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How to reshape environmental policy.

Here is a proposal to change the rules of the game before we waste more time and money on the wrong problems.

Two decades after the "green" movement was born, the system that drives U.S. environmental policy is as obsolete as slide rules, leisure suits, and leaded gasoline. Our nation's environmental laws and regulations are largely out of touch with reality because they are based on the public's fear and hysteria, not on sound scientific reasoning. Within the labyrinth of our regulatory system, the advances in scientific knowledge of the past 20 years are difficult to find.

As a result, we are devoting precious time and money to programs that have little real impact on the environment. Our government must reassess its environmental priorities and policies so that we are investing only in programs that provide the most return for our environmental dollar.

This is not to say that America's environmental efforts have always been this misguided. After putting all of our resources into building the engine of economic growth in the 1950s and 1960s, we finally turned our attention to making sure that engine ran cleanly in the 1970s. The Clean Air Act of 1970, followed by the Clean Water Act of 1972, led to better air quality in our nation's cities and the revival of once-dead rivers and lakes.

But somewhere along the way our government lost its focus on the most important pollution problems and began pandering to public sentiment, taking a sensational "disease of the week" approach. A quick read of the headlines of the last decade -- acid rain, ocean dumping, toxic waste, Alar, Chilean grapes -- tells the story.

And you've read about the many industrial culprits. All too often business is blamed for the sorry state of the environment, without any recognition for the strides companies have made in integrating environmental policy into strategic business plans, policing their own operations for pollution, and establishing such far-reaching initiatives as the chemical industry's Responsible Care program.

Realizing that our nation has veered off course, many scientists, economists, and government officials believe it is time for a change. They are concerned that we are spending billions of dollars on the wrong environmental problems and that the current tangle of regulations is choking our nation's competitiveness.

The numbers are astounding. Over the last 20 years, the price tag for pollution cleanup in the U.S. has been a whopping $1.2 trillion. Our nation currently spends $122 billion a year on the environment, a figure expected to rise to about $180 billion annually, or about 2.8% of the gross domestic product, by the year 2000 -- far more than any other country spends.

Resources for the Future, a nonpartisan environmental research organization, found in a recent study that the 1990 Clean Air Act amendments alone could cost Americans up to $36 billion a year, with benefits of no more than $25 billion annually. In fact, four of the seven major environmental laws administered by the U.S. Environmental Protection Agency do not consider costs in setting standards.

The result is that money is being wasted on the wrong problems. Mayors from 114 cities in 49 states said as much last January in a letter to President Clinton: "Not only do we sometimes pay too much to solve environmental problems," they wrote, "we've been known to confront the wrong problems for the wrong reasons with the wrong technology."

Hazardous waste cleanup programs, like Superfund and the Resource Conservation and Recovery Act, have come to embody all of these wrongs. The EPA's own experts rank hazardous waste well down on their list of health and ecological risks. The public, though, sees hazardous waste as our nation's biggest environmental problem.

Wasted Monies

Since 1980, more than $12 billion has been spent through the Superfund program to clean up toxic dumps, yet a large percentage of that money was wasted on litigation to determine who should pay; only about 10% of the sites actually were sanitized. The estimated cost to clean up all Superfund sites ranges from $200 billion to $600 billion.

Acid rain is another "threat" that has become over-amplified by publicity. Most scientists agree that acid rain poses only a minor danger to rivers and lakes, and no serious threat to human health. But the EPA expects to spend roughly $4 billion a year on programs to reduce acid rain.

I propose that we change the rules of the game before we waste more time and money on the wrong problems. What we need now is a partnership between the government and private industry to address three crucial areas: 1) Reforming the regulatory process; 2) Applying market-oriented mechanisms; 3) Adopting a "property rights" approach.

Environmental reform should not seek to change the regulatory structure but should instead focus on the regulations themselves and how they are implemented. The standard cookie-cutter approach should be abandoned in favor of new approaches that reduce regulatory cycle time, curtail over-regulation, and establish uniform risk assessment standards. Above all, the economic impact of regulations should be carefully weighed and be made an integral part of the decisionmaking process.

Creative Alternatives

There are a number of creative alternatives that deserve further consideration:

* Establish a Scientific Advisory Panel. Scientific experts should be called upon to help the EPA prioritize our environmental problems so that the most pressing receive immediate attention. The EPA's ranking should be based on reasonable probability and scientific knowledge, and funded accordingly.

* Place an Ombudsman in Each Agency. Many agree that regulatory agencies are blind to the cost of their own policies. An ombudsman assigned to each agency could argue against regulation when it impedes technological or economic growth. The ombudsman would represent the public's interest by forcing each agency to weigh the risks of certain products or processes against the risks of over-regulating, i.e., fewer jobs and fewer new technologies.

* Adopt a "Toll-Road" Approach. Regulatory agencies need to streamline their permitting process by involving the private sector. For instance, it takes the EPA an average of two years to issue a waste-disposal permit, making it difficult for companies to engage in long-term planning. To relieve the traffic jam, agencies should adopt a "toll-road" approach that would allow companies the flexibility of paying a certified independent consultant to accelerate the evaluation of their permit request.

* Establish Uniform Risk-Assessment Standards. All government agencies that deal with science, chemicals, and toxic risk should be playing on a level field. Today, the EPA has one set of standards, the Food and Drug Administration has another, and the Occupational Safety and Health Administration has still another. To standardize and streamline the regulatory process, a single set of risk assessment standards should be adopted.

These standards should move beyond the myth of "zero-risk" (defined as less than one in a million over a lifetime of daily exposure) because it means spending huge amounts of money for minimal gain. Government should set priorities and balance them with the cost of reducing risk.

* Put Caps on Spending. The government should consider setting a limit on what it's willing to spend on regulations in a given year. Such spending caps, in theory, would force agencies to set priorities and focus on confronting the most serious, and not just the most controversial, problems.

Market-Oriented Mechanisms

Adopting a market orientation also would stimulate improvements in our regulatory system. When it's allowed to work, a free-market economy really is the environment's best friend.

Take packaging as an example of how the market can influence the environment. Despite widespread belief that excess packaging is responsible for the solid-waste crisis, there actually has been a decline in packaging over the past 20 years, as well as in the proportion of space it takes up in landfills.

This decline can largely be attributed to the competitive process. The move to cut costs and satisfy customers has led directly to innovations and new technology that have made it possible to reduce the amount of packaging in the waste stream.

Free-market economics also have proven effective in curbing air pollution. The Clean Air Act's tradeable permit system allows companies to buy and sell the right to emit sulfur dioxide -- the pollutant that causes acid rain. If a company is unable to meet clean air requirements, it can purchase "pollution allotments" from companies already in compliance.

The system works because companies that have cleaned up their act are rewarded by those who have not. Plants and technologies that create less pollution thus gain a competitive advantage over those that continue to pollute.

In this era of tight government budgets, we should be applying similar economic-incentive schemes to other environmental issues, such as the threat of global warming, protecting our water supplies, and managing our forests and wetlands.

The final element to this reform plan, the property-rights approach, involves using voluntary arrangements and expanding property rights to protect the environment. In essence, it allows environmental resources to be protected and nurtured by private initiative.

One success story is the Hawk Mountain Sanctuary Association in eastern Pennsylvania, a preserve for birds of prey financed through dues and admission fees. A private individual purchased the site at a time when the prevailing wisdom held that hawks should be eliminated. A naturalist was hired to protect the site, which was a focal point for hawk migration, and began a long-term effort to educate the public.

Or, take the movie, "Last of the Mohicans." Did you know that the forest scenes -- intended to replicate the virgin forests of the upper Hudson Valley more than two centuries ago -- took place in a corporate-managed private forest near Asheville, N.C.? Every tree in the movie was between nine and 22 years old, all the product of clear-cutting.

Our Greatest Challenge

When you break it down into its components, this plan for reform isn't entirely new or radical. But it is a sound formula that blends the energy, creativity, and entrepreneurial skills of the private sector with the hard-learned lessons of existing environmental policy.

Throughout the remainder of this decade, and beyond, our greatest challenge will be to decide which of our infinite environmental choices should gain first claim on our finite economic and technical resources. Such decisions should be based on sound science -- not fear or hysteria.

Put another way, we can be wise owls and spend our money prudently on the environment. Or, every time someone yells, "the sky is falling," we can play "Chicken Little" with billions of taxpayer dollars -- money that can be better spent fighting our nation's medical, economic, and social ills.

The choice is ours.

Earnest W. Deavenport Jr. is President of Eastman Chemical Co., a $4 billion manufacturer of chemicals, fibers, and plastics based in Kingsport, Tenn. Currently a unit of Eastman Kodak Co., Eastman Chemical will be spun off as an independent, publicly owned company at the end of this year. Deavenport, expected to be named Chairman and Chief Executive Officer of the new company, also will become Chairman of the Chemical Manufacturers Association in 1994.
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Title Annotation:Leadership in Environmental Initiatives
Author:Deavenport, Earnest W., Jr.
Publication:Directors & Boards
Date:Sep 22, 1993
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