UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
WASHINGTON, D.C. 20460
January 15, 2002
OFFICE OF THE ADMINISTRATOR
SCIENCE ADVISORY BOARD
EPA-SAB-EEAC-COM-02-001
Governor Christine Todd Whitman
Administrator
United States Environmental Protection Agency
1200 Pennsylvania Avenue, NW
Washington, DC 20460
Subject: Importance of Maintaining the Annual Pollution Abatement Cost and
Expenditures (PACE) Survey
Dear Governor Whitman:
This Commentary was developed by the Environmental Economics Advisory Committee
(EEAC) of the EPA Science Advisory Board (SAB) subsequent to a discussion with staff of the
U.S. EPA's National Center for Environmental Economics and other Agency officials at the
EEAC's public meeting on November 30, 2001. The Committee prepared this Commentary to
bring to your attention the great importance of maintaining the annual Pollution Abatement Cost
and Expenditures (PACE) Survey, the only source of consistent nationwide information
available on the costs of environmental protection.
The PACE Survey was conducted annually from 1973 through 1994 by the U.S. Bureau
of the Census, when it was suspended by the Bureau for budgetary reasons. In November of
1998, the EEAC held a discussion with the former Assistant Administrator for Policy, Planning,
and Evaluation, and followed up with a Commentary to Administrator Browner in January,
1999, on the "Importance of Reinstating the PACE Survey." Four months later, EPA announced
that it would reinstate the PACE Survey, with support from the Bureau of the Census. A
workshop was then held at Resources for the Future to improve the Survey instrument, and in the
year 2000 a Survey was carried out of 1999 costs.
The time has come (and perhaps has gone) for a Survey of year 2000 costs, but the
Committee is concerned that time and resource constraints might prevent or delay
implementation of the next PACE cycle. This is partly due to a provision in the original "Terms
of Clearance" for the Survey which requires that an evaluation of the PACE Survey instrument
be carried out prior to additional data collection Given the limited resources for the Survey, the
Committee is concerned about whether EPA can support both the evaluation and the Survey in a
single year. There has also been discussion of the possibility of saving fUnds by carrying out
Surveys in the future on a biennial basis. The Committee views the maintenance of an
uninterrupted, annual PACE Survey as an exceptionally high priority.
The PACE Survey data pro vide a truly unique tool for evaluation of the costs of
compliance with environmental regulations. The collection of these data has provided the United
States with an important source of information to facilitate the evaluation of environmental
programs and, in turn, to improve the design and performance of these programs. EPA has used
the PACE data in its Cost of Clean reports, the Section 812 Clean Air Retrospective Cost
Analysis, numerous sector-specific studies, Regulatory Impact Analyses, analyses of recycling
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activities, and national studies of environmental protection activities. The relatively low cost of
the PACE Survey, combined with its great benefits to EPA, means that the annual Survey
provides the Agency with a tremendous return on its investment.
In addition, the existence of the Survey data has seeded considerable academic interest
and activity. Staff from EPA's National Center for Environmental Research (in the Office of
Research and Development) indicated at our November 30th EEAC meeting that in the past year
it had received more than a dozen proposals that involved the use of PACE Survey data.
At once, the PACE Survey provides a means to assess the costs of environmental
regulations in aggregate and individually, and it provides important data with which to compare
the cost-effectiveness of alternative regulatory approaches. The systematic collection of
information on these costs of regulation is essential to meet expanding legal requirements for
review of the costs of regulation, and it is important for EPA's efforts to develop sound and
effective regulations.
The PACE Survey provides data at three distinct levels, each valuable to EPA. First, the
published PACE Survey provides aggregate data on pollution abatement spending, both for new
capital expenditures and for operating costs. This supports calculations for numerous EPA
reports, and provides an overall benchmark for examining trends in abatement expenditures over
time.
Second, the PACE Survey provides abatement cost spending data at the industry- and
state-specific level. EPA has used these data for sector-specific studies and Regulatory Impact
Analyses. These data have also been used to examine the relationship between abatement costs
and productivity growth at the industry level and to calculate indices of state regulatory intensity
using differences in PACE-based abatement costs across states.
Third, the plant-level data collected for the PACE Survey can be linked with other
Census-collected data for those plants, and accessed by researchers working at Census Research
Data Centers around the country under strict controls to maintain confidentiality. These data
have already been used in projects analyzing a number of important questions: how abatement
costs are related to productivity levels across plants, how abatement investment affects other
capital investment, how effective abatement spending is in reducing emissions, and whether
abatement costs are related to local benefits from pollution abatement.
The value of any set of data of the type collected through the PACE Survey is
significantly enhanced as the longevity and consistency of the data series is expanded. In other
contexts, the Agency has argued that inconsistent funding of monitoring programs, leading to
interruptions in monitoring data, has undermined the validation of the achievement of
environmental goals. The same reasoning applies to the collection of data on the costs of
compliance with environmental laws and regulations.
It is exceptionally important that the Survey continue to be conducted annually, to
provide continuous plant-level data. This is especially important for capital expenditures: these
data tend to be sporadic, and collecting the data less than annually would result in missing large
amounts of investment and weaken the ability to identify the pollution abatement capital stock at
a plant. Examining the timing of the impact of abatement costs on plants requires a complete
time-series of data.
The PACE Survey has significant spill-over benefits affecting the various program
offices in the Agency, and a number of other agencies. Therefore, the cost of the Survey should
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be shared with offices across and even outside the agency, rather than being concentrated in any
one office or agency. The funding of the National Health and Nutrition Examination Survey
could serve as a useful model in terms of multi-agency support.
With annual private sector expenditures for environmental compliance now exceeding
$100 billion, an annual expenditure of less than $2 million seems to be a modest and
exceptionally sound investment to acquire the only systematic information available of the costs
of environmental regulation.
We hope this Commentary offers some insight into the importance of the PACE Survey
to EPA for achieving its mission, and we urge you to take immediate action to support the
maintenance of an uninterrupted, annual PACE Survey. The Committee will be pleased to
answer any questions you or your staff may have.
Sincerely,
/S/ /S/
Dr. William Glaze, Chair Dr. Robert N. Stavins, Chair
EPA Science Advisory Board Environmental Economics Advisory Committee
EPA Science Advisory Board
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U.S. Environmental Protection Agency
EPA Science Advisory Board
Environmental Economics Advisory Committee
November 30, 2001
CHAIR
Dr. Robert Stavins, Harvard University, Cambridge, MA
Also Member: Executive Committee
SAB MEMBERS
Dr. Dallas Burtraw, Resources for the Future, Washington, DC
Dr. W. Michael Hanemann, University of California, Berkeley, CA
Dr. Gloria Helfand, University of Michigan, Ann Arbor, MI
Dr. Paul Joskow, Massachusetts Institute of Technology, Cambridge, MA
Dr. Richard Norgaard, University of California at Berkeley, Berkeley, CA
Dr. Stephen Polasky, University of Minnesota, St. Paul, MN
Dr. Richard Revesz, New York University, New York, NY
SCIENCE ADVISORY BOARD STAFF
Mr. Thomas Miller, Designated Federal Officer, US EPA Science Advisory Board,
Washington, DC
Ms. Wanda Fields, Management Assistant, US EPA Science Advisory Board, Washington, DC
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NOTICE
This report has been written as part of the activities of the EPA Science Advisory Board,
a public advisory group providing extramural scientific information and advice to the
Administrator and other officials of the Environmental Protection Agency. The Board is
structured to provide balanced, expert assessment of scientific matters related to problems facing
the Agency. This report has not been reviewed for approval by the Agency and, hence, the
contents of this report do not necessarily represent the views and policies of the Environmental
Protection Agency, nor of other agencies in the Executive Branch of the Federal government, nor
does mention of trade names or commercial products constitute a recommendation for use.
Distribution and Availability: This EPA Science Advisory Board report is provided to the EPA
Administrator, senior Agency management, appropriate program staff, interested members of the
public, and is posted on the SAB website (www.epa.gov/sab). Information on its availability is
also provided in the SAB's monthly newsletter (Happenings at the Science Advisory Board).
Additional copies and further information are available from the SAB Staff [US EPA Science
Advisory Board (1400A), 1200 Pennsylvania Avenue, NW, Washington, DC 20460-0001; 202-
564-4533].
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