With its six goals established, the Eco-Efficiency Task Force next
developed nine policies to achieve the goals. These policies are derived
from the findings of the Demonstration Projects and the Policy Clusters.
They recommend new, more eco-efficient methods of operation
that can be adopted by individuals, companies, regulators, and
environmental organizations. Collectively, the nine recommendations offer
a means of linking the nation's economic prosperity to continued
protection of the environment.
The recommendations fall into three subgroups: new societal approaches
to achieve the goal of sustainable development, sets of policy tools to
implement these approaches, and realignments of the existing system.
Each policy is summarized below and then discussed on the following pages.
New Environmental Management System
Establish an environmental management system that uses participatory
decisionmaking to set verifiable and enforceable performance goals and
allows regulated entities operational flexibility to meet those goals.
The new system would replace the current practice of command-and-control
regulation, which often creates adversarial relationships and results in
costly litigation and delays in meeting environmental goals. The new
system would encourage partnerships and participation and should
yield better environmental results, for more people, while reducing
costs for regulated entities.
Extended Product Responsibility
Encourage the practice of shared responsibility for the environmental
impact of products among the designers, suppliers, manufacturers,
distributors, users, and disposers of those products. This
new practice would extend the current approach to waste reduction,
resource conservation, and pollution prevention by treating products
holistically, from "cradle-to-cradle."
Market incentives, such as tradeable permits and environmental fees,
should be used to achieve environmental goals and stimulate technological
innovation. Market-based approaches should be appropriately designed for
specific problems to ensure that the most effective and fair solutions
are achieved in a least-cost manner.
Information Collection and Dissemination
Efficiently collect and disseminate high quality information. Good
information enables informed decisionmaking, allows the public to verify
progress toward sustainable development goals, and
supports the transition to a new environmental management system.
Augment accounting of the gross national product by implementing a
satellite system of national accounts that measures sustainable
development through integrated tracking of the environment,
economy, and the natural resource base.
Sustainable Development Indicators
Develop a full set of national sustainable development indicators to
highlight and enable monitoring of the nation's economic, environmental,
and social trends.
Access to Capital
Develop innovative financing programs to improve access to capital for
small businesses and communities so they may more easily invest in
eco-efficient practices. Existing programs within
the U.S. Environmental Protection Agency (EPA) and U.S. Small Business
Administration (SBA) should be coordinated in order to spawn investment
in technologies and practices that improve resource efficiency, reduce
waste, and add value to local economies.
Realignment of the Present System
Redesign or eliminate federal subsidies that fail to incorporate the
economic value of natural, environmental, and social resources into the
marketplace and into governmental policies.
Revenue-Neutral Tax Shift
Shift taxes away from activities that promote economic progress--such
as work, savings, and investment--toward activities that lead to
excessive environmental damage.
ECO-EFFICIENCY TASK FORCE POLICY RECOMMENDATIONS
|Policy Recommendation 1|
ENVIRONMENTAL MANAGEMENT SYSTEM
The Eco-Efficiency Task Force
recommends the design and
establishment of a bold new
management system. The three essential
principles of the new environmental
management system would be: verifiable
and enforceable performance goals;
operational flexibility; and
participatory decisionmaking in
environmental goal setting. The new
system would result in greater
environmental protection than under
the current system, for more people, and
at a reduced cost to regulated entities.
Partnerships and participation would
replace the current pattern of costly
litigation between adversaries.
The current regulatory system has led to substantial
environmental improvement. However there is growing
consensus that it is failing to maximize environmental
results in the most cost-effective manner.
Current laws, regulations, and incentives focus on
pollution control and clean-up. Typically, they address
emissions into air, water, and land separately, and they
often dictate specific technologies for treating specific
A new environmental management system would focus on
prevention, would address environmental impact within a
whole facility or within a whole ecosystem and would
encourage better management of materials and energy
flowing through product systems.
The current system focuses on achieving compliance with
sometimes complicated and rigid regulatory requirements.
The new system is based on the principles of sustainable
development--maximizing environmental performance
in a way that promotes fairness, economic growth, and
The new environmental management system should result
in a cleaner environment, greater cost-effectiveness, and
increased public participation.
A Cleaner Environment
The new environmental management system would yield
superior environmental performance over the current
Ambitious performance goals are one mechanism to
ensure superior results. The operational flexibility of the
new environmental management system is another.
Operational flexibility allows reallocation of limited
resources into energy efficiency, resource conservation,
and pollution prevention consistent with the EPA waste
management hierarchy. While the current system
principally focuses on minimum compliance with technical
standards, the new environmental management system will
induce continuous environmental improvement.
The new environmental management system would use economic
incentives and grant participants the necessary flexibility to meet
long-term performance goals efficiently and cost-effectively.
Economic incentives, regulatory flexibility, and enforcement
innovations will attract business participation in the new system.
Tools such as emissions reduction banking and recognition of
superior performance will reduce costs and promote strategic
environmental thinking in government, business, and in other
These tools that harness the market must be designed to minimize
negative impacts on health, safety, and the environment, and
prevent geographic pockets of increased pollution.
More Public Participation
Improved public participation and information dissemination will
make the new environmental management system more equitable
than the current system.
Multistakeholder, consensus-building teams would provide active
and meaningful participation for individuals and communities.
Interactive processes would provide the public the opportunity to
help establish environmental goals and to verify progress toward
those goals over time.
Information and education will play a critical role in the new
system. Collection and dissemination of relevant information, with
sufficient protection for proprietary information, would ensure that
consumers, businesses, and government officials fully understand
the impact of their decisions and actions.
Implementation of the new performance-based environmental
management system would begin with demonstration projects.
During this transition period a simultaneous effort will be made to
increase operational flexibility and make other improvements in the
existing regulation-based system. Lessons from demonstration
projects would provide valuable feedback necessary to determine
whether to reconcile the current and new systems or to continue
administering two parallel tracks.
Establishment of the new performance-based
environmental management system
Demonstration projects would be the first step in
implementing the new environmental management system.
These projects would be selected based on prior environmental
performance; ability to implement a new system; geographic,
industrial, and size diversity; and the resource constraints of
the EPA and other regulatory agencies and other key
A balanced, multistakeholder group would have an integral
role in designing, implementing, and evaluating the new
Lessons from the initial projects will be incorporated into the
system within four years and a second generafion of projects
will be identified.
Where administrative authority is insufficient to launch the
demonstration projects, legislation would be drafted to
authorize projects based on the new system.
Improvements to the existing regulatory system
The EPA and other regulatory agencies should work to achieve
currently mandated environmental standards in a more cost-effective
manner by providing greater operational flexibility to
regulated entities and to state and local governments.
Other means of improving the current system should include
enhanced public participation, administrative streaming, and
identification of opportunities and incentives to exceed
regulatory requirements. Better information for all
stakeholders would be common feature of these
Changes to the current system could be reviewed by a multi-stakeholder
panel. The panel could also propose better ways to achieve or exceed
current regulatory requirements.
Where administrative authority is insufficient to improve the
current system, legislation would be drafted to provide the
National Research Agenda
Implementation of the new environmental management system would be
supported by a national research body. This body would conduct research
and provide feedback, ensuring that lessons learned through the
demonstration projects would reform and unprove the operation of the new
The research body would also analyze economic, environmental,
and social issues on various scales (i.e., local, state, regional,
national, and global). These analyses would help define and
measure sustainable development and would help with design of
future innovations in environmental management such as
government/industry compacts. The analysis would also ensure
that all efforts associated with the new environmental
management system are predicated on sound science.
CHARACTERISTICS OF THE NEW
Ambitious long-term environmental performance goals,
strategically and collaboratively set on an industry, facility, agency,
community, or geographic basis;
Interim quantitative milestones which ensure that participating entities
continuously improve environmental performance and make progress toward
long-term performance goals;
Increased operational flexibility that maximizes innovation and
cost-effectiveness in exchange for achieving improved environmental
Use of Incentives to increase operational flexibility, decrease
participation costs, and encourage continuous improvement in
Use of information mechanisms to measure and demonstrate
progress toward goals and to provide participants with information that
facilitates environmental decisionmaking while sufficiently
protecting proprietary information;
Enhanced public involvement in setting goals for sustainability and
reviewing progress toward goals at the local, regional, state, and
<A life-cycle perspective that encourages participating
entities to establish pollution prevention and product stewardship as
standard business practices, and
A multi-media approach that encourages participating
entities to manage environmental responsibilities on a "Whole-facility" or
|Policy Recommendation 2|
|EXTENDED PRODUCT RESPONSIBILITY
The Eco-Efficiency Task Force
recommends that a unified system of
extended product responsibility
transform the present, dispersed
approach to waste reduction, resource
conservation, and pollution prevention.
This new approach is based on the
principle of shared responsibility.
Through a mix of incentives,
information, education, and
institutional support, this new
approach would motivate individuals,
governments, and corporations to
recognize, understand, and act on their
responsibility to advance the nation's
sustainable development goals.
Demonstration projects should be
undertaken to implement extended
responsibility for several product
categories. The goal of the projects
should be to reduce impact in various
stages of the product life cycles
including manufacture, transport, and
post consumer waste.
While the past two and one-half decades have led to
significant environmental improvement, further advances
will remain incremental as long as progress depends on the
isolated actions of a few participants involved in product
design, manufacture, use, or disposal.
Extended product responsibility is an emerging practice
that considers the entire life of a product, from design to
disposal, to identify opportunities for resource
conservation and pollution prevention. Under extended
product responsibility accountability for the environmental impacts
of products and waste streams is shared among manufacturers, suppliers,
users (both public and private), and disposers of products.
Such a life-cycle approach captures upstream impacts associated with raw
material extraction and use, effects from production and distribution,
and the downstream effects associated with product use and disposal. This
comprehensive analysis permits identification of the critical links in
the product life-cycle where improvements could be substantial. Extended
product responsibility also addresses the underlying influence of
consumer needs and preferences.
A goal of extended product responsibility is to identify those actors and
actions with the greatest ability to reduce the environmental and energy
impact of specific products. In some cases, this may be the producer of
raw materials, in other cases, the end user. Voluntary assumption of
responsibility is ideal, but national legislation assigning
responsibility would be drafted if sufficient progress had not occurred
within four years of the program's inception.
Implementation would occur in three phases:
Phase I - Prioritization
A multistakeholder advisory panel would identify and prioritize product
categories for initial application of EPR policy options, taking into
account lessons learned from other analyses.
The following criteria would guide the selection of product categories:
- Products that utilize non-renewable/non-recoverable resources.
- Products that pose high hazard risks and the potential for injurious
exposure, or contribute significantly to environmental degradation.
- Products that contribute significantly to waste streams entering the
air, land, or water.
Once product categories are selected, the panel would identify the actors
and links in the chain of commerce with the greatest ability to leverage
improvements. Where actors assume voluntary responsibility, the panel
would work to secure sufficient protection against unjustified extension
of product liability.
Concurrently, the panel would establish goals for pollution prevention,
resource conservation, and waste reduction for each product category. The
panel would recommend a set of policy options best suited for reaching
Phase 2 - Demonstration Projects
Demonstration projects would be undertaken in the identified product
categories recognizing the need to conduct demonstrations in a variety of
regions and sectors. Companion training and education programs would
communicate the objectives of the demonstration project and the
principles of eco-efficiency and extended product responsibility.
One initial demonstration project should include ways to reduce post
consumer waste by exploring a more eco-efficient redistribution or sharing
of responsibilities among actors in the products' life-cycles.
Academic or institutional researchers would monitor the demonstration
projects to provide independent analysis of the projects' successes. This
feedback would be utilized in developing the national and regional scale
policies of Phase 3.
Phase 3 - Development of National and Regional Scale Policies
In Phase 3, the practice of extended product responsibility would begin
on a larger scale. Lessons learned from the demonstration projects would
shape regional and national policies. Evaluation and policy refinement
would continue in Phase 3 as the practice of extended product
responsibility expands to an ever broader array of product categories and
TOOLS FOR THE PRACTICE OF EXTENDED
A variety of tools can be used to implement extended product
responsibility. Some, like labeling programs, inform. Others, like
product fees, use economic signals. All help decision-makers recognize
and respond to opportunities to change. These tools can be implemented
voluntarily or mandatorily and may specify individual actions or a
coordinated effort among multiple actors along the chain of commerce.
Examples of these tools are listed below:
Product Stewardship Programs or Partnerships: Stewardship programs
typically deal with the downstream environmental and safety aspects of
product use. Many companies and organizations have active stewardship
programs. Some examples are the EPA's Green Lights programs, Chemical
Manufacturers Association's Responsible CareR program, and
the Environmental Defense Fund/McDonalds partnership.
Take-Back, Buy-Back, Leasing, and Reuse/Recycling: Under take-back
or buy-back systems, the products, packaging, or waste materials are
returned to their source for reuse, recycling, treatment, or safe
disposal. This mitigates downstream environmental impacts, permits
recovery of valuable materials, and fosters design of eco-efficient
products. Take-back programs might not be appropriate for all product
categories such as those that are extremely complex or where recycling
infrastructure already exists or could be established. Under leasing
systems, ownership of materials or products is never transferred, thus
encouraging the manufacturer to close material flow loops and extend
product life. Reuse or recycling by another manufacturer also closes
material flow loops.
Education, Information and Training: Purchasers and users can be
helped to make informed environmental decisions. Appropriate information
can be made available through labeling, other product literature and
"seal-of-approval" programs. What is important is a continuous flow of
information from designer to manufacturer to user and back to designer. A
more detailed discussion follows in Policy Recommendation 3: Market
Government Subsidies, Tax Credits or Procurement Preferences:
Direct subsidies or tax credits can be used to encourage sustainable
processes and products. Because a national priority is usually the
justification for a subsidy or tax credit, these tools should be used
sparingly and should be revenue-neutral. Federal, state, local, and
tribal governments can also exert influence in the marketplace through
their purchasing specifications for environmentally superior products.
Material Taxes/Fees, Product Taxes/Fees, Deposit-Refund Systems:
Taxes and feeds that add the value of environmental impacts to the cost
of materials and products can make those with higher environmental
impacts relatively less preferable in the marketplace. Taxes and fees may
also be used to shift the cost of waste management to the waste
generator. Examples include taxes on new automobile tires or batteries or
variable pricing for municipal waste programs. A more detailed discussion
follows in Policy Recommendation 3: Market
|Policy Recommendation 3|
The Eco-Efficiency Task Force recommends using market incentives to
achieve environmental goals and stimulate technological innovation
Market forces offer a powerful means of affecting the decisionmaking of
individuals, businesses, and governments. The use of market-based
incentives to further environmental goals encourages the application of
pollution control measures in the places where these controls will be
most cost-effective. This is the essence of eco-efficiency: increased
environmental performance at reduced cost.
Economic instruments also provide operational flexibility and account for
the need of U.S. manufacturers to remain competitive in the global
Emission trading schemes are designed to allow regulated entities to meet
emissions reduction obligations using reductions produced in excess of
legal or other requirements or from other sources. These reductions can
accrue from other sources within the environmentally relevant parameters,
i.e. airshed, watershed, and time frame. By creating market structures
for environmental compliance, these systems harness private
entrepreneurial energies in the search for the most efficient means to
achieve environmental goals.
Two existing approaches to trading are "cap and trade" and "emission
reduction credit" systems. Both have produced economic and environmental
benefits. The cap and trade system is exemplified by the federal Acid
Rain Control Program which allows sources to trade sulfur dioxide
allowances between plants. The emission reduction
credit system has largely been applied to the management of smog
precursors in metropolitan areas. Cities failing to meet the National
Ambient Air Quality Standards have used emission reduction credit trading
to allow new sources to build and operate without increasing the area's
overall emissions. A third approach, termed "open market trading," has
been proposed by EPA. The open market system would allow emitters to
acquire surplus discrete emission reduction from other sources in lieu of
existing regulatory requirements. This system is still under development
and awaits experience in application.
Care must be taken to match the program's design and application to the
underlying physical nature of the environmental problem in spatial and
temporal dimensions. Trading systems work best when all stakeholders
believe that transactions involve "excess reductions" between sources to
voluntarily lower and redistribute the costs of compliance while
guaranteeing that the overarching environmental goal will be met.
Emissions fees use the price mechanism to provide incentives for
environmental improvement by making environmentally damaging activities
or products more expensive than less polluting alternatives. Firms and
individuals control pollution to the level at which it is cheaper to pay
the emission fee than to further reduce pollution. Emission fees can be
particularly useful when pollution is due to many small sources, or where
direct regulation or trading schemes may be impractical due to high
Another important market mechanism is consumer choice. Providing
information to consumers about the environmental consequences of, or
risks associated with, their market choices can lead to behavioral
changes. Some examples of this type of program which have been used by
states, localities, and other entities include radon and lead testing,
seals-of-approval, and labeling programs such as required under
California's Proposition 65.
Another type of program relies on public disclosure of information on
facilities' environmental releases and doff-site transfer of certain
wastes (e.g., the Toxic Release Inventory. This
information encourages continuous environmental improvement and also
provides industry a vehicle for enhancing public image.
The success of such programs as the sulfur dioxide trading market, lead
phase-down banking and trading, and hundreds of pay-by-the-bag trash
collection systems justifies the expanded use of market incentives to
achieve environmental and economic objectives.
Economic instruments have their own "niches," but they can also be used
effectively in combination. For example, trading or pricing approaches
work better if supported by information programs -- communities that
adopted pay-by-the-bag systems of trash disposal found fewer problems
when households were given adequate information well in advance.
Similarly, environmental tax systems can incorporate trading features;
for example, taxes could be levied on net emissions after trades occur.
The way forward is not to debate the merits of various approaches in the
abstract. The challenge is to design the most appropriate market
incentives to deal with particular environmental problems. These
incentives should always reflect sustainable development ideals; steady
progress in reducing environmental risks, cost-effectiveness,
encouragement of technological innovation, shared responsibility,
fairness, and administrative simplicity.
|Policy Recommendation 4|
|INFORMATION COLLECTION AND DISSEMINATION
The Eco-Efficiency Task Force recommends improving the nature and means
of information collection and dissemination. Environmental, economic, and
social information collected should be that which is most useful to
stakeholders in reaching the goals of eco-efficiency. It should be
collected and made accessible in an efficient and coordinated manner.
These improvements must take place with full protection for proprietary
Accurate and relevant information is essential to reaching the goal of
sustainable development. It assists individuals, communities,
governments, and businesses to understand how their actions affect the
environment. It increase their sense of shared responsibility. Good
information allows verification of progress toward long-term goals and
enables public accountability. High quality information about product
life-cycles is necessary to make sound environmental management
decisions, especially within corporations. It also influences the
purchasing decisions of individual consumers and organizations.
Once information is collected, it must also be made available in a form
most useful and appropriate. Examples of such forms include environmental
labeling, material flow reporting, full cost accounting, and integrated
In order to ensure that information is useful and relevant for its
intended audience, and developed in the most cost-effective manner, the
following actions should occur:
- Review all data required by regulatory agencies for duplicative or
unnecessary information, and where identified, eliminate such information.
- Consolidate useful, relevant data into single, standardized formats.
- Use inter-agency common identifiers for companies, locations, and
regulated chemicals to facilitate analysis of economic and environmental
- Provide data necessary to evaluate environmental and economic
progress without compromising confidential or proprietary business
- Make data widely available to the public and other users, including
government policymakers, business managers, local communities, and
|Policy Recommendation 5|
|INTEGRATED ECONOMIC AND ENVIRONMENTAL
Establish and implement a system of national accounting to measure
sustainable development through integrated tracking of the environment,
economy, and natural resource base.
One of the most common measures of our nation's economic health is the
gross domestic product (GDP), an indicator that accounts for the dollar
value of all goods and services produced in our economy. However, GDP is
an incomplete and imperfect measure of sustainable development because it
does not adequately account for environmental quality and natural
resource depletion. Therefore, we need to develop a better national
accounting system which reflects environmental concerns as well as
traditional economic indicators.
The U.S. Department of Commerce, Economics and Statistics Administration,
Bureau of Economic Analysis, has designed a new set of economic accounts
for analysis of the interaction of the economy and the environment. The
Integrated Economic and Environmental Satellite Accounts (EESA) will
include measures of economic growth, natural resource use, and
environmental quality. The satellite accounts will not interfere with the
continued tracking of the GDP and other agreed-upon indicators.
By recording the "stock" of natural resources, these satellite accounts
can, in theory, provide a better measure of sustainable product than
traditional accounts. Fully implemented, the accounts could also provide
an improved basis for analyzing the interaction between the economy and
the environment in a number of ways -- by type of resource, industry,
product, and region.
However, it is important to note that the development of the integrated
accounts is a difficult and challenging task. It requires methodologies
and data that are not yet available. Also, to the extent that the concept
of sustainability is considered to include a wider range of social
issues, indicators of change in these areas are more appropriately
tracked within the proposed framework of "sustainable development
indicators than in the national economic accounts.
- The Bureau of Economic Analysis has already completed the first
phase of the accounts. The overall framework and prototype estimates
focus on mineral resources, including oil and gas, coal, metals, and
other minerals with a scarcity value.
- Pending completion of a National Academy of Sciences study of the
IEESAs -- which was requested by Congress -- the Bureau will move forward
with the second phase to extend the accounts to encompass renewable
natural resource assets, such as timberland, fish stocks, and water
resources. Development of these estimates will be more difficult than for
mineral resources because they will be based on less refined concepts
and less data.
- The third phase will involve issues associated with a broader range
of environmental assets, including the economic value of the degradation
of clean air and water and the value of recreational assets, such as
lakes and national forests. To accomplish these objectives, significant
advances will be required in the underlying environmental and economic
data, as well as in concepts and method.
- The Bureau of Economic Analysis will move forward in its work with
international agencies -- and all other interested private and public
sector parties -- to research, develop, and implement economic accounting
concepts that more fully reflect the interaction of the economy, the
environment, and the natural resource base.
- Progress in this work will depend upon resource availability and
close, continuing cooperation with the scientific, statistical, economic,
and environmental communities.
|Policy Recommendation 6|
|SUSTAINABLE DEVELOPMENT INDICATORS
The Eco-Efficiency Task Force recommends developing a full set of
national sustainable development indicators to highlight economic,
environmental, and social trends. This collaborative effort will entail
developing an information access system, developing analytical techniques
for constructing indicators, providing regular reports on progress toward
national sustainable development goals, and encouraging the development
of indicators at regional, local, and industry levels.
The assessment of progress toward sustainable development is difficult
because the concept integrates three complex and dynamic systems; the
social, economic, and environmental. Assessment is further complicated by
multiple scales and various time frames over which development occurs.
Ethics and values must also be considered. These requirements go beyond
the assessment provided by national accounts. Therefore, new indicators
Significant work on environmental policy indicators has been done by the
Organization for Economic Cooperation and Development, the United Nations
Commission on Sustainable Development, and the Dutch government.
The Dutch have developed indicators for distinct environmental issues
(climate change, stratospheric ozone depletion, acidification,
eutrophication, dispersion of toxic substances, disposal of solid waste,
and disturbance of local environments) and for target sectors
(agriculture, traffic and transport, industry, energy, refineries,
building trade, and consumers).
The Eco-Efficiency Task Force recommends building on this work and
expanding the scope of indicators to include economic and social
dimensions as well as environmental factors. This may require
establishment of an institutional mechanism to unify the efforts of a
variety of federal agencies working collaboratively with international
agencies, nongovernmental organizations, academic institutions, industry,
and the public.
|Policy Recommendation 6|
The Eco-Efficiency Task
Force recommends developing innovative financing programs to improve
access to capital for small businesses and communities so they may more
easily invest in technologies and practices that will use resources more
efficiently, product less waste, and add value to local economies.
Small businesses and
communities face a variety of barriers which prevent straightforward
investment in environmental improvements. Without some intervention, the
capital market is unlikely to drive the transformation to a sustainable
economy. At the same time, the threat of environmental liability prevents
some lending institutions from supporting projects perceived to be
high-risk. Addressing these access and liability barriers will speed the
infusion of capital for eco-efficiency gains. It will free up capital for
eco-efficient investments and it will facilitate investors' access to
Below are three innovative techniques to
improve access to capital and reduce the financial risk of environmental
investments. These techniques, and others, need to be further developed
and brought into use.
Initially, government may be involved to demonstrate and support methods
to increase access to capital; but the use of public funds should be
limited. Eventually, it is expected that the market will come to value
the economic benefits of investments in sustainable development and
Stimulating and Leveraging Eco-Efficient Investments in Small
At present, leaders evaluating the creditworthiness of
environmental investments typically rely on a fixed set of qualifying
ratios that are a function of the percentages of assets, inventory, and
receivables held by the applicant. As a result, high-return investments
that cost-effectively improve resource utilization and reduce emissions
often do not quality for funding because their potential benefits are
The creditworthiness of cost-effective, environmentally-driven
investments, and the inherent value of "avoided costs" (e.g. reduced
energy and material use) need to be demonstrated to the lending
community. Market incentives should be used to internalize these real, but
currently unrecognized attributes. The federal government could help
reduce risk by providing loan guarantees for qualifying small business
projects. On a pilot basis, the federal government should also develop
alternative underwriting standards for eco-efficient investments for
The EPA an SBA should identify exiting funds that could be made available
for small business eco-efficiency investment. The amount of assistance
should depend on the expected level of environmental improvement
resulting from the project, and the extent to which the project would
meet the needs of certain target groups.
During the development of the EPA-SBA "environmental bank," the SBA
should also review its existing ranking system to identify opportunities
for incorporating sustainable development criteria into its granting and
Community Environmental Investment Boards
should be established to facilitate market-based environmental trades in
the private sector and help identify nontraditional sources of capital.
Trade receipts could be used in a number of ways to promote community
The innovative trade package described below resulted in a win-win-win
outcome for the environment, the community, and the private companies.
In 1992, the Procter and Gamble company purchased $1.5
million in pollution credits from Minnesota Mining and Manufacturing,
Inc. (3M). 3M then donated these proceeds -- earning a tax write-off --
to Ventura County Community Foundation. With the money, Ventura County
established a permanent revolving loan to fund pollution prevention
programs in small industry and government.
Innovative financing and trading programs have the potential to become
self-financing. Until that time, funding could be drawn from existing
public sources or from savings from the elimination of subsidies, as
described in Policy Recommendation 8: Subsidy Reform. Donations from
private sector trades could also be used.
The Sustainable Communities Task Force Report contains more detailed
descriptions of techniques to increase access to capital for
|Policy Recommendation 8|
The Eco-Efficiency Task
Force recommends redesigning or eliminating federal subsidies that fail
to incorporate the economic value of natural, environmental, and social
resources into the marketplace and into governmental policies. This will
help achieve the broader national goals of minimizing subsidies, reducing
the deficit, and moving private investment into sustainable processes,
products, and practices.
Any federal subsidy program
should provide a reasonable return to taxpayers. Many federal subsidy
programs, however, no longer effectively serve valid public policy goals.
Many are economically unjustified, no longer benefiting the target groups
or activities that originally needed federal assistance. Many directly
conflict with other federal policies and objectives including that of
deficit reduction, but continue to exist because of the political efforts
of well-organized interest groups. At times these subsidies promote
excessive,, inefficient, and environmentally damaging use of natural
Eliminating subsidy programs or significantly redesigning them to more
accurately target beneficiaries could reduce economic waste and
environmental damage. In addition, the federal government could achieve
billions of dollars of annual savings. These savings could be used to
finance higher priority objectives, such as deficit reduction and tax relief.
Economically inefficient and environmentally damaging federal subsidy
programs include: agricultural commodity support programs; various energy
research and development programs; various energy research and
development programs; investment and operating programs; many road and
water public works program; irrigation subsidies; below-cost timber sales
and timber road construction expenditures; underpriced mining, grazing,
and recreational activities on federal lands; and subsidized flood, crop,
and disaster insurance programs. Most of these programs have been the
subject of repeated critiques, reform recommendations, and proposals for
change by both the Congress and the Executive Branch.
- Establish a National Commission to review all major federal
subsidy programs to determine whether there is a national need to
continue the subsidy. Within 18 months of its charter, the Commission
would present to the President a list of subsidies which are no longer
necessary. The President would submit the list to Congress and Congress
would have 45 legislative days to reject the list. If the list is not
rejected, all listed subsidies would be eliminated over a 3-5 year time
- For those subsidies determined to still meet a national need, the
Commission would set criteria to be used by the administering agency to
bring the program into line with the goals of sustainable development.
- In addition, the validity of these remaining subsidies would be
subject to a review every 5 years.
|Policy Recommendation 9||REVENUE-NEUTRAL TAX SHIFT
The Eco-Efficiency Task Force recommends shifting taxes away from
activities that promote economic progress -- such as work, savings, and
investment -- toward activities that lead to excessive environmental
damage. Such a shift, designed to minimize adverse impacts on vulnerable
segments of the population, would promote sustainable development by
stimulating economic growth and protecting the environment.
Government exerts tremendous
influence over the direction of economic activity through the tax code.
Currently, federal and state governments raise a significant portion of
their revenue through taxes on individual and business incomes --
payroll taxes further add to federal revenues. Such
taxes discourage work and savings, thereby reducing national income.
This, in turn, reduces the ability of the economy to create new jobs,
invest in new technologies, and remain competitive in the global market.
Therefore, the need exists to change the tax code to advance sustainable
It is also recognized that the free market sometimes fails to incorporate
the environmental costs of economic activities. This reduces efficiency
and may allow excessive levels of environmental damage. Where such
activities are dispersed among millions of households and enterprises,
the price mechanism may influence behavior more effectively than direct
At sufficient levels, taxes offer one way of affecting prices in order to
discourage activities damaging to the environment. They are an effective
way of influencing the behavior of hundreds of millions of citizens:
motorists, water and energy uses, trash generators, and users of lawn and
farm chemicals, whose activities result in significant environmental
Federal, state, and local governments should
begin designing and implementing tax policies that better reflect
environmental costs and help achieve sustainable development goals.
Although environmental taxes are not, in principle, more regressive than
the existing tax structure, they should be designed to minimize adverse
impacts on vulnerable segments of the population, and part of the revenue
generated should also serve equity considerations. Other revenue should
be used to reduce burdensome income, capital, and employment
 For example, see the Clean Air Act of 1970, 42 U.S.C. 7401 et seq.
(1994); the Clean Water Act of 1972, 33 U.S.C. 1251 et seq. (1982); The
Resource Conservation and Recovery Act (RCRA) of 1976, 42 U.S.C. 6901 et
seq. (1994); and the Comprehensive Environmental Response, Compensation,
and Liability Act (CERCLA) of 1980, 42 U.S.C. 9601-75 (1994).
 The Pollution Prevention Act of 1990 equates pollution prevention
with source reduction and states that pollution should be prevented or
reduced at the source whenever feasible, pollution that cannot be
prevented or source reduced should be safely recycled, pollution that
cannot be prevented or reduced or recycled should be safely treated, and
any remaining waste should be disposed of in a manner which is protective
of human health and the environment. 42 U.S.C. 13101-09 (1994); see also,
Carol M. Browner, Administrator, U.S. Environmental Protection Agency,
Pollution Prevention Policy Statement: New Directions for
Environmental Protection (Washington, D.C., 1993).
 U.S. Environmental Protection Agency, Introducing... The Green
Lights Program, fact sheet, EPA 430-F-93-050, November, 1993;
Chemical Manufacturer's Association, Responsible CareR,
fact sheet; and Environmental Defense Fund, "Agreement on a Joint
McDonald's/EDF Task Force to Address McDonald's Solid Waste Issues," 1
August 1990, reproduced in McDonald's Corporation and EDF Waste Reduction
Task Force, "Final Report," April 1991.
 Clean Air Act Amendments of 1990, Pub. L., 101-549, 104 Stat. 2399.
 California Proposition 65 requires the labeling of pesticides and
chemicals which cause cancer or reproductive problems. It is codified as
the Safe Drinking Water and Toxic Enforcement Act of 1986, West
Annotated Cal. Health and Safety Code 25249.5 et seq.
 The Toxic Release Inventory is required by the Emergency Planning
and Community Right-to-Know Act of 1986, 42 U.S.C. 11001-50 (1994).
 See U.S. Department of Commerce, Bureau of Economic Analysis,
"Integrated Economic and Environmental Satellite Accounts" and
"Accounting for Mineral Resource Issues and Bureau of Economic Analysis'
Initial Estimates," Survey of Current Business, April 1994.
 Organization for Economic Cooperation and Development,
Environmental Indicators (Paris, 1994); J.A. Bakkes et al., An
Overview of Environmental Indicators: State of the Art and
Perspectives (Nairobi: U.N. Environment Program, 1994); and Albert
Adriaanse, The Development of Environmental Performance Indicators in
the Netherlands (paper presented to the President's Council on
Sustainable Development, Eco-Efficiency Task Force, The Netherlands, May
 See Albert Adriaanse, Environmental Policy Performance
Indicators: A Study on the Development of Indicators for Environmental
Policy in the Netherlands (The Hague: Dutch Ministry of Housing, 1993).
 3M Corporation, Innovation & Partnership: The Ventura County
Clean Air Fund, fact sheet.
 Statistical Abstract of the United States 1994, p. 331, table
505 (for federal tax receipts); and p. 307, table 477 (for state tax
Summary of Demonstration Projects |