incentive for firms to develop and deploy more effective pollution prevention techniques and pollution-
control technologies. But that equation works only if firms can actually sell those credits. Allowance
REGION Ill's SUMMARY or THE NAPA REPORT
14
-------
markets have been inhibited by requirements that firms may not purchase allowances to meet existing
technology standards.
Finding 10: States and EPA can use trading ratios to meet public policy goals, including ensuring
environmental justice, encouraging the development of new monitoring technology, and providing
environmental data to the public.
Recommendations
1. Authorize and encourage trading systems.
EPA and Congress should aggressively encourage states to develop and implement allowance trading
programs, particularly cap-and-trade systems, and particularly systems designed to reduce nonpoint
runoff of nutrients in watersheds.
a. Congress should authorize extended state or regional allowance-trading programs in watersheds for
nutrients and other pollutants unlikely to create toxic hot spots. For example, Congress should authorize
states to implement nutrient cap-and-trade systems that would enable point sources to meet strict
performance requirements by purchasing reductions from nonpoint sources.
b. EPA should revise its TMDL and NPDES rules to explicitly authorize allowance-trading systems and
group permits within watersheds when those trades are linked to achieving a net improvement in water
quality. The goal of those revisions should be to create dynamic markets for allowances with low
transaction costs for participants and regulators alike.
c. Congress and states should encourage the coordination of allowance-trading systems with other
market-based environmental programs, such as targeted subsidies to farmers for reducing nutrient runoff
or restoring riparian habitat.
2. Create regional cap-and-trade systems for NOx .
To reduce the pervasive health and ecological damage caused by smog in the eastern half of the United
States, and to do so at the lowest possible cost, Congress should explicitly authorize EPA to create
regional cap-and-trade systems to reduce nitrogen oxides and possibly other regional air pollutants such
as fine particles. The authorization should also encourage state and federal efforts to reduce the cost of
controlling VOC emissions, including carefully constrained cap-and-trade systems.
3. Develop monitoring technologies.
EPA should invest in developing monitoring technologies that will facilitate trading systems. EPA and
states should create an incentive for the development and deployment of better monitoring technology by
setting trading ratios that favor trades that can be closely monitored.
OIOM Hi's SUMMARY OF THE NAPA REFORT
-------
CHAPTER4
Protecting Watersheds: A New Confluence
This chapter... lays out a strategy for making progress. It also details the critical roles that EPA and its
state counterparts have in cleaning up the nation's waters. Among the most pivotal challenges is
choreographing the efforts of EPA and state agencies with the work of other federal and state agencies,
local leaders, landowners, and the broader public. Reducing nonpoint pollution from agriculture and
development will require a coordinated effort unlike any EPA has yet undertaken, because success will
depend in part on changing how Americans use their land. The previous chapter noted several of the
legal and regulatory hurdles EPA must overcome to encourage cap-and-trade systems for reducing
nutrient runoff into surface waters. This chapter looks at how EPA and state environmental agencies can
work alongside civic "watershed management" efforts, and identifies legal, organizational, and political
hurdles to such cooperation.
Finding 1: The nation has new opportunities to make progress in its long drive for cleaner, healthier,
more economically valuable surface waters. An increasing number of communities have organized
collaborative watershed protection efforts in recent years. In addition, land trusts and "save-the-river,
save-the-bay" advocacy groups have grown. New technologies are increasingly capable of documenting
polluted runoff, and of providing comparatively inexpensive ways of reducing such pollution. Many
farmers, developers, and other landowners have become increasingly aware that polluted runoff is a
major environmental problem in many watersheds. Federal court decisions about TMDL regulation,
listings of endangered species (especially in the West), and slowly tightening state regulation are
persuading many landowners that if local collaborative processes are not successful, additional state and
federal regulation may be inevitable. Thus popular support for more effective control of nonpoint
pollution is slowly buiding nationally and locally.
Finding 2: Collaborative processes lead to improved environmental quality in many, but not all,
watersheds. They can help build public understanding of environmental problems in watersheds. Even
smoothly functioning processes may lead to isolated, ineffective projects in some situations. Lacking
good data about the extent and causes of environmental problems or enough political will to challenge
powerful local interests, collaborators may settle for "feel-good" projects that make no significant impact
on environmental quality. And if key landowners feel they can afford to refuse to participate,
collaborative processes are likely to fall apart, or to result in little environmental improvement.
Finding 3: Regulation and collaborative civic environmental activities are not alternatives: they are
complementary approaches. The effectiveness of local collaboration depends on agency support.
Success depends on setting meaningful, achievable goals, monitoring progress, and making necessary
changes—all of which require agency information and assistance.
Finding 4: Congress, EPA, and state environmental agencies have not yet built the necessary
infrastructure of information and policies to support strong local collaborative efforts. Good data about
local watershed conditions, linked to information about habitat and land use, is essential to focus local
collaborative processes on the most important problems. Yet EPA and state environmental agencies
have not developed a strong database of water quality.
A few states—Wisconsin, Oregon, Washington, Massachusetts, and Maryland among them—have
invested significant energy and resources in building local institutions at the watershed level, and in
REGION Ill's SUMMARY or THE NAPA REPORT
16
-------
focusing state water-quality programs at the watershed level. Several have recently developed tighter
regulations for concentrated animal feeding operations. But most state environmental agencies, and EPA
regional offices as well, are preoccupied with case-by-case management of permits for point sources, and
have thus devoted less energy to nonpoint sources and other watershed issues.
Recommendations
For States:
1. Set watershed-protection goals.
To meet the rising public concern about watershed health, fulfill their constitutional responsibilities for
land use, and forestall federal regulation, states must step forward with creative, aggressive watershed-
protection programs. As a start, state governors and legislatures should set ambitious goals for
watershed protection, and for reduction of polluted runoff. They should also invest sufficient political
and financial capital to make those efforts successful. For their parts, state environmental agencies
should change their structures to focus on performance goals, and train their staffs to work effectively
with local collaborative processes.
2. Strengthen cost-sharing and technical-assistance programs.
Initiating state bond issues for land conservation; encouraging land trusts; regulating concentrated animal
feeding operations; targeting of 319, State Revolving Loan, and other cost-sharing programs; and
experimenting with nutrient trading programs are all positive steps.
3. Support collaborative watershed processes
Each state environmental agency should custom-design its watershed program to fit local environmental,
institutional, and social realities. Agencies should organize internally to provide state staffing support
for collaborative watershed activities, arrange their permitting activities to encourage the development of
watershed-wide strategies, and ensure creative consideration of broad environmental and economic
issues, as well as case-by-case permitting decisions for point sources.
4. Develop adequate data for local, state, and national decision making.
State environmental agencies should work closely with EPA, as well as with local governments and other
federal and state agencies, to develop better data about watershed issues. With federal support, they
should adopt standard national sampling and quality-control procedures, increase the density of
monitoring data, and work with local governments and others to link environmental with land-use and
other data.
For Congress and EPA:
1. Improve and fund water-quality data.
Congress should direct EPA to improve data about water quality and provide the agency sufficient
resources to do so. EPA should insist that states make major improvements in the quality, coverage, and
REOION Ill's SUMMARY or THE NAPA REPORT
17
-------
comparability of data that they gather and submit to the agency.
2. Identify the most cost-effective ways to reduce polluted runoff.
EPA should provide a detailed analysis of how the nation might meet national water-quality goals. The
analysis should address the full spectrum of threats to water quality, and should identify the most
promising "first steps " in a long-term strategy for improvement. The agency should attempt to quantify
the costs and benefits of various cleanup programs, and provide that information for states and local
collaborative processes to use in formulating their own goals and strategies.
3. Encourage state experimentation.
EPA should offer explicit opportunities for states and individual watersheds within states to test
promising approaches. States should not be merely laboratories for innovation: they should be the
factories where innovation is produced. If court decisions and current statutes do not permit such
flexibility, EPA should ask Congress and courts for permission to allow experimentation.
4. Negotiate national and state-level goals for cleanup.
After consultation with Congress, EPA should seek to negotiate specific agreements with states about
goals and schedules for meeting water-quality standards. Those goals would then guide not just the
TMDL process, but also other steps to reduce polluted runoff, including federal cost-sharing programs,
local collaborative efforts, the upgrading of water-quality data, allowance-trading programs, and
experimentation with other innovative approaches.
CHAPTERS
Focusing the EPA-State Relationship on Environmental Results
Protecting the environment and public health in the United States is both technically difficult and legally,
administratively, and even morally, contentious. Each of the 50 states and the many sovereign Native
American tribes has a different set of environmental, social, and political problems and opportunities.
This chapter examines the complex interplay of relationships between and among EPA's various national
and regional offices and state environmental agencies as they attempt—both individually and
collectively—to meet the challenges inherent in those issues. The chapter focuses on the five-year
history of the National Environmental Performance Partnership System (NEPPS), and in particular on
three substantive challenges NEPPS catalyzed:
• defining and measuring "environmental" performance
recasting the federal-state partnership to focus on environmental results
finding a new role for EPA's regional offices now that states manage most federal
programs competently
Finding 1: Some states are beginning to use performance-based tools to manage their programs more
effectively and efficiently. A small but increasing number of state environmental agencies has invested
in performance-based management systems.
REGION Ill's SUMMARY or THE NAPA REPORT
18
-------
Finding 2: The National Environmental Performance Partnership System (NEPPS) sought to transform
the EPA-state relationship, encouraging priority setting, multimedia management, and more effective
joint efforts for environmental protection. However, because NEPPS is an overlay on a deeply
entrenched culture that focuses on process rather than results, it has had a marginal impact on most
states, and its future viability is in doubt.
Finding 3: EPA 's 10 regional offices, which employ 8,753 people—nearly 40 percent of EPA 's total staff
of 18,967—play (he central role in balancing the need for innovation and flexibility with the need to
maintain the integrity of EPA 's national regulatory system. They also must cope with the inevitable
differences between state and federal priorities. They must consider their special responsibilities for
cross-border environmental problems, and for handling EPA 's relationships with tribal governments and
local governments, as well. The regional offices are indeed at the front line of transforming EPA into a
performance-driven organization.
Many of the innovative approaches piloted at EPA New England have been quite successful and could be
transferred to other regions: the blending of compliance assistance with traditional enforcement;
intensive goal-driven work with other agencies in high-profile watersheds and communities; and after-
the-fact multimedia oversight of state enforcement and compliance activities. The region has combined
toughness towards violators with flexibility in dealing with companies, local governments, and state
agencies that sought more efficient, more effective approaches to environmental protection. The EPA
New England model is not perfect, not the only way to transform a regional office, and, indeed, may not
work in other regions, each of which has unique characteristics and problems.
Recommendations
Despite its potential, NEPPS cannot succeed, or EPA regional offices transform themselves as needed,
without substantial changes in EPA as a whole. If NEPPS is to be a tool that focuses national attention
on environmental problems, and—perhaps more importantly—lets the country know how well its goals
are being met, the agency must change fundamentally its old ways. To prevent NEPPS from being yet
another ebbing tide of reform, the agency must allow states—and itself—room to demonstrate further the
capacities for innovation and results that exist among federal, state and local government managers, as
well as in industry, non-governmental organizations, and the public itself. The Academy panel thus
makes the following recommendations for the agency and its partner states.
1. Renew the commitment to NEPPS.
EPA and states should renew their commitment to transforming the federal-state relationship through
NEPPS. In consultation with local governments, national and regional environmental groups and
businesses, EPA and the states should reform that partnership program. Congress should provide any
necessary statutory authorization for a reformed NEPPS. EPA and states should agree on a higher floor
for participation in NEPPS, including:
a. Self-assessment. States should prepare full self-assessments, setting environmental priorities and
analyzing progress based on analysis by both agency staff and independent experts. EPA should offer
support to states for developing models for such assessments. Regional offices should also complete
self-assessments of their own activities and performance.
19
U'« SUMMARY or THE NAPA REPORT • '
-------
b. Public participation. States and EPA regions should make creative and effective efforts to engage
legislators, environmental and business groups, local governments, and the public in framing priorities
and assessing progress.
c. Core performance measures. All states should compile core performance measures; EPA should
gather them and make them publicly available.
d. Grants. EPA should make performance partnership grants only to states that have completed
performance partnership agreements.
e. After-the-fact oversight. Regional offices should not conduct "real-time" oversight of state programs
that are participating in NEPPS. Instead, regions should monitor state performance to assure that states
are complying with NEPPS agreements, and conduct after-the-fact evaluations of environmental
performance as part of negotiating renewed agreements.
2. Revitalize regional offices.
As states assume operational responsibilities for federal programs and develop innovative ways of
accomplishing their own and national environmental goals, the role of the EPA regions becomes more
important, not less. Regional offices play the pivotal role in balancing flexibility with preservation of
the integrity of the national system of environmental regulation. Thus EPA should invigorate its regional
offices, and clarify their roles.
Regions should be held accountable for improvements in environmental performance, including effective
performance by states under NEPPS, addressing high-priority regional environmental issues, and
contributing to the achievement of national environmental goals. Regional administrators should have
the necessary tools to assure effective performance: regular meetings and communication with the
administrator and deputy administrator; substantial regional budgetary authority; sufficient and capable
staff; and authority to make decisions about state performance plans, proposals for waivers, and
approval of innovative state programs.
3. Reform the GPRA planning and budgeting systems.
EPA should accommodate both NEPPS and regional accountability.
a. EPA's GPRA systems should encourage regional and other place-based goals.
b. EPA should encourage states to establish environmental goals, define differences between state and
EPA goals, and reconcile the differences to the extent possible.
c. EPA should finalize its Part 35 regulations to allow maximum state flexibility in the use and
accounting of expenditures under Performance Partnership Grants. The agency should not request or
report state expenditures in greater detail than required in PPG applications. If necessary, EPA should
seek regulatory or statutory changes to ensure that accounting rules allow states flexibility in spending
their PPGs.
REGION Ill's SUMMARY or THE NAPA REPORT
20
-------
CHAPTER6
Transforming EPA
This chapter assesses EPA's efforts to build the capacity it needs to maintain the integrity of the nation's
regulatory system as its role shifts. It explains how EPA has transformed two of its core programs
—Superfund and the Office of Enforcement and Compliance Assurance—over the last decade. This
record is encouraging, at Jeast up to a point. Superfund has made substantial progress in embracing a
broader more results-oriented vision of its purposes, and OECA has begun to do the same. But the
reforms in Superfund and enforcement have not required EPA to surrender day-to-day control of
decisions about compliance by individual firms.
The chapter also reviews EPA's efforts to equip its employees with the information, knowledge, and
skills they will need in the future: not only do their jobs, but to inform and involve the public as well.
Here the story is sobering. With many hesitations and false starts, the agency is just beginning to build
the capacity to understand how environmental conditions are changing, as well as whether EPA and state
efforts are making any difference. The chapter offers an agenda for the management steps and the
program improvements the agency must make to prepare for a world of performance-based management.
Finding 1: Some successful innovation at EPA is taking place within individual agency programs. The
agency finds it easiest to innovate when it retains control over the management of programs.
EPA has been able to break the logjam in its Superfund program, sharply increasing the pace of cleanup
at Superfund sites and moving effectively to encourage cleanup and redevelopment at other sites. Driven
by the threat that Congress might dismantle key portions of the Superfund program in the mid-1990s and
supported by the president and the EPA administrator, agency managers implemented changes that had
been developed and tested over the years in the agency's regional offices. While it did not surrender
control over site-by-site decisions about Superfund cleanups, EPA did offer some landowners assurances
that their sites would not be listed as Superfund sites. It also helped many local communities plan and
finance cleanup and redevelopment of Brownfield sites that were not listed. EPA's Office of
Enforcement and Compliance Assurance has also begun to experiment with more voluntary approaches
such as compliance assistance, self-disclosure, and public pressure. However, OECA still focuses most
°f its attention on traditional enforcement activities, and its criticism of innovation programs led by
states or other parts of the agency has been a powerful block to new approaches to environmental
protection.
Finding 2: EPA's efforts to build the infrastructure for multimedia, performance-based management are
still in their infancy. Efforts to transform processes that cut across the fragmented organization of the
agency have had little success. The new information office has the responsibility for integrating the
agencies many information systems, but it lacks the clout to do so. The agency's information systems
are still under the control of its fragmented regulatory programs, and the design of the systems is still
directed towards tracking all the program activities, rather than addressing the underlying issue: what
information do the agency, Congress, states, and the public need? EPA has never had much capacity to
assess the impact of its work on environmental conditions, and it has disbanded its evaluation program.
Within the agency some units are just beginning to build evaluation capacity.
lira SUMMARY or THE NAPA REPORT
-------
Recommendations
In 2001, the new EPA administrator will have the opportunity to set the agency firmly on a new path,
building on a rising tide of innovation and intellectual progress. A few key decisions can begin the
fundamental transformation of the agency, equipping it to provide stronger, more authoritative
leadership to state environmental agencies and the nation, and focusing the agency on the most
important to the environment and the biggest opportunities for environmental protection. To provide
national leadership in setting environmental goals and priorities, the new EPA administrator should:
1. Build a strong, independent office of environmental information.
EPA needs the capacity to provide authoritative information about environmental conditions and
analysis of how best to protect the environment. A new office should define the data that the nation
needs about changing environmental conditions. It should also define the data that Congress, EPA, and
the public need to have confidence that federal regulatory programs are being managed effectively by the
agency or by states. The office should work closely with states to gather such data in the most cost-
effective, least burdensome and least intrusive manner possible. The new office should have sufficient
independence from political pressures and the policymaking process to become a credible, authoritative
source of information and analysis.
2. Create an independent capacity for assessment.
EPA should finance a series of independent, authoritative assessments of how well state and federal
regulatory programs, market-incentives, voluntary and collaborative efforts, and other activities help
protect the environment. Studies published by the agency should be peer-re-viewed, and should be held
to the highest standards of objectivity and independence. EPA should also work with private
foundations, corporations, state governments, universities and others that can support such studies, to
build a vibrant, independent capacity for continued learning about ways to protect the environment.
3. Foster a management culture of prompt decision making and action.
The administrator should use the full array of management tools—personal leadership, clear delegation
of responsibilities, reorganization, and human resource management—to transform the values, norms,
and behavior of the organization. While EPA must retain its strong commitment to environmental
protection, the administrator should encourage timely decision making, prudent risk-taking, and a focus
on environmental results rather than on process. The agency also needs to transform its working
partnership with state environmental agencies.
Thus EPA 's regional offices are in many ways at the crux of institutional changes the agency needs.
Some of the regions have already reorganized along multimedia lines and have become powerful forces
for innovation and organizational change. The administrator needs to find ways of continuing the
process of regional transformation.
REGION Ill's SUMMARY or THE NAPA REPORT
22
-------
CHAPTER?
Transforming Environmental Governance
The nation's environmental management "system" is so rich and complex that no one institution—not
Congress, not EPA, not the states or Wall Street, or even the myriad NGOs and private companies
—controls the system. Yet each of those institutions, acting separately, can change the system. Indeed,
each has changed the system. The innovations described in this report have originated and propagated
within EPA, state agencies, communities, and companies. Because promising practices for dealing with
the 21st Century's outstanding environmental problems emerge at many points in the system, EPA and
Congress must redefine their leadership roles to foster broad innovation. In fact, the nation will meet its
environmental and social goals only if Congress and EPA deploy new policy tools to better mobilize the
nation's resources. This chapter lays out a strategy far EPA, Congress, businesses and NGOs, to
achieve that transformation of environmental governance.
In 1995, an Academy panel found that the nation's system for protecting the environment was
"broken"—in the sense that it was not addressing high-risk problems, was not responding to
environmental problems that crossed environmental media, and was failing to draw on the problem-
solving capacity of states, cities, and the private-sector firms it was regulating. In each of those
respects, the system is still broken. High-risk problems, including non-point water pollution, smog, and
the emission of greenhouse gases, are not responsive to traditional federal or state pollution-control
programs. The innovations examined in this report demonstrate practical ways to correct the system's
failings, to transform environmental governance as a whole.
Each of the previous chapters of this report focused on one part of the nation's environmental
management system: the relationships between reguiators and businesses; the marketplace; watersheds;
the interface between EPA and the states; and strategies for organizational change. Each chapter
described promising innovations, documented how some had been frustrated by business as usual at EPA
(and in some cases in state environmental agencies, businesses, and NGOs as well), and called for
renewed, more effective efforts to make change. Together those chapters present a case for the
transformation of EPA, state environmental agencies, and the system within which they operate.
The Academy Panel summarizes that case in the findings listed below. The section following the
findings reprises the scenarios that opened this report and draws from them a strategy to tune the nation's
environmental protection system to the problems and opportunities of the 21st Century in America. The
chapter closes with the panel's recommendations to the next EPA administrator, the next Congress, and
those businesses and NGOs that must help lead the transformation. Those recommendations synthesize
and expand upon the recommendations at the end of the previous chapters.
Summary Findings
Finding 1: The United States needs—and will continue to need—a strong national environmental
regulatory agency.
• EPA must have the capacity to set national environmental goals and regulatory standards,
particularly for problems that cross state or national borders, or that pose risks to future
generations. Congress must provide EPA and other federal environmental agencies the capacity
to identify and manage environmental problems of national and global significance. The system
Ufa SUMMARY or THE NAPA Rerom-
-------
in which the agency operates must give states and municipalities latitude to set their own
environmental goals as well. It should encourage technological innovation, civic engagement,
and the spread of knowledge. EPA and Congress must set the direction and assess the
performance of the entire system.
• Vigorous enforcement by EPA and states has been the foundation of the nation's regulatory
system and will continue to be indispensable. The status quo, however, will not deliver the
environmental quality Americans want. As the nation addresses other problems besides
pollution by large, highly visible facilities, and encourages businesses to redesign their products,
services, and production processes to reduce negative impacts on the environment, EPA and
states need to develop additional information about market-based tools, and to develop
integrated strategies that balance those new tools with traditional regulation. They must also
determine ways to make the most of civic capacity and public opinion.
Finding 2: EPA and the states have demonstrated the potential and challenge of performance-based
management.
• Federal and state regulators have made serious efforts to incorporate more environmental
information into their decisions. Those efforts have shown that redefining success in
environmental terms makes sense to agency officials, businesses, and the public. They have also
demonstrated that environmental measures alone are insufficient for agency management. The
states have not done enough to make "core performance measures" work and EPA has not
encouraged them to do better. State commissioners and EPA need to renew their efforts to define
measures that each will use to set priorities, measure success, and improve the environment.
Neither EPA nor most of the states has made the changes necessary to realize the full potential
of the National Environmental Performance Partnership System. The fundamental principles of
NEPPS are sound: that EPA's regional offices and the states should negotiate performance
objectives based on thorough analyses of the environmental and management problems they
face. The states should acknowledge that it is fair and appropriate for EPA to compare their
programs' performance using some form of "core performance measures." EPA 's program
offices and regional offices should acknowledge that EPA 's oversight of states that are doing
their jobs should focus at the program level, not at the activity level or on individual permits.
Finding 3: EPA's statutory framework and its conservative culture inhibit innovation both within the
agency and in the states.
Pilot projects have demonstrated the potential of new policies and tools to improve the
environment. For a number of years, EPA, states, businesses, nonprofits, and other entities have
developed and tested new tools in a series of innovative efforts. Several of those—cap-and-trade
systems, and collaborative approaches, for example—have proved that they can deliver
environmental improvements more effectively or efficiently than traditional tools.
Neither EPA nor its state counterparts has transformed its core programs to use new tools to
address effectively or efficiently some of the most serious environmental problems facing
America. Innovation at EPA and the states is still of marginal significance. There is no system
to identify and sustain the most productive innovations.
RCOION Ill's SUMMARY or THE NAPA REPORT
24
-------
• EPA 's successful innovations and management reforms have been those it could carry out within
a single national program office. Most efforts to innovate across programs have failed The
agency made a significant improvement in the management of the Superfund program, in
OECA's use of its audit policy and "integrated enforcement" tools, and in the development of
trading systems in air pollutants. The agency's efforts to coordinate its national program offices
through Project XL, priority setting through NEPPS or GPRA, the Common Sense Initiative, or
ecosystem protection, however, have demonstrated that EPA's media-based organizations
remain fundamentally unable to work together.
Finding 4: Reducing the damage to surface waters and estuaries caused by nutrient runoff is within
reach.
A shift to TMDLs and standards based on ambient water-quality poses particular challenges and
opportunities. Implementing TMDLs is most likely to succeed in places where civic institutions
are strong, extensive environmental data are available, and citizens have a relatively
sophisticated under-standing of environmental problems and management. In such locations,
TMDLs should yield environmental benefits far superior to those that could be achieved by
traditional regulation of point sources alone.
Optimal approaches will vary by watershed, so EPA and other federal agencies will need an
exceptionally flexible approach. Cap-and-trade systems, and even open-market trading systems,
will work in some areas. In others, state and federal agencies may need to target public funds to
produce the largest possible gains.
Finding 5: The federal government must be a source of credible, authoritative, and useful
environmental data.
• Information technologies may fundamentally change how federal and state governments regulate
or hold firms accountable for meeting environmental requirements. Information-rich
"environmental management systems" at the facility level can help plant managers identify
problems and opportunities for waste-reduction. More facility-level caps, whole-facility
regulation, and cap-and-trade systems within airsheds or watersheds are possible in part because
of better monitoring systems to hold firms accountable to the public and one other. Such trading
systems provide incentives for firms to find their own best ways to reduce environmental harm at
the lowest possible cost. Those attributes may make cap-and-trade systems an essential
component of any national effort to reduce greenhouse gas emissions.
* No institution will be able to control the information on "the green web, " and a diversity of
sources will probably strengthen environmental awareness. Nevertheless, Americans and
American policymakers will need a source of credible, comparable environmental information
they can trust and use. The government should be that source.
• EPA 's Office of Environmental Information lacks the authority it needs to achieve its mission.
As it exists today, the office suffers from the same organizational weakness that has impaired
Project XL, NEPPS, and the Common Sense Initiative: the office needs the authority to reshape
and integrate the agency's media-based data systems.
RCOION lira SUMMARY or THE NAPA REPORT
25
-------
Finding 6: Environmental policy and direct action must continue to flow from Americans' individual
and collective values and goals. Civic involvement in environmental protection is important, particularly
in addressing problems at the local level. Collaborative watershed-management projects demonstrate the
potential for locally driven action. The challenge of reducing environmental threats to large interstate
bodies of water illustrates the need for state and federal action as well.
For the 21st Century
The nation's economy, technical capacity, and environmental conditions have changed dramatically in
the three decades since Congress passed most of the laws that have framed environmental governance.
Although they have served the nation well, today their inadequacies manifest themselves in the
numerous ways identified in the previous chapters. Adopting legislation—or adapting institutions—for
the economy, technology, and environment of 2020 or 2030, however, remains a difficult task. To help
readers imagine how a new system of environmental governance might evolve over the next two or three
decades, the Academy Panel framed three scenarios of"the future: the Green Web, Old Glory, and Local
Option. They illustrated how choices made by Congress, EPA, states, businesses, and ultimately, by
American voters and consumers, could influence the future of the nation's entire environmental
protection efforts.
The next EPA administrator should be America's chief advocate for environmental protection, the
defmer of EPA's national purpose. Part of the administrator's leadership challenge will be to keep
reminding Americans of the work that the nation—the American people—still needs to do to protect the
environment. Another part will be to listen to Americans and build a pragmatic political agenda that
moves the nation forward. The administrator's success will ultimately depend on his or her ability to
work with Congress, the states, and individuals to define national environmental goals, and to focus the
nation's energy on achieving them. A truly gifted administrator will accomplish that without acting as if
he or she is at the pinnacle of the only institution concerned with environmental protection. On many
issues, after all, activists in NGOs, communities and the private sector and any number of state and local
agencies will be ahead of EPA.
The administrator should focus the nation's attention on a small number of significant environmental
problems that are not being addressed by the current regulatory system. The panel has recommended
that those include smog, nonpoint water pollution, and greenhouse gases, though other problems
that resist end-of-pipe solutions certainly fit on that list. Because addressing such problems will
require immense institutional change, the list should be small enough to enable the administrator to stay
focused. Of course, EPA will have to continue most of its conventional work even as the administrator
helps it adjust to new ways of doing business. As the agency develops strategies to reduce nonpoint
pollution or climate change or smog, however, its personnel will discover more effective ways to manage
the old problems as well.
The administrator should use the new tools of environmental protection to address those problems. The
administrator should help the nation adopt the most effective management strategies available, even
when doing so will require new authorization from Congress, new relationships with the states and
regulated entities, and new attitudes and activities within the environmental protection system.
The administrator should develop a comprehensive strategy for change. The innovations discussed in
26
RCOIOH Ill's SUMMARY OF THE NAPA REPORT
-------
this report illustrate the complexity of the administrator's challenge: the system of environmental
governance in America is so complex and so rooted in statutes and relationships that it seems actively to
resist change. The next administrator will need a strategy to overcome that inertia. The strategy must
include ways in which the administrator will allow the agency to mobilize its talents, and will infuse its
culture with an appreciation of what EPA and others could accomplish with the new tools. The strategy
must include a means of cooperating with Congress on the statutory reforms and financial resources that
will be necessary to more effective and efficient environmental protection. The strategy must also
involve the states, or at least those states that are firmly committed to environmental protection and
prepared to invest the time and resources necessary for testing new ideas. The administrator should also
support alliances of environmental organizations and business groups as they recognize mutual
advantages in securing the nation's environmental future.
97
RCOION lira SUMMARY or THC NAPA REPORT *• '
------- |