Environmental Protection: EPA Should Strengthen Its Efforts to Measure
and Encourage Pollution Prevention (Chapter Report, 02/21/2001,
GAO/GAO-01-283).

Limited quantitative data exists on the extent to which American
industry has sought to use pollution prevention methods to reduce
pollutants discharged from its facilities. This shortcoming has
inhibited the Environmental Protection Agency's (EPA) efforts to monitor
and encourage companies' use of pollution prevention measures. Whether
to undertake pollution prevention is typically a business decision that
is influenced largely by a company's judgment as to whether an
investment in pollution prevention will benefit it financially. One
notable exception is the design of environmental regulations, some of
which have had the unintended consequence of discouraging pollution
prevention practices. In some cases, the EPA may have no means to
address them. The design of some regulations may be constrained by their
governing statutes. In other cases, EPA may be better able to take the
national goal of promoting pollution prevention into consideration in
developing its regulatory proposals. The Pollution Prevention Act
requires EPA to review its regulatory proposals to determine their
effects on source reduction. However, the agency has not systematically
tracked the implementation of this provision, and therefore does not
know the extent to which source reduction has been considered in the
promulgation of EPA regulations. While it may be impossible to promote
pollution prevention in all of the agency's regulations, a greater
awareness of these practices in the agency's rulemaking process can help
significantly to further this important goal.

--------------------------- Indexing Terms -----------------------------

 REPORTNUM:  GAO-01-283
     TITLE:  Environmental Protection: EPA Should Strengthen Its
	     Efforts to Measure and Encourage Pollution Prevention
      DATE:  02/21/2001
   SUBJECT:  Environmental monitoring
	     Pollution control
	     Toxic substances
	     Reporting requirements
	     Environmental law
	     Industrial facilities
	     Industrial pollution
	     Agency proceedings
IDENTIFIER:  EPA Acid Rain Program
	     EPA Project XL
	     EPA Pollution Prevention in Permitting Program
	     EPA Pollution Prevention Incentives for States
	     EPA State and Territorial Air Pollution Program
	     EPA Toxic Release Inventory

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GAO-01-283

Report to Congressional Requesters

United States General Accounting Office

GAO

February 2001 ENVIRONMENTAL PROTECTION EPA Should Strengthen Its Efforts to
Measure and Encourage Pollution Prevention

Page i GAO- 01- 283 Pollution Prevention Letter 1

Executive Summary 2

Chapter 1 Introduction 11

Chapter 2 Some Companies Have Implemented Pollution Prevention But Full
Extent is Unknown 14

Chapter 3 Key Factors Affecting the Use of Pollution Prevention Techniques
25

Appendix I GAO Contacts and Staff Acknowledgments 46

Tables

Table 1: Pollution Prevention and Chemical Use at the Ten Largest Users of
Toxic Chemicals in Minnesota, 1995 to 1996 20

Figures

Figure 1: Facilities Reporting Pollution Prevention Activities to TRI from
1991 through 1998 15 Figure 2: Types of Pollution Prevention Activities
Reported in 1998 17

Abbreviations

ALAPCO Association of Local Air Pollution Control Officials EMS
Environmental Management System EPA Environmental Protection Agency GAO
General Accounting Office SEP Supplemental Environmental Project STAPPA
State and Terrirotiral Air Pollution Program Administrators TRI Toxics
Release Inventory Contents

Page 1 GAO- 01- 283 Pollution Prevention

February 21, 2001 The Honorable Sherwood Boehlert The Honorable Cal Dooley
The Honorable James Greenwood House of Representatives

In response to your request, this report examines the extent to which
companies have adopted pollution prevention measures, the major incentives
encouraging companies to use pollution prevention strategies, and the major
disincentives that discourage their use of these strategies.

Unless you publicly announce its contents earlier, we plan no further
distribution of this report until 30 days from the date of this letter. At
that time, we will send copies to appropriate congressional committees, the
Administrator of the Environmental Protection Agency, and the Director of
the Office of Management and Budget. We will also make copies available to
others upon request.

Please call me at (202) 512- 3841 if you or your staff have any questions.
Major contributors to this report are listed in appendix I.

Sincerely yours, David G. Wood Director, Natural Resources

and Environment

United States General Accounting Office Washington, DC 20548

Executive Summary Page 2 GAO- 01- 283 Pollution Prevention

Each year American industry generates billions of pounds of toxic waste,
which can pose risks to the health of workers, consumers, and the public.
Traditionally, efforts to control pollution have focused on the treatment or
disposal of pollutants after they are created, often with “end- of-
pipe” pollution control technologies. In recent years, however,
federal and state regulators have given greater attention to controlling
pollution at the source by avoiding the creation of pollutants in the first
place- an approach commonly referred to as pollution prevention.

Interested in the potential for U. S. industry to make greater use of
pollution prevention activities, several Members of Congress asked GAO to
(1) examine the extent to which companies have employed pollution prevention
strategies, (2) identify the major factors that facilitate or encourage
companies to use pollution prevention strategies, and (3) identify the major
factors that discourage their use of pollution prevention. In addressing
this issue, GAO, among other things, examined quantitative data available
from EPA and other sources on companies' pollution prevention practices,
interviewed representatives of relevant national organizations and
individual companies, and reviewed existing literature on the subject. GAO
also conducted site visits to a number of firms to obtain detailed insights
on their experiences in employing pollution prevention measures.

While end- of- pipe pollution control strategies have helped further the
nation's environmental goals and promote facilities' compliance, they do not
necessarily keep “controlled” pollutants from entering the
environment. For example, a wastewater treatment plant may extract hazardous
pollutants before they are discharged into a receiving body of water, but
the resulting sludge generated by its pollution control process may create a
hazardous waste that must be disposed in a landfill- in some cases posing
continued environmental and health risks. Likewise, other control strategies
often result in the shuffling of pollution from one medium to another
without actually reducing pollution entering the environment.

The Pollution Prevention Act of 1990 established a national policy that
pollution should be prevented or reduced at its source. Under the act,
pollution that cannot be prevented should be recycled or treated in a safe
manner; disposal or other releases should be used only as a last resort. The
act also directed EPA to develop and implement a strategy promoting source
reduction, which it defined as any practice that reduces (1) the amount of
any hazardous substance, pollutant, or contaminant from Executive Summary

Purpose Background

Executive Summary Page 3 GAO- 01- 283 Pollution Prevention

entering any waste stream or being released into the environment prior to
recycling, treatment, or disposal, and (2) the hazards to public health and
the environment associated with the release. These measures can range from
simple techniques, such as covering exposed containers of volatile organic
compounds or tightening loose pipe connections, to completely redesigning a
production process or reformulating a product.

Among other things, the act also expanded the agency's Toxics Release
Inventory (TRI) to include source reduction information from reporting
facilities. Created by the Congress in 1986 under the Emergency Planning and
Community Right- to- Know Act, TRI is an information system containing data
on estimated releases of hundreds of chemicals that companies report
annually to EPA and the states. However, the reporting requirements apply
only to a certain set of industries and to certain chemicals of concern, and
not all facilities. The Pollution Prevention Act requires each of these
affected facilities to report, among other things, (1) the quantity of toxic
chemicals entering any waste stream prior to recycling, treatment, or
disposal; (2) a comparison of the ratio of a chemical's production or use
from the facility's previous report; and (3) the source reduction practices
used, if any, to reduce chemical waste. EPA compiles the data and makes them
available to the public.

Limited quantitative data exist on the extent to which American industry has
sought to use pollution prevention methods to reduce pollutants discharged
from its facilities. Specifically, Toxics Release Inventory data show that
in each year between 1991 and 1998, approximately one- quarter to one- third
of reporting firms implemented at least one pollution prevention measure.
Nonetheless, according to studies conducted by individual state agencies and
other organizations (as well as the large majority of industry participants,
regulators, and analysts GAO contacted), additional opportunities exist for
pollution prevention that could provide cost- effective ways to help meet
environmental requirements. EPA officials note that the limitations of
available data inhibit both their ability to ascertain the extent to which
companies use pollution prevention practices, and their attempt to target
efforts to further encourage these practices. Agency officials acknowledged
that revisions in the information companies provide TRI could significantly
help address these needs.

For many companies, the opportunity for a financial return is the primary
impetus for pursuing pollution prevention. Another key factor is the
prospect that pollution prevention could improve a company's public or
community image. Representatives of several firms told GAO, for example,
Results in Brief

Executive Summary Page 4 GAO- 01- 283 Pollution Prevention

that the public availability of Toxics Release Inventory data on facilities'
discharges provided a powerful incentive to minimize releases of toxic
pollutants. Other factors that facilitate or encourage firms to pursue
pollution prevention include (1) laws and regulations that reduce allowable
pollutant discharges while allowing companies the flexibility to achieve the
reductions through pollution prevention; and (2) the proliferation in recent
years of business strategies, such as environmental management systems,
under which firms look comprehensively at the environmental impacts of their
products and services. Such strategies, while not directly intended to
promote pollution prevention, nonetheless create an environment in which
pollution prevention measures are more likely to be adopted.

Technical challenges associated with new and sometimes unproven techniques
are one of the principal barriers hindering the wider use of pollution
prevention. While some pollution prevention techniques involve relatively
simple, common sense practices, others can involve significant changes, such
as revamped production practices or changes in raw materials. These
technical challenges are sometimes compounded by the preference among key
decisionmakers to rely on “tried and tested” methods. Second,
pollution prevention methods may be rejected because they are not considered
sufficiently profitable. The decision to adopt a pollution prevention
measure may require more justification than a calculation that its benefits
exceed its costs. Proponents of the measure may need to demonstrate that its
financial return will be greater than the return from alternative
investments competing for the firm's capital. Third, regulations that
prescribe the use of specific techniques to meet pollutant emission limits
sometimes have the unintended effect of discouraging pollution prevention.
Recognizing the possibility that agency regulations may have such unintended
consequences, the Pollution Prevention Act requires that EPA review its
regulatory proposals and determine their effect on source reduction.
However, EPA has not systematically tracked its compliance with this
provision and therefore does not know the extent to which source reduction
has, in fact, been considered in the promulgation of EPA regulations.

Executive Summary Page 5 GAO- 01- 283 Pollution Prevention

GAO's analysis of the Toxics Release Inventory data reveals that in each
year from 1991 through 1998, approximately one- quarter to one- third of
facilities reported implementing at least one pollution prevention activity.
The data also indicate that over the entire 8- year period, about half the
reporting companies indicated implementation of at least one pollution
prevention measure. EPA's guidance on reporting requirements for the
Inventory also states that industrial facilities reporting prevention
activities must identify the types of strategies they use. Over the 8- year
period, good operating practices, such as improved maintenance or covering
solvent tanks when not in use to minimize evaporation, were the most common
type of pollution prevention approach, implemented in over 57,000 reported
instances. Process modifications, such as installing a new catalyst in a
process that substantially reduces the generation of a pollutant or
modifying production equipment and piping in a way that generates less
waste, were cited in over 40,000 instances. Product modifications, which
include changing product design, specifications, or packaging, were
implemented in about 10,000 instances.

TRI pollution prevention data, however, should be interpreted with caution.
Although companies are required to report emissions of hundreds of toxic
chemicals, such as arsenic, benzene, and chlorine, they do not report
pollution prevention activities associated with other important pollutants,
such as sulfur dioxide and nitrogen oxide emissions from power plants or
nutrients from wastewater treatment plants. Second, as EPA officials
acknowledged to GAO, ambiguities in the guidance for reporting source
reduction activities likely result in inconsistencies in the way sources are
reporting their emissions. These officials acknowledged that these problems
inhibit their ability (1) to ascertain the extent to which companies use
pollution prevention and (2) to target efforts to further encourage these
practices. They also agreed that revisions to the information, which the
agency presently seeks from companies under their Toxics Release Inventory
reporting requirements, could significantly help address these needs.

A number of state agencies have undertaken studies showing how extensively
specific jurisdictions or industries have used pollution prevention. For
example, in 1998, the Minnesota Office of Environmental Assistance reported
a significant use of pollution prevention measures among the 10 largest
managers of toxic chemicals in the state. Four of the 10 facilities achieved
an overall reduction in chemical usage through Principal Findings

Extent to Which Pollution Prevention is Used

Executive Summary Page 6 GAO- 01- 283 Pollution Prevention

pollution prevention. Under Massachusetts' Toxics Use Reduction program,
reporting facilities reduced toxic waste generation by 48 percent from 1990
to 1998- a decline state officials said could be attributed in part to the
greater use of pollution prevention. Data from EPA, state, and industry
sources also indicate that pollution prevention has generally taken root to
a greater extent among larger facilities than smaller ones.

Not surprisingly, companies are more likely to use pollution prevention when
it enhances business profitability. Representatives of four of the five
firms GAO visited and industry associations GAO contacted said that the
opportunity for a significant financial return was among the primary reasons
for pursuing pollution prevention. Company officials stated that one key way
that pollution prevention improves the bottom line is by reducing production
costs. Certain pollution prevention techniques, for example, can help a firm
lower its materials cost, improve the efficiency of the production process,
or eliminate the costs of treatment and disposal. A printing firm
representative, for example, cited his company's use of

“direct to press” printing technology, which uses digital
technology to replace several steps in the traditional printing process. He
said that direct to press technology has not only offered the company cost
savings through greater efficiency but has also reduced pollution by (1)
rendering unnecessary the use of photographic film, plates, and processing
chemicals and (2) reducing wastewater discharges. Companies also identified
instances where they avoided having to install expensive pollution control
equipment like air stack “scrubbers” by controlling emissions
through less expensive pollution prevention techniques, such as switching to
cleaner fuels.

Several firms GAO contacted also cited a firm's sensitivity to its community
relations and public image as an important incentive to pursue pollution
prevention. For example, the Dow Chemical Company's Midland, Michigan
facility- in conjunction with the local community, a major national
environmental organization, and other concerned parties- agreed to engage in
a major pollution prevention experiment. In addition to identifying numerous
successful pollution prevention opportunities, Dow officials and
environmental representatives agreed that the experiment helped to improve
the facility's corporate image.

According to some industry and regulatory officials, the public availability
of TRI data is another key factor that prods firms to use pollution
prevention to improve community and public relations. TRI contains detailed
information on the chemical releases of each reporting facility, Key Factors
That

Encourage Pollution Prevention

Executive Summary Page 7 GAO- 01- 283 Pollution Prevention

including the number and quantity of toxic chemicals used, waste treatment
methods used, and total pounds of each chemical emitted into the
environment. As a result, according to company officials, the year- toyear
changes in a firm's environmental performance are transparent and fully
available to the public.

Environmental laws and regulations can play a key role in promoting
pollution prevention in at least two ways. First, some regulations may
prompt firms to adopt pollution prevention practices to keep emissions below
regulatory thresholds. In some cases this allows them to avoid a potentially
costly and time- consuming permitting process; in other cases it precludes
the need to install costly emissions control technology. For example, a
representative of the Intel Corporation told us that, under a major source
air emissions permit, any changes to the production process, including
engineering or raw materials changes that might affect emissions, must be
reported to the permitting authority so that the facility's permit can be
amended- an often time- consuming process. He said that Intel could ill
afford such delays, given the fast- paced and competitive nature of the
microprocessor industry. To avoid delays, the official said, Intel
facilities strive to stay below the threshold of emissions that requires a
facility to be regulated as a major source of volatile organic compounds and
hazardous air pollutants.

Similarly, regulations may encourage pollution prevention in instances when
firm emission standards are set, yet companies are given the flexibility to
determine how best to meet such standards. The Clean Air Act's Acid Rain
Program, which set stringent performance standards for sulfur dioxide
emissions while allowing flexibility on the means of achieving them, serves
as a good example of the effectiveness of this approach. Power plants are
given the choice of reducing their emissions either by installing
“scrubbers” to trap sulfur dioxide before it enters the
atmosphere or by switching their fuel from high- sulfur coal to either
lower- sulfur coal or natural gas, thereby preventing a portion of the
pollutant from being emitted in the first place. 1 By switching fuels, some
utilities have reduced their emissions at lower cost than had they purchased
and installed scrubbers.

1 The program also established an allowance trading system that permits
electric utilities to trade sulfur dioxide allowances and apply them against
their annual emissions. The trading system allows the utilities more
flexibility in planning how to achieve the required reductions in emissions
and also enables them to minimize the costs of complying with these
reductions.

Executive Summary Page 8 GAO- 01- 283 Pollution Prevention

GAO's site visits, as well as recent studies, indicate that even after
extensive analysis and planning, some pollution prevention measures may pose
technical uncertainties and considerable risk. Officials from Kodak
Corporation, for example, cited their effort in the 1980s and 1990s to
reduce emissions of methylene chloride, a key ingredient used in
manufacturing the plastic sheeting that serves as the base of Kodak's
photographic film. There were two paths to take to achieve reduced
emissions: significant engineering changes to the manufacturing facility,
which would reduce emissions through pollution prevention, or the purchase
of an “add- on” pollution control device. While the pollution
prevention measures met considerable internal resistance within the project
team because of concerns about regulatory deadlines, product quality, and
the potential for success with the use of pollution prevention techniques,
the measures were ultimately taken and proved to be successful. Faced with
similar technical uncertainties, however, some companies (particularly
smaller companies) have elected not to pursue pollution prevention projects.

In many cases, financial concerns have also been a significant barrier to
companies considering whether or not to invest in pollution prevention.
Particularly for smaller firms, the up- front capital investment that some
pollution prevention measures require may deter a company from changing
long- established practices to pursue pollution prevention opportunities.
Larger firms may also find the financial threshold for undertaking a
pollution prevention project difficult to attain. A Dow Chemical Company
official told GAO that to justify undertaking a proposed pollution
prevention project, the project's rate of return generally has to exceed the
“hurdle rate”- a rate of return at least as great as the return
expected of any alternative company investment. Similarly, DuPont officials
told GAO that the company's environmental plan included a database
containing several thousand potential waste reduction projects. Generally,
80 percent of the mass emissions are from 20 percent of the sources. The
firm ranks each project by cost and waste reduction potential. The objective
is to achieve for the entire list of proposals 80 percent of the benefit for
20 percent of their total projected cost. Projects falling below this cutoff
are generally not implemented.

GAO found broad agreement among industry representatives that while
regulatory standards have promoted pollution prevention by compelling
industry to lower its overall pollutant releases, certain types of
regulations can have the unintended effect of discouraging pollution
prevention. In particular, regulations that prescribe the use of specific
technologies to meet pollutant limitations can discourage (or preclude)
regulated entities Key Factors That

Discourage Wider Use of Pollution Prevention

Executive Summary Page 9 GAO- 01- 283 Pollution Prevention

from choosing alternative tools to achieve these limitations- tools that
often may include pollution prevention. The Clean Water Act and Clean Air
Act, for example, require EPA to establish technology- based discharge rate
limits based on “available” or “feasible” emission
control technologies. Such standards can discourage pollution prevention in
a number of ways, including emphasizing, or even requiring, end- of- pipe
compliance solutions instead of process or other pollution prevention
solutions. Even in instances when other preventive solutions are not
explicitly prohibited, a lack of time, resources, and willingness to accept
risk may lead state permit writers to disapprove methods of reducing
emissions other than the established control technologies.

To encourage greater consideration of pollution prevention in the
development of EPA regulations, the Pollution Prevention Act requires EPA to
review its regulatory proposals to determine their effects on source
reduction. However, the agency has not systematically tracked its
implementation of this provision and therefore does not know the extent to
which source reduction has been considered in the promulgation of EPA
regulations. According to EPA, anecdotal evidence suggests that such
consideration is, at best, inconsistent. While it may be impossible to
promote pollution prevention in all agency regulations, GAO concluded that a
greater awareness of these practices in the agency's rule- making process
could help significantly to further this important national goal.

GAO recommends that the Administrator, EPA, amend the agency's rule for
companies that report toxic releases to its Toxics Release Inventory (1) to
clarify reporting requirements so that facilities report their source
reduction activities in a consistent manner and (2) to obtain accurate data
on the quantity of emissions reduced so that the agency can ascertain the
extent and impact of source reduction activities.

GAO also recommends that the Administrator systematically determine the
extent of the agency's compliance with the Pollution Prevention Act's
requirement that EPA “review regulations of the Agency prior and
subsequent to their proposal to determine their effect on source
reduction.” If warranted by the results of the agency's analysis, GAO
further recommends that the Administrator develop a plan to improve the
agency's compliance.

GAO provided a draft of this report to EPA for its review and comment.
Officials from the agency's Office of Pollution Prevention and Toxic
Recommendations

Agency Comments

Executive Summary Page 10 GAO- 01- 283 Pollution Prevention

Substances said that overall the report was a balanced characterization of
the factors encouraging and discouraging pollution prevention. Among its
specific comments, the officials suggested that the report mention the
variety of programs and other activities the agency had initiated to promote
pollution prevention. While GAO's draft report had touched on several such
activities, a fuller discussion of these activities was added to chapter 3.
GAO also added a discussion of the role of many state programs in
encouraging pollution prevention.

The officials also noted that in characterizing the impacts of its
regulations on pollution prevention, it is also important to consider the
impacts on pollution prevention of permitting, inspections, enforcement, and
other activities associated with the implementation of regulations. They
further noted that the Pollution Prevention Act encourages consideration of
pollution prevention in permitting, inspection, and enforcement; and that
consequently, any recommendation concerning the consideration of pollution
prevention in the development of regulations should also address the way
pollution prevention is taken into account in these implementation- related
activities as well. GAO's recommendation focused on EPA's development of
regulations because it was that part of the process that was most frequently
cited as a disincentive within the regulated community to engage in
pollution prevention. That said, GAO acknowledged the value of any EPA
effort to encourage greater consideration of pollution prevention in
permitting, inspection, and other aspects of regulatory implementation.

Officials from EPA's Office of Environmental Information provided technical
corrections to the discussion in chapter 2 relating to the Toxics Release
Inventory, which were incorporated into the final report. In addition, GAO
provided relevant sections of the draft report to representatives of the
companies visited during its review to verify statements attributed to them
and other information provided. Their comments were also incorporated into
the final report.

Chapter 1: Introduction Page 11 GAO- 01- 283 Pollution Prevention

For many years, environmental regulation in the United States has focused on
“end- of- pipe” pollution controls to treat, store, and dispose
of toxic wastes and other pollutants. This overall strategy, however, has
had limited success in reducing the amount of pollution that ultimately
enters the environment. For example, a wastewater treatment plant may reduce
the amount of hazardous pollutants discharged into a receiving body of
water, but the resulting sludge generated by its process may create a
hazardous waste that must be disposed in a landfill- in some cases posing
continued environmental and health risks. Similarly, other control
strategies often result in a similar environmental “shell game”
that transfers pollution from one medium to another without actually
reducing the amount of pollution entering the environment. Industrial by-
products, for example, are often incinerated, but generally not without at
least some impact on air quality.

In recent years, federal and state regulators, industry, and environmental
organizations have devoted increased attention to controlling pollution by
avoiding the creation of pollutants in the first place- an approach commonly
referred to as pollution prevention. In recognition of this growing emphasis
on pollution prevention and the limitations of end- ofpipe pollution
controls, in 1990 the Congress enacted the Pollution Prevention Act, which
established a national policy that pollution should be prevented or reduced
at its source. Under the act, pollution that cannot be prevented should be
recycled or treated in a safe manner, and disposal or other releases should
be used only as a last resort. The act also directed EPA to develop and
implement a strategy to promote source reduction, which the act defined as
any practice that (1) reduces the amount of any hazardous substance,
pollutant, or contaminant from entering any waste stream or being released
into the environment prior to recycling, treatment, or disposal and (2)
reduces the hazards to public health and the environment associated with the
release. Source reduction includes such practices as modifying equipment,
technology, processes, or procedures; redesigning products; and substituting
less- toxic raw materials.

Among other things, the act also included a mandate to expand the Toxics
Release Inventory (TRI) to include information on source reduction for
reporting facilities. Created by the Congress in 1986 under the Emergency
Planning and Community Right- to- Know Act, the TRI is an information system
to which companies report annually to EPA and the states on their
facilities' estimated releases of hundreds of chemicals. The Pollution
Prevention Act requires each facility submitting information to the TRI to
report (1) the quantity of toxic chemicals entering any waste stream prior
Chapter 1: Introduction

Increased Focus on Pollution Prevention

Chapter 1: Introduction Page 12 GAO- 01- 283 Pollution Prevention

to recycling, treatment, or disposal, (2) a comparison showing the ratio
between a firm's current chemical production or use and the facility's
previous report, and (3) the source reduction practices used, if any, to
reduce chemical waste. EPA compiles the data and makes them available to the
public.

Interested in the potential for U. S. industry to make greater use of
pollution prevention activities, Congressmen Boehlert, Dooley, and Greenwood
asked us to (1) examine the extent to which companies are employing
pollution prevention strategies, (2) identify the major incentives
encouraging companies to use pollution prevention strategies, and (3)
identify the major disincentives that discourage their use of pollution
prevention.

To determine the extent to which companies employ pollution prevention
strategies, we analyzed quantitative data available from EPA and other
sources on companies' pollution prevention practices, interviewed
representatives of relevant national organizations, and reviewed existing
literature on the subject. Our primary data source was EPA's Toxics Release
Inventory, which agency officials cited as the most comprehensive source of
information available on pollution prevention practices nationwide. We did
not perform an independent test of the data's accuracy and completeness, but
did obtain information on these matters from EPA Headquarters officials. We
also examined data from several individual states, including Massachusetts,
Minnesota, and New Jersey, which experts had identified as leaders both in
promoting pollution prevention practices and in measuring the extent of
implementation within their jurisdictions.

We supplemented these data with interviews of officials representing EPA,
state environmental agencies, independent research groups such as the
Environmental Law Institute, environmental organizations such as the Natural
Resources Defense Council, and industry organizations such as the Business
Roundtable and the American Chemistry Council. We also reviewed existing
literature that addresses the extent to which pollution prevention
strategies have been employed.

To identify major incentives and disincentives affecting companies' use of
pollution prevention, we interviewed representatives of the organizations
noted above, and reviewed published literature addressing these issues. To
obtain more detailed insights, we also conducted site visits to several
firms that had employed pollution prevention measures. In selecting the
firms, Objectives, Scope,

and Methodology

Chapter 1: Introduction Page 13 GAO- 01- 283 Pollution Prevention

we considered a number of factors to help ensure that we would obtain
information on diverse pollution prevention experiences. Accordingly, we
included several different industries, such as chemical manufacturing,
microprocessor manufacturing, and printing firms. We also visited large,
diverse firms such as the DuPont, Kodak and Intel corporations, as well as a
smaller local facility (a Minnesota printing company). In making our
selections, we also sought to visit firms from different states in order to
identify what effect, if any, state pollution prevention policies had on the
firms' pollution prevention practices.

During our site visits to these firms, we sought to obtain detailed
information concerning their decisions whether or not to pursue pollution
prevention, specific process or input changes implemented, the environmental
results of pollution prevention measures taken, and the cost impacts
associated with these measures. We supplemented these visits by following up
with other companies whose pollution prevention practices had already been
documented by other organizations. Dow Chemical Corporation was among the
companies that had recently undertaken significant pollution prevention
efforts at its La Porte, Texas and Midland, Michigan facilities.

We conducted our work from June 2000 through January 2001 in accordance with
generally accepted government auditing standards.

Chapter 2: Some Companies Have Implemented Pollution Prevention But Full
Extent is Unknown

Page 14 GAO- 01- 283 Pollution Prevention

Limited quantitative data exist regarding the extent to which U. S.
companies have implemented pollution prevention measures. According to EPA,
the agency's Toxics Release Inventory (TRI) database- while far from a
complete record on the subject- contains the most comprehensive information
of any source regarding both the type and extent of pollution prevention
methods in use. GAO analysis of TRI data showed that in each year from 1991
to 1998, one- fourth to one- third of reporting firms implemented at least
one pollution prevention measure. Other information supplied by EPA, as well
as studies from individual states and other sources, also documented the
extent to which individual companies have adopted pollution prevention
techniques. This information was supplemented by our contacts with industry
participants, regulators, and analysts, who conveyed a consensus that many
additional opportunities exist for companies to use pollution prevention in
finding cost- effective opportunities to meet environmental requirements.

Quantitative data on the extent to which companies have implemented
pollution prevention efforts are limited, and national data on emissions
reduced through pollution prevention measures do not exist. Data from EPA's
TRI indicate that in each year between 1991 and 1998, approximately one-
quarter to one- third of reporting facilities implemented at least one
pollution prevention measure. Good operating practices, such as improved
facility maintenance and production process modifications, were the most
common types of pollution prevention measures reported. Other EPA data, as
well as analyses by individual state environmental agencies and other
organizations, also documented pollution prevention efforts of specific
industry sectors.

Since 1987, industrial facilities have been required to report annually to
the TRI on the types of chemicals they use and manufacture, as well as the
amounts of these chemicals that are being released into the environment or
otherwise managed as waste. Since the passage of the Pollution Prevention
Act of 1990, these facilities have also been required to report on their
efforts to prevent or reduce pollution at the source. As a result, since
1991, the TRI has collected information on the number and type of such
source reduction activities implemented, as well as quantities of chemicals
recycled, combusted for energy recovery, and treated on and off site.
Chapter 2: Some Companies Have

Implemented Pollution Prevention But Full Extent is Unknown

Limited Quantitative Data on the Extent of Pollution Prevention
Implementation

TRI Data on the Use of Pollution Prevention

Chapter 2: Some Companies Have Implemented Pollution Prevention But Full
Extent is Unknown

Page 15 GAO- 01- 283 Pollution Prevention

GAO's analysis of TRI data reveals that in each year from 1991 through 1998,
approximately one- quarter to one- third of facilities reported implementing
at least one pollution prevention activity.

Figure 1: Facilities Reporting Pollution Prevention Activities to TRI from
1991 through 1998

Source: GAO analysis of TRI data.

While figure 1 appears to show a steady decline in the number of facilities
engaged in pollution prevention activity, this does not necessarily indicate
a decline in the use or impact of pollution prevention measures. EPA notes,
for example, that companies may have launched their pollution prevention
efforts by focusing on a large number of simple activities and have since
moved on to larger, more complex activities. This could have led to a
decrease in the number of activities undertaken, while the amount of effort
devoted to pollution prevention may have remained undiminished. Furthermore,
the decline in the number of facilities reporting pollution prevention does
not necessarily reflect a decline in the amount of emissions reduced through
such efforts. Finally, pollution prevention efforts are not discrete events
with an impact at only one point in time, but tend to have ongoing emissions
reduction effects once implemented. Therefore, if a company undertakes a
pollution prevention

0 5000

10000 15000

20000 25000

1991 1992 1993 1994 1995 1996 1997 1998 Years

Total facilities Total facilities reporting use of pollution prevention

Chapter 2: Some Companies Have Implemented Pollution Prevention But Full
Extent is Unknown

Page 16 GAO- 01- 283 Pollution Prevention

measure, such as substituting a non- toxic material for a toxic substance in
a production process, it is likely that the decrease in emissions will carry
through to subsequent years, but that the continuing impact of the measure
will go unreported.

We also identified the total number of facilities that reported implementing
pollution prevention over the course of the 8- year period. About half of
the facilities reported implementing at least one pollution prevention
measure during this period.

TRI also requires industrial facilities that report pollution prevention
activities to identify the types of strategies they use. Over the 8- year
period, good operating practices- such as covering solvent tanks when not in
use to minimize evaporation or improved maintenance scheduling- were by far
the most common type of pollution prevention approach, implemented in over
57,000 reported instances. 1 Process modifications -

the second most commonly implemented category of pollution prevention- were
cited in over 40,000 instances. Process modifications can include installing
a new catalyst in a process that substantially reduces the generation of a
pollutant, or modifying production equipment and piping in a way that
generates less waste. Product modifications, such as changing product
design, specifications, or packaging, were the least common form of
pollution prevention- implemented in about 10, 000 instances. Figure 2
illustrates the frequency at which facilities implemented the different
categories of pollution prevention practices in 1998. This distribution
remained relatively consistent in each year during the 8- year period we
examined.

1 This figure may include some degree of double counting. Facilities submit
a separate TRI form for each toxic chemical they report, and the same
pollution prevention measure may have addressed more than one chemical.
Hence, a single instance of a pollution prevention activity may have been
reported two or more times.

Chapter 2: Some Companies Have Implemented Pollution Prevention But Full
Extent is Unknown

Page 17 GAO- 01- 283 Pollution Prevention

Figure 2: Types of Pollution Prevention Activities Reported in 1998

Note: The percentages in this figure do not add to 100 percent due to
rounding. Source: GAO analysis of TRI data.

There are several limitations to drawing broad conclusions from TRI data.
Facilities with fewer than 10 full- time employees are not required to
report to TRI. As a result, small facilities are excluded from reporting
their emissions even though they may collectively contribute a significant
amount. Secondly, only certain industries are required to report. Chemical
manufacturers, printers, and electric utilities must report while dry
cleaners and automotive repair shops, for example, have no obligation to do
so. 2 Finally, while hundreds of chemicals are reported to TRI, many
pollutants of concern, such as sulfur dioxide and nitrogen oxide emissions

2 EPA has expanded the list of industries required to report over the years.
For example, metal mining and coal mining were added in 1998.

10% Raw material modification

15% ? Spill and leak prevention 8%

Inventory control

31% ? Good operating practices ?

5%

Product modifications ?

7%

Surface preparation and finishing ?

5%

Cleaning and degreasing

20% ?

Process modifications

Chapter 2: Some Companies Have Implemented Pollution Prevention But Full
Extent is Unknown

Page 18 GAO- 01- 283 Pollution Prevention

from power plants or nutrients from wastewater treatment plants, are not
covered. Moreover, the chemicals that are covered must be reported only if
the amount of discharge exceeds a specified threshold.

Another key limitation of TRI data is the potentially inconsistent and
incomplete manner in which companies report to the TRI. As EPA officials
noted, the guidance for reporting source reduction activities to the TRI is
ambiguous, and may result in inconsistencies in reporting. For example, some
facilities may report a source reduction activity only in the year it was
implemented, while other facilities may report the same activity year after
year. In addition, TRI gives no indication of the quantitative impact of
pollution prevention activities. EPA's guidance on the TRI reporting
requirements states only that facilities must report on source reduction
activities. It does not require companies to report the quantity of
emissions reduced through these activities. Without data on the quantity of
emissions reduced, it is difficult to draw conclusions about the extent and
impact of source reduction activities.

EPA officials told us that the agency is considering ways to address some of
these limitations through rulemaking. The agency's effort could include
definitions and guidance to assist companies in filling out the sections
applicable to source reduction activities. For example, the new rule could
address how facilities should report pollution prevention initiatives that
have an impact over a multi- year period. This rule would also help to
ensure that the data collected are more consistent across facilities. In
addition, EPA may also add additional reporting elements, such as the
quantity of toxic chemicals reduced due to source reduction activities. EPA
officials stated that this information would help them estimate the progress
of source reduction, which in turn would help them better target their
efforts.

A variety of studies and other sources provide additional information on
industry's use of pollution prevention, supplementing EPA's TRI data. These
sources tend to focus on specific industries or activities within specific
states. Some suggest that implementation of pollution prevention may be
somewhat broader than that implied by the TRI data. For example, a draft
1997 EPA study on lithographic printers and larger manufacturing companies
found the implementation of pollution prevention activities to Other Studies
Also

Document Use of Pollution Prevention

Chapter 2: Some Companies Have Implemented Pollution Prevention But Full
Extent is Unknown

Page 19 GAO- 01- 283 Pollution Prevention

be fairly widespread, especially among larger firms. 3 Overall, 85 percent
of the 516 production officials for large manufacturers contacted reported
implementing pollution prevention measures, with the implementation of good
operating practices and modifications to the production processes being the
most common types. In general, larger facilities- as measured by the number
of production employees per shift- were more likely to pursue pollution
prevention than smaller ones.

According to EPA, several factors may account for the differences between
TRI data and the findings of its 1997 report. First, the study focused on
larger manufacturing firms that, as discussed in the last section of this
chapter, may have a greater tendency to engage in pollution prevention than
smaller firms do. Second, the data were obtained through interviews with
production- line officials and not corporate environmental officials. These
individuals, who make the day- to- day decisions, tend to have the best
knowledge about pollution prevention activities. Finally, the questions in
the survey did not focus specifically on environmental issues, but covered a
wide range of factors. By interviewing production- line officials and
avoiding the use of environmental nomenclature, this study may have revealed
“pollution prevention” efforts that were not recognized as such
by the implementing facilities.

In addition to EPA, a number of states have also undertaken studies that
shed some light on pollution prevention activities within their
jurisdictions. For example, the Minnesota Office of Environmental Assistance
published a report in 1998 that indicated significant use of pollution
prevention among the 10 largest managers of toxic chemicals in the state. As
table 1 indicates, 9 of the 10 facilities reduced the use of two or more
chemicals through pollution prevention techniques. In addition, 4 of the 10
facilities achieved an overall reduction in chemical usage through pollution
prevention. In some cases, the reductions were quite significant. For
example, the 3M- Cottage Grove facility reduced 17 of 32 chemicals, and
reduced the total chemical usage from about 26 million pounds to about 14
million pounds. At 5 of the 10 facilities, however, reductions in the use of
some chemicals were more than offset by greater use of the remaining
chemicals. For example, although the Ashland Petroleum Company substantially
reduced its use of phosphoric acid and ammonia,

3 Study of Industry Motivations for Pollution Prevention (Draft report). U.
S. EPA Pollution Prevention Policy Staff, April, 1997

Chapter 2: Some Companies Have Implemented Pollution Prevention But Full
Extent is Unknown

Page 20 GAO- 01- 283 Pollution Prevention

total use of toxic chemicals rose from 1.1 million in 1995 to 2.6 million
pounds in 1996.

Table 1: Pollution Prevention and Chemical Use at the Ten Largest Users of
Toxic Chemicals in Minnesota, 1995 to 1996 Facility

Number of TRI Chemicals Used or

Produced Number of TRI

Chemicals Reduced through Pollution

Prevention Did Facility Achieve a

Net Reduction In TRI Chemical Discharges? Example of

Techniques Used 3M- Hutchinson

Tape manufacturing plant

16 9 Yes Solvent recovery

3M- Cottage Grove

Hazardous waste incinerator

32 17 Yes Changes in operating practices

Boise- Cascade

Paper mill 9 2 No Spill and leak prevention

Potlach Corporation

Paper manufacturer 8 5 No Re- circulation within a process

North Star Steel

Steel manufacturer 8 5 Yes Increase purity of raw materials

3M Company

Consumer products 14 10 No Modified product design/ composition

Ashland Petroleum

Oil refinery 21 7 No Improved loading procedures

Koch Refining Co.

Chemical refining 32 17 No Improved storage

Sheldahl Inc.

Printed circuitry and other electronics

9 6 Yes Substituted raw materials

Mixon Inc.

Metal casting factory 1 0 No Modified equipment Source: 1998 Pollution
Prevention Evaluation Report, Minnesota Office of Environmental Assistance,
February 1998.

The Massachusetts Toxics Use Reduction Act established the prevention of
pollution at the source as the state's top priority in pollution control.
Data from the Massachusetts Toxics Use Reduction Program indicate the extent
to which facilities have reduced toxic emissions through pollution
prevention. Adjusted for changes in production, 4 reporting facilities
reduced toxic waste generation by 48 percent from 106 million pounds in 1990
to 55 million pounds in 1998. Although other factors may have contributed to
this decline (e. g., substituting a toxic chemical for another

4 Because chemical use can fluctuate with production levels, Massachusetts
adjusts its data on toxic chemical use to account for changes in production,
so that the effects of source reduction activities can be compared from year
to year.

Chapter 2: Some Companies Have Implemented Pollution Prevention But Full
Extent is Unknown

Page 21 GAO- 01- 283 Pollution Prevention

similarly toxic chemical not on the list), state officials said that a
substantial portion of the decline could be attributed to pollution
prevention efforts. A 1997 study of the state Toxics Use Reduction Program
reported that 351 of 434 surveyed facilities (81 percent) stated that they
had, or would, implement pollution prevention projects identified in their
toxics use reduction plans. Finally, in- depth studies at 22 selected
facilities found that each facility had implemented one or more pollution
prevention measures since 1990, although the intensity of the efforts varied
from firm to firm. Several firms had mounted aggressive efforts to eliminate
the use of toxic chemicals while others had reported more limited efforts,
such as modifying a single production process or reducing the generation of
a specific chemical.

Given the relative paucity of complete and reliable quantitative information
on the extent of pollution prevention activities nationwide, we interviewed
a range of knowledgeable parties, including federal and state environmental
officials, industry association representatives, and environmental
representatives. These officials concurred with recent studies on the
subject that had found that although some progress had been made in
implementing pollution prevention during the past 10 years, significant
opportunities have not been realized. Their comments also revealed a strong
consensus that larger firms had made significantly more progress in
institutionalizing pollution prevention than smaller firms.

The state pollution prevention officials we interviewed concurred that while
pollution prevention has received greater attention during the past decade,
substantial opportunities exist for pollution prevention across a range of
industries that could provide cost- effective ways to meet environmental
requirements. For example, a representative of the New Jersey Department of
Environmental Protection said that not only is “low

hanging fruit” going unpicked, some is “rotting on the
ground.” She noted that there are tremendous opportunities, including
ones that companies could implement with little difficulty. The New Jersey
official added that almost all facilities could identify pollution
prevention opportunities in the pollution prevention plans they submit to
the state, even if they are not implementing the measures. Similarly, a
representative from the Illinois Office of Pollution Prevention remarked
that state engineers rarely visit a facility without finding fairly simple
pollution prevention opportunities to suggest. Regulators and Other

Knowledgeable Sources Agree that Additional Pollution Prevention
Opportunities Exist

Chapter 2: Some Companies Have Implemented Pollution Prevention But Full
Extent is Unknown

Page 22 GAO- 01- 283 Pollution Prevention

This perception is consistent with the data published in a 1998 Business
Roundtable report. 5 The report stated that despite significant company
experience with pollution prevention, the concept remains timely for
manufacturers it surveyed. Seventy- eight percent of facilities responding
to a Roundtable survey stated that undiscovered pollution prevention
opportunities exist in their manufacturing operations, while 95 percent of
respondents stated that new opportunities would likely emerge in the next
three years.

State officials also stated that larger firms had generally made the
greatest progress in implementing pollution prevention measures. For
example, an official from Virginia's Department of Environmental Quality
explained that large companies such as Ford, Merck and DuPont have taken
significant advantage of pollution prevention opportunities. This view was
supported by a representative of New York's Department of Environmental
Conservation, who stated that smaller firms were generally less aware of
pollution prevention measures than larger firms were, or less able to
implement them. She underscored the potential environmental significance of
the problem by citing the state's metal finishing industry, which, she
indicated, was composed mainly of small to medium firms that generally did
not pursue pollution prevention. She further noted that these facilities
emit metals and other pollutants that the state has identified as priority
pollutants for reduction. Almost all of the other state environmental
representatives we interviewed reported similar disparities in the
approaches toward pollution prevention that exist between large and small
firms.

EPA's draft 1997 study highlighted this disparity between large and small
firms, as did the industry representatives we interviewed. For example, the
EPA study found that 90 percent of firms with 100 or more employees on the
average shift had reported implementing pollution prevention measures,
whereas 76 percent of facilities with between 1 and 19 production employees
per shift had implemented pollution prevention. Similar results were found
for a sample of 520 lithographic printing companies. We were also told
repeatedly by representatives of the chemical and electronics industries
that a limited number of large firms in those industries tended to be the
most aggressive, while smaller firms

5 A Benchmarking Study of Pollution Prevention Planning: Best Practices,
Issues, and Implications for Public Policy, The Business Roundtable
Environment Task Force, August 1998.

Chapter 2: Some Companies Have Implemented Pollution Prevention But Full
Extent is Unknown

Page 23 GAO- 01- 283 Pollution Prevention

were less aggressive. The representative of the electronics industry noted
that the reluctance of smaller firms in that industry to pursue pollution
prevention has had an industry- wide impact because the manufacture of
printed wiring boards is largely dominated by small firms. These views were
echoed in a 1999 study by the Environmental Law Institute (ELI), which noted
that industries dominated by small business lack both the technical and
financial capacity to conduct the necessary research efforts to identify new
opportunities. Among other industries, ELI cited the example of the dry
cleaning industry as one that is “dominated by very small firms and
where the industry has financed little research on alternative
processes.” 6

Limited quantitative data exist on the extent to which American industry has
sought to use pollution prevention methods to reduce pollutants discharged
from its facilities. Nonetheless, targeted studies conducted by individual
state agencies and other organizations and a widespread consensus among
industry participants, regulators, and analysts strongly suggest that
additional cost- effective opportunities exist for pollution prevention that
could help companies fulfill their environmental requirements.

EPA officials noted that gaps exist in the information facilities report on
their efforts to reduce toxic releases. They noted in particular that
ambiguities in the agency's guidance on how facilities report source
reduction activities to the TRI may result in inconsistencies in how this
requirement is addressed from facility to facility. In addition, TRI reports
do not provide accurate information on the quantity of emissions reduced
from source reduction activities. As agency officials acknowledged, revising
the EPA guidance could both improve the accuracy of TRI reporting and help
the agency to better target its own efforts to further encourage pollution
prevention.

We recommend that the Administrator, EPA, amend the agency's rule on the way
companies report toxic releases to TRI to (1) clarify reporting requirements
so that facilities report their source reduction activities in a

6 Environmental Law Institute, Innovation, Cost and Environmental
Regulation: Perspectives on Business, Policy and Legal Factors Affecting the
Cost of Compliance (May 1999: Washington D. C.), p. 19. Conclusions

Recommendation

Chapter 2: Some Companies Have Implemented Pollution Prevention But Full
Extent is Unknown

Page 24 GAO- 01- 283 Pollution Prevention

consistent manner and (2) obtain accurate data on the quantity of emissions
reduced so that the agency can ascertain the extent and impact of source
reduction activities.

Chapter 3: Key Factors Affecting the Use of Pollution Prevention Techniques

Page 25 GAO- 01- 283 Pollution Prevention

A number of factors affect companies' decisions as to whether and how they
will pursue pollution prevention. The key incentives that encourage
companies' use of pollution prevention tend to be economic in nature; a
company is more likely to use such practices when they enhance its business
profitability by making its processes more efficient. Other key factors that
affect companies' decisions include the prospect that pollution prevention
could improve a company's public or community image; regulations that
encourage reductions in allowable pollutant discharges (particularly those
offering companies the flexibility to choose how to achieve such
reductions); and the proliferation in recent years of business strategies
that incorporate more comprehensive environmental management tools.

Major impediments to the wider use of pollution prevention include (1) the
technical challenges associated with new and sometimes unproven techniques,
(2) decisionmakers' tendency to rely on methods that are

“tried and tested” and to avoid risks that could expose a
company to loss, (3) concerns over a potentially unfavorable rate of return
(particularly when compared with alternative investments under
consideration), and (4) regulations that prescribe a specific technology or
method to meet pollutant limitations, thereby discouraging or precluding the
use of alternative means of achieving necessary reductions.

Pollution prevention can offer firms a variety of financial benefits,
including lower costs for materials and more efficient processes.
Representatives of 4 of the 5 firms we visited and each of the industry
associations we contacted said that the opportunity for a significant
financial return, either by reducing production costs or by enhancing
revenues, was among the primary reasons for pursuing pollution prevention.

The prospect of reduced production costs has been recognized as a potential
benefit of implementing pollution prevention measures. As EPA noted in 1992,
pollution prevention techniques can help a firm lower its Chapter 3: Key
Factors Affecting the Use of

Pollution Prevention Techniques Factors That Encourage Pollution Prevention
Enhancing Business Profitability

Chapter 3: Key Factors Affecting the Use of Pollution Prevention Techniques

Page 26 GAO- 01- 283 Pollution Prevention

materials cost, improve the efficiency of the production process, or
eliminate the costs of treatment and disposal. 1 A firm may reduce materials
costs by eliminating a particular ingredient or chemical, finding a less-
polluting raw material, or making adjustments to the production process
resulting in lower waste generation. In such cases, the cost of raw
materials and waste per unit of output may decline. For example, the cost of
materials can be reduced by production and packaging changes that consume
fewer resources, and thus result in less waste.

This point was further emphasized in our interview with a printing firm
representative, who characterized the printing industry as one comprised of
many small firms with narrow profit margins that are intensely competitive.
He noted that with profit margins of about 6 percent, it takes about $450,
000 in new sales to realize $25,000 in additional profits. Therefore, a
successful pollution prevention practice that reduced costs could
potentially add to the firm's bottom line in a way that would be difficult
to achieve through increased sales. He also noted that pollution prevention
has sometimes been the indirect result of a production innovation undertaken
for non- pollution related financial reasons. As an example, he cited
“direct to press” printing technology, which uses digital
technology to supplant several steps in the traditional printing process. He
said that direct to press technology has not only offered the company cost
savings through greater efficiency, but has also reduced pollution by (1)
rendering unnecessary the use of photographic film, plates, and processing
chemicals and (2) reducing wastewater discharges.

Firms can also realize cost savings by substituting a cleaner, less- costly
material for a polluting chemical. For example, a National Pollution
Prevention Roundtable report identified an automobile parts manufacturer
that switched from a methanol- based adhesive to a water- based adhesive to
bond rubber and metal parts. 2 This practice reduced methanol consumption at
the facility from 240 to 24 drums per year, and consequently diminished
emissions of volatile organic compounds by 38 tons. As a result, the
facility achieved operating savings of $21,000 annually.

1 Environmental Protection Agency, Facility Pollution Prevention Guide, May
1992. 2 National Pollution Prevention Roundtable, A Global Pollution
Prevention Compendium: Case Studies and Legislative Efforts (Fall 1998).

Chapter 3: Key Factors Affecting the Use of Pollution Prevention Techniques

Page 27 GAO- 01- 283 Pollution Prevention

We also found instances in which pollution prevention techniques helped
firms avoid the costs of installing emissions control technology. Officials
at the DuPont Company cited one of their facilities that produces titanium
dioxide- a white pigment that gives opacity to products such as toothpaste
and paint. The emissions from the titanium dioxide manufacturing process
included sulfur dioxide and carbonyl sulfide. While the facility had to
install a stack scrubber to capture the sulfur dioxide emissions, it was
able to control 90 percent of its carbonyl sulfide emissions through use of
pollution prevention techniques. According to DuPont officials, the company
saved about $5 million at a single facility by avoiding the need to install
carbonyl sulfide control equipment, and has since chosen to implement the
same pollution prevention approach at five other facilities.

According to the representatives of several firms and the industry trade
associations we contacted, a key incentive to engage in pollution prevention
is its potential to (1) improve a firm's relationship with the communities
in which industrial facilities are located and (2) cultivate a corporate
image as a good environmental steward. For example, maintaining good
relations with local community activists was one of the chief reasons the
Dow Chemical Company pursued the Michigan Source Reduction Initiative- an
extensive effort to identify and implement pollution prevention measures at
Dow's facility in Midland, Michigan. A Dow official noted that the Midland
facility had a long history with local activists and non- governmental
groups. He said these activists were well informed about Dow's plant and
activities in Midland, and once Dow came up with the overall goal of cutting
waste by 50 percent, these activists came up with a list of chemicals for
Dow to reduce. He noted that Dow officials might have picked different focus
areas had they taken their preference, but they focused instead on the
priority areas the activists had selected.

According to industry and regulatory officials, the public availability of
TRI data provides an additional strong incentive to use pollution prevention
techniques in a way that enhances its community relations and public image.
They noted that since TRI contains such detailed information about reporting
facilities' use and release of toxic chemicals, the year- to- year changes
of a firm's environmental performance are transparent and are fully
available to the public.

An official in Minnesota's Office of Environmental Assistance agreed that
the public availability of these data has been a huge motivator for
Improving a Firm's

Community Relations and Public Image

Chapter 3: Key Factors Affecting the Use of Pollution Prevention Techniques

Page 28 GAO- 01- 283 Pollution Prevention

pollution prevention, and advocated that EPA strengthen its efforts to
publicize and enhance the public's access to TRI data. Industry officials
also pointed to the public availability of TRI data as a key factor
affecting their community and public relations and therefore their incentive
to minimize discharges of TRI pollutants. A representative of DuPont said
that emissions reduction through pollution prevention remained a major
corporate goal in his firm, which had, at one time, been the largest emitter
of toxic substances under TRI. The Minnesota printing company representative
said that his firm specifically sought to reduce its overall volume of TRI
chemicals below the threshold at which it must be reported.

Other officials applauded programs that provide public recognition to firms
that minimize their discharges through pollution prevention. Several pointed
specifically to EPA's 33/ 50 Program as a key impetus for engaging in the
practice. Begun in 1991, the program challenged firms to voluntarily reduce
their releases and transfers of 17 priority chemicals 33 percent by 1992,
and 50 percent by 1995. Several industry and regulatory officials told us
that the 33/ 50 Program was a major spur for voluntary pollution prevention
activities. For example, a DuPont official stated that meeting the goals of
the 33/ 50 Program had had a significant public relations benefit for the
company, and the firm met its obligations largely through pollution
prevention rather than end- of- pipe controls. According to EPA, TRI data
also indicate that the 33/ 50 Program encouraged pollution prevention.
Specifically, a March 1999 report on the 33/ 50 Program showed that
participating facilities reported more pollution prevention activities for
the 17 priority chemicals under the 33/ 50 Program than for other toxic
chemicals reported to the TRI.

Environmental laws and regulations can promote pollution prevention in a
number of ways. First, firms may adopt pollution prevention in order to keep
emissions below regulatory thresholds. By taking these steps, they may avoid
a potentially costly and time- consuming permitting process, and possible
requirements to install costly emissions control technology. For example, a
representative of the Printing Industries of America explained that a
facility could be subject to significant regulatory requirements if its
emissions exceed the regulatory threshold for a pollutant, such as volatile
organic compounds. Accordingly, he said, many printing firms implemented
pollution prevention measures to keep their emissions below these
thresholds. He indicated, for example, that to stay beneath the

“major source” threshold, some firms have substituted other
chemicals for isopropyl alcohol, which leads to volatile organic compound
emissions. Complying With

Environmental Laws and Regulations

Chapter 3: Key Factors Affecting the Use of Pollution Prevention Techniques

Page 29 GAO- 01- 283 Pollution Prevention

Similarly, an Intel representative told us that the Clean Air Act's
requirement that major sources obtain federal permits is a major driver for
pollution prevention efforts at the company's chip- making facilities. He
said that under a major source permit, any changes to the production
process, including engineering or raw materials changes that might affect
emissions, must be re- permitted. He said that Intel can ill afford such
delays, given the fast- pace and competitive nature of the microprocessor
industry. Accordingly, the official said, Intel facilities continue to
strive to stay under the threshold of being regulated as a major source of
volatile organic compounds and hazardous air pollutants.

Pollution prevention can also be encouraged by regulations and policies that
set firm emission standards for firms and industries, but allow firms
flexibility in how to meet such standards. For example, under its Project XL
and its Pollution Prevention in Permitting Program, EPA has offered
facilities operational flexibility in exchange for a commitment to maintain
emissions under a specific ceiling. In one XL project, a Merck
Pharmaceuticals plant in Virginia agreed to facility- wide caps on emission
of several air pollutants in exchange for the right to make process and
equipment changes without going through the permit review process. Under
this program, Merck converted its boiler at the facility from coal to
natural gas, thus achieving a 94- percent reduction in sulfur dioxide
emissions. 3

The Clean Air Act's Acid Rain Program serves as another example of a
flexible regulatory approach. It has encouraged pollution prevention by
setting stringent performance standards while allowing companies the
flexibility to decide the best means of achieving them. The program requires
electric power plants to reduce their sulfur dioxide emissions, by choosing
either to reduce their emissions by installing “scrubbers” to
trap sulfur dioxide before it enters the atmosphere or by switching their
fuel from high- sulfur coal to either lower- sulfur coal or natural gas,
thereby preventing a portion of the pollutant from being emitted in the
first place. 4

3 National Academy of Public Administration, Environment. gov: Transforming
Environmental Protection for the 21st Century, November 2000. 4 The program
also established an allowance trading system that permits electric utilities
to trade sulfur dioxide allowances and apply them against their annual
emissions. The trading system allows the utilities more flexibility in
planning how to achieve the required reductions in emissions and also
enables them to minimize the costs of complying with these reductions.

Chapter 3: Key Factors Affecting the Use of Pollution Prevention Techniques

Page 30 GAO- 01- 283 Pollution Prevention

By switching fuels, the utilities can sometimes reduce their emissions at
lower cost than if they had purchased and installed scrubbers.

A recent study prepared for EPA shows that many utilities have, in fact,
exercised their flexibility to employ the preventive fuel- switching
approach to achieve their required reductions. 5 Specifically, between 1995
and 1997, fuel switching accounted for 63 percent of the total sulfur
dioxide emissions reduced under the program.

The benefits from this preventive option were underscored by environmental
officials at Dominion Virginia Power, who told us that the flexibility under
the program to switch to low- sulfur coal has the potential to save them
millions of dollars at a single power plant. Specifically, the company is
evaluating the feasibility of using imported, low- sulfur coal to reduce
sulfur dioxide emissions sufficiently to avoid the use of stack scrubbers at
the company's Mount Storm power plant in West Virginia. Company officials
estimated the cost to add the three scrubbers to be roughly $300 million.

Pollution taxes serve as an alternative regulatory approach that offers
strong financial incentives, rather than a strict mandate, to reduce
pollution. They also offer the flexibility to reduce pollution using
techniques, including pollution prevention, that go beyond conventional
pollution control. Under this approach, emission charges are levied on the
discharge of pollutants into the environment, and product charges are levied
on products deemed harmful to the environment when produced, used, or
disposed of. Thus, for example, taxing each pound of a facility's air
pollutant emissions may give that facility an incentive to find ways to
prevent emissions in the first place. Generally, a pollution tax gives firms
an incentive to reduce pollution as long as the tax remains higher than the
cost of controlling the pollution. As polluters seek new ways to lower their
taxes by reducing pollution, the approach provides them both the flexibility
and the incentive to experiment with technical innovation, including the
development and use of pollution prevention techniques.

Finally, EPA officials pointed out that strong incentives to engage in
pollution prevention might result not just from laws and regulations
themselves, but from the compliance process associated with the

5 A. D. Ellerman, P. L. Joskow, R. Schmalensee, J. P. Montero, and E. M.
Bailey, Markets for Clean Air: The U. S. Acid Rain Program.

Chapter 3: Key Factors Affecting the Use of Pollution Prevention Techniques

Page 31 GAO- 01- 283 Pollution Prevention

regulations. For example, EPA policy encourages pollution prevention when
negotiating enforcement settlements with industrial facilities that have
committed violations. During the settlement process, EPA uses two basic
avenues to promote pollution prevention. First, the agency may require the
respondent/ defendant to use pollution prevention methods to redress the
original violation and to achieve compliance. 6 Second, EPA and the
respondent/ defendant may agree to the inclusion of a Supplemental
Environmental Project (SEP) as part of a settlement agreement. Under an SEP,
the respondent/ defendant agrees to conduct one or more projects that reduce
risks posed to human health and the environment beyond what the law
requires. SEPs are not designed to redress the original violation, but
rather to mitigate the size of an assessed penalty. According to EPA,
innovative pollution prevention approaches have been used in undertaking
SEPs.

In recent years, American industry has engaged in an increasing number of
business practices that promote a more systematic and thorough approach to
environmental protection. While these practices may not have been designed
to promote pollution prevention, they nonetheless create an environment in
which pollution prevention measures have a greater chance of being adopted.

One important example involves the use by a growing number of companies of
environmental management systems (EMSs). EMSs are intended primarily to
ensure that facilities are in full compliance with applicable regulations.
However, they also routinely encourage firms to go beyond compliance,
focusing on ways a facility can continue to improve its environmental
performance. Of particular note, according to an international standard for
environmental management systems, 7 firms adopting a management system are
to identify all facility operations and processes that have negative
environmental impacts, evaluate the

6 In the absence of statutory, regulatory, or permit language, members of
the regulated community are free to choose how to comply. However, once a
civil or administrative action has been initiated, the specific means of
returning to compliance are subject to administrative or judicial orders,
and/ or mutual agreement between EPA and the respondent/ defendant. As part
of this process, pollution prevention compliance methods can be utilized
along with more traditional end- of- pipe compliance methods.

7 Developed by the International Organization for Standardization, this
standard is commonly referred to as ISO 14001. Implementing

Environmentally- Friendly Business Practices

Chapter 3: Key Factors Affecting the Use of Pollution Prevention Techniques

Page 32 GAO- 01- 283 Pollution Prevention

significance of the impacts, and set objectives and targets for reducing
these negative impacts.

A 1998 analysis by the National Pollution Prevention Roundtable found that
the ISO 14001 standard's emphasis on involvement of top- level management
and a systematic approach to environmental management could encourage the
use of pollution prevention. 8 This finding was substantiated when the
regulatory and industry officials we interviewed indicated that a facility
that adopted an environmental management system would be more likely to
pursue future pollution prevention opportunities. For example, in exchange
for granting flexibility in the state's environmental permitting process,
Oregon's Green Permits Program requires participating firms to adopt an EMS,
with the expectation that this would move facilities to systematically
identify, monitor, and reduce environmental impacts. A representative of the
Oregon Department of Environmental Quality said the adoption of management
systems is beneficial, because it is one way to get businesses to think
about their processes- the first important step in pollution prevention.
Similarly, an official with the Wisconsin Electric Power Company noted that
the company routinely conducts environmental audits of its facilities,
primarily to ensure their compliance with environmental requirements.
According to the official, however, these audits identify pollution
prevention opportunities as well.

Environmental cost accounting can be an important element of an EMS.
According to EPA and others, the full costs of a firm's environmental
impacts are often obscured by traditional accounting systems. Such systems
often obscure such items as the costs of obtaining an environmental permit,
evaluating alternative pollution control equipment, and training employees.
In addition, intangible costs, such as the costs a facility incurs in
maintaining a good relationship with customers and the host community, may
not be recognized as environmental costs. Instead of explicitly recognizing
such costs, firms often allocate them to other categories such as overhead,
and research and development. A 1998 analysis by Resources for the Future
noted a widespread belief that sound environmental accounting will help
firms identify and implement

8 The National Pollution Prevention Roundtable is a national organization of
officials representing state, local, and tribal pollution prevention
programs. The analysis also noted several drawbacks to the ISO 14001
standard as it pertains to pollution prevention.

Chapter 3: Key Factors Affecting the Use of Pollution Prevention Techniques

Page 33 GAO- 01- 283 Pollution Prevention

financially desirable environmental innovations, such as pollution
prevention. 9

Some firms, such as Kodak, have used a technique known as life cycle
assessment that, in effect, promotes pollution prevention in the design of
products. Life cycle assessment is primarily a tool for assessing the
environmental impact of a product or a material through its entire life
cycle, including the impacts of raw material extraction and processing,
manufacturing, distributing, product use, recycling, and disposal. For each
stage of the life cycle, analyses are performed on a wide range of
environmental and health impacts, such as energy consumed in product
manufacture or use; impacts of raw material utilization; the emissions
occurring as a result of processing or manufacture; and the prospects for
recycling or reusing the product. A representative of Kodak told us that the
firm had used life cycle analysis to compare the environmental impact of 3
alternative designs for its one- time- use cameras. In this case, the scope
of the assessment was limited to raw material extraction and manufacturing
of the camera body and associated electronics. Analysts assessed the
alternatives' impact on a wide array of environmental indicators, including
energy use, ozone depletion, and air and water toxicity. In the end, one
alternative proved to be superior to the other two alternatives for all
indicators. As a result, according to the Kodak official, the pollution was
minimized in the design phase of the camera. 10

In addition to the incentives discussed above, EPA has initiated a number of
programs and other activities to promote the wider use of pollution
prevention. One example is the Design for the Environment Program, in which
the agency enters into partnerships with industry sectors to develop
products, processes, and technologies that have been designed with
environmental considerations in mind. One goal of the program is to
encourage the use of pollution prevention to reduce potential risks to human
health and the environment as an alternative to relying solely on end- of-
pipe controls. EPA's Environmental Accounting Project encourages

9 The Benefits of Improved Environmental Accounting: An Economic Framework
to Identify Priorities, Discussion Paper 98- 49, James Boyd, Resources for
the Future, September 1998. 10 Kodak officials also noted that life cycle
assessment is an emerging science, and further developments are needed
before it can be used effectively and broadly during product design. EPA and
State Pollution

Prevention Programs

Chapter 3: Key Factors Affecting the Use of Pollution Prevention Techniques

Page 34 GAO- 01- 283 Pollution Prevention

businesses to understand the full spectrum of their environmental costs and
integrate those costs into the decision- making and capital- budgeting
processes. EPA has also encouraged the use of pollution prevention by
providing grants to states. Under the Pollution Prevention Incentives for
States (PPIS) grant program, for example, funds are used to assist
businesses and industries in identifying better environmental strategies and
solutions for complying with regulations. Specifically, grants are provided
for state and tribal pollution prevention projects, such as technical
assistance, training, education, outreach, and awards and recognition
programs.

Many states also have programs that focus on promoting the adoption of
pollution prevention. Some states target their efforts toward environmental
assistance programs. For example, the Minnesota Technical Assistance Program
is a state- supported, non- regulatory program under which technical staff
help businesses and industries identify opportunities where pollution
prevention can help solve environmental problems. Other states have
regulatory integration programs under which a facility's compliance record
is considered holistically rather than just on a statute- by- statute basis.
Under these programs, pollution prevention opportunities are often
encouraged during the permitting, inspection, and enforcement processes.
Other states maintain clearinghouses to gather and disseminate information
on pollution prevention to interested organizations and the public at large.

Among the primary barriers hindering the wider use of pollution prevention
are the technical challenges associated with new and sometimes unproven
techniques. While some pollution prevention techniques involve relatively
simple, common sense practices, others can involve significant changes, such
as revamped production practices or changes in raw materials. These
technical challenges are sometimes compounded by the preference among key
decision- makers to rely on

“tried and tested” methods. Second, pollution prevention methods
may be rejected because they are not considered to be sufficiently
profitable. The decision to adopt a pollution prevention measure may require
more justification than a calculation showing that its benefits exceed its
costs. Rather, proponents of the pollution prevention measure may need to
demonstrate that its financial return will be greater than the return from
alternative investments competing for the firm's capital. Third, regulations
that prescribe the use of specific techniques to meet pollutant limitations
have sometimes had the unintended effect of discouraging pollution
prevention. Recognizing the possibility of these unintended consequences,
Factors That

Discourage Wider Use of Pollution Prevention

Chapter 3: Key Factors Affecting the Use of Pollution Prevention Techniques

Page 35 GAO- 01- 283 Pollution Prevention

the Pollution Prevention Act requires that EPA review its regulatory
proposals to determine their effect on source reduction. However, EPA has
not systematically tracked its own compliance with this provision, and
therefore does not know the extent to which source reduction has, in fact,
been considered in the promulgation of EPA regulations.

Some pollution prevention techniques involve little more than the exercise
of common sense over such matters as how materials are labeled, stored, or
handled by facility personnel. Such measures require little investment in
time and money, and pose little chance that the steps taken will be
unsuccessful or result in unanticipated risk. In many cases, however,
pollution prevention measures can involve significant changes to established
practices, such as revamped production processes or changes in raw materials
used. Such measures can be significantly more difficult to pursue. In
addition, technical issues can pose substantial risks if changes are
costlier than anticipated, affect the company's compliance with
environmental or other requirements, or affect the quality of its product.

Both our site visits and recent studies indicate that even after extensive
analysis and planning, some pollution prevention measures may pose technical
uncertainties and considerable risk. Officials from Kodak Corporation, for
example, cited their effort in the 1980s and 1990s to reduce emissions of
methylene chloride, a key ingredient used in manufacturing the plastic
sheeting that serves as the base of Kodak's photographic film. Officials saw
two possible paths to take to achieve reduced emissions: (1) significant
engineering changes to the manufacturing facility, which would reduce
emissions through pollution prevention, or (2) the purchase of an
“add- on” pollution control device. There was considerable
internal resistance within the project team, because it was uncertain
whether the proposed pollution prevention pathway could achieve the
necessary emissions reductions, especially considering the need to meet
regulatory deadlines for achieving the reductions. Concerns were also raised
about the potential adverse effects that the changes with the pollution
prevention effort could have on product quality. The pollution prevention
measures were ultimately taken, resulting in the attainment of emissions
reduction goals within the required regulatory timeframe. The measures also
prevented emissions that would have resulted from operating a large air
pollution control device; avoided the high cost of operating that device;
and did not result in negative impacts on production equipment or product
quality. Technical Challenges

Associated With New and Sometimes Unproven Techniques

Chapter 3: Key Factors Affecting the Use of Pollution Prevention Techniques

Page 36 GAO- 01- 283 Pollution Prevention

Similar concerns surfaced at the Dow Chemical Company's La Porte, Texas,
facility as officials there launched efforts to determine whether emissions
of monochlorobenzene could be eliminated through in- process recycling. 11
This pollution prevention opportunity presented an attractive alternative to
the company because the successful recycling of the pollutant could
facilitate the closure of a waste incinerator- which would otherwise require
a major upgrade costing millions of dollars in order to meet regulatory
standards. To shut down the incinerator, however, the facility found itself
faced with a series of cascading issues. For example, it had to find ways of
addressing other waste streams that were also burned in the incinerator,
such as phosgene and methanol. These wastes would either have to be
eliminated, recycled, or treated in another way if the incinerator were shut
down, leading to a number of complications. The methanol, for instance,
could be addressed in a number of ways, but each of the two options
evaluated raised additional problems. For example, it could be sold to
another firm for recycling, but the methanol itself was contaminated with
impurities that would have to be removed before sale. Similarly, it could be
burned off site, but this would incur transportation costs and the costs of
off- site burning, which are typically higher than onsite burning. Shutting
down the incinerator would also create

“downstream” technical challenges. A wastewater treatment plant
located at the facility used the incinerator's water to keep its own
effluent within an acceptable range of salinity. Without the water from the
incinerator, the biological treatment that removes organic compounds from
the wastewater would be disrupted. These technical issues were critical
factors leading to the project's deferral.

Smaller firms face even more significant technical challenges in pursuing
pollution prevention than their larger counterparts. According to the
industry and regulatory officials we interviewed, smaller firms often do not
have the technical ability or resources to pursue many pollution prevention
alternatives. One expert explained that pollution prevention measures tend
not to be “plug- in” technologies, but instead can require a
great deal of technical sophistication and resources. Small firms generally
do not have the technical ability and resources to identify such practices.
The Environmental Law Institute also made this point in a 1999 study that
showed that in the dry cleaning industry, “the small size and lack of

11 A fuller discussion of this experience is contained in Searching for the
Profit in Pollution Prevention: Case Studies in the Corporate Evaluation of
Environmental Opportunities, by James Boyd, Resources for the Future, May
1998. Technical Uncertainties Are

Particularly Challenging for Small Firms

Chapter 3: Key Factors Affecting the Use of Pollution Prevention Techniques

Page 37 GAO- 01- 283 Pollution Prevention

research or financial capacity in virtually all firms in the industry
precluded research or development of several promising alternatives to the
use of perchloroethlyene, the principal solvent used in dry cleaning.”
12 The study concluded that industries dominated by small business lack both
the technical and financial capacity to conduct the necessary research
efforts to identify new opportunities.

Pollution prevention officials from Delaware, Illinois and New York also
emphasized that a lack of knowledge and technical sophistication inhibits
the wider use of pollution prevention by small and medium- sized firms. An
official at the New York Department of Environmental Conservation told us
that smaller firms face many barriers, including a lack of resources for the
initial outlay, a lack of expertise, an unwillingness to change timehonored
practices, and time constraints. An official of the Illinois Environmental
Protection Agency raised similar issues, noting in particular that the main
barrier affecting small- and medium- sized firms was a lack of information
and technical sophistication. He said such firms typically do not have the
time and resources to research and evaluate their options, and therefore
need mentors, such as experts from larger firms, to help them identify and
implement various options. Accordingly, many states have established
technical assistance programs specifically designed to assist smaller firms
identify and implement pollution prevention measures.

These difficult technical challenges are sometimes compounded by the common
phenomenon in many organizations to rely on “tried and tested”
methods and to avoid significant risks that could expose a company to
financial loss, liability, or other problems. This point was raised during
many of our interviews with state and industry officials. For example, a
representative of the Delaware Department of Natural Resources and
Environmental Control said that long established practices and habits can be
hard for a firm to break, especially when there are concerns about the
market and customer preferences. The official recalled a visit to a maker of
filing cabinets that had painted the inside of their high- end cabinets,
even though the metal was pre- coated. The official pointed out that the
company could save material and reduce waste by ending this practice, but
the company was reluctant to do so because it feared customer

12 Environmental Law Institute, Innovation, Cost, and Environmental
Regulation: Perspectives on Business, Policy, and Legal Factors Affecting
the Cost of Compliance, May 1999. Technical Challenges Are

Sometimes Compounded by Institutional Resistance

Chapter 3: Key Factors Affecting the Use of Pollution Prevention Techniques

Page 38 GAO- 01- 283 Pollution Prevention

reaction. After a few years, the company stopped painting the inside, and
the feared loss in sales did not materialize.

Similarly, the organization and allocation of responsibility for
environmental matters within a firm can impede identification and
implementation of pollution prevention measures. More complex pollution
prevention approaches require intimate familiarity with the production
process, such as that possessed by line workers, managers, and engineers.
However, as a 1994 report by the Office of Technology Assessment noted,

“Responsibility for finding pollution prevention solutions may not
rest with those most capable of doing so.” 13 Indeed, they may oppose
pollution prevention measures over concerns that the measures will divert
resources away from production, or over concerns that pollution prevention
initiatives may harm product quality. Environmental management is often the
responsibility of a separate department in a firm, which may not have
effective communication or working relationships with other more
knowledgeable staff.

As noted above, the prospect of financial gain has perhaps been the primary
impetus behind many successful pollution prevention efforts. In other cases,
however, concerns over financial risk or a poor rate of return- particularly
when compared to other candidates for capital investment- often act as a
deterrent to undertaking pollution prevention.

Particularly for smaller firms, the up- front capital investment required
for some pollution prevention measures may be enough of a deterrent to
discourage a company from changing long- established practices to pursue
pollution prevention opportunities. A pollution prevention official from New
York's Department of Environmental Conservation reinforced this point,
noting that smaller firms in particular are generally unwilling or unable to
make the initial outlay for process changes or additional equipment. The
point was also made in the 1994 Office of Technology Assessment report,
which noted that some industries with low profits and mature markets and
equipment, such as metal finishing, invest less in new

13 U. S. Congress, Office of Technology Assessment, Industry, Technology,
and the Environment: Competitive Challenges and Business Opportunities,
January 1994. Pollution Prevention

Measures May Not Be Sufficiently Profitable

Chapter 3: Key Factors Affecting the Use of Pollution Prevention Techniques

Page 39 GAO- 01- 283 Pollution Prevention

facilities. 14 As a consequence, making investments in pollution prevention
equipment can be more difficult, regardless of the expected payback.

Ironically, in the case of large corporations, a comparatively small
investment required by some pollution prevention efforts can become a
barrier, if the small size of the proposed project provides it with
insufficient visibility for corporate management. Such was the case in the
Michigan Source Reduction Initiative involving Dow Chemical Company, the
Natural Resources Defense Council, and other participants. Under the
initiative, participants sought to reduce releases of 26 priority chemicals
by 35 percent using only pollution prevention techniques. To do so, the
company's Midland, Michigan facility identified and implemented 17 projects
with capital costs ranging between zero and $330, 000. According to the
report documenting the results of this initiative, a key lesson learned from
the project was that low- cost projects are often overlooked by the
engineering staffs of large companies even when they have the potential to
realize large reductions. 15 A Dow official told us that the company only
pursued so many relatively small- scale measures because they were treated
as a group of projects under the company's Source Reduction Initiative. He
suggested that had the measures been outside the context of the Initiative,
they probably would not have caught the attention of upper management or the
interest of engineering staff.

An additional key message stemming from the Dow experience is that it is not
necessarily sufficient that a project have a net positive return for it to
be viewed as a worthwhile investment. As a Dow official told us, a proposed
pollution prevention project has to have a projected return on investment
greater than or equal to the return expected of any company investment- the
“hurdle rate.” The environmental official participating in this
process noted that the concept of a hurdle rate was surprising, as she had
previously assumed that it would be sufficient incentive if a pollution
prevention project “paid for itself.”

The notion that pollution prevention proposals must often compete with other
projects- and therefore do more than simply pay for themselves- was also
cited by other industry and state pollution prevention officials we

14 Ibid. 15 Dow Chemical Company, Natural Resources Defense Council, et.
al., Preventing Industrial Pollution at Its Source: The Final Report of The
Michigan Source Reduction Initiative, September 1999.

Chapter 3: Key Factors Affecting the Use of Pollution Prevention Techniques

Page 40 GAO- 01- 283 Pollution Prevention

interviewed. DuPont officials, for example, told us that the corporate
environmental plan has a database of several thousand potential waste
reduction projects. Generally, 80 percent of the mass emissions are from 20
percent of the sources. The firm ranks the proposals by cost and waste
reduction potential. Its objective is to achieve 80 percent of the benefit
from the entire list of proposals for 20 percent of their total projected
cost. Projects falling below this cutoff are generally not implemented.
Similarly, the representative of the Minneapolis printing firm told us that
his company had considered purchasing equipment that would have expanded its
ability to extract solvent from soiled shop towels on- site, as opposed to
shipping the soiled towels off- site for laundering. The representative
explained that after comparing this pollution prevention proposal to other
investments, the firm ultimately chose not to go ahead with the $135,000
proposal.

Broad agreement exists among environmental experts and practitioners that in
some respects, regulatory standards have been an important catalyst in
promoting pollution prevention by compelling industry to lower their overall
pollutant releases. However, certain types of regulations can have the
unintended effect of discouraging pollution prevention. In particular,
regulations that prescribe the use of specific technologies to meet
pollutant limitations can discourage (or preclude) regulated entities from
choosing the best tools to achieve these limitations- tools that may often
include pollution prevention.

The prescriptive nature of some environmental regulations has been the
subject of an extensive literature. In summarizing this literature, the
Environmental Law Institute (ELI) notes that a central problem has been that
the design of most standards under the Clean Water Act and Clean Air Act
require EPA to establish technology- based discharge rate limits based on
“available” or “feasible” emission control
technologies. 16 For air, such standards include “reasonably available
control technology” for existing sources, “best available
control technology” for new sources, and

“maximum achievable control technology” for hazardous
pollutants. Water standards include “best available technology
economically achievable.”

16 Environmental Law Institute, Innovation, Cost and Environmental
Regulation: Perspectives on Business, Policy, and Legal Factors Affecting
the Cost of Compliance, May 1999. The Environmental Law Institute is an
independent research and education center that seeks to develop effective
solutions to pressing environmental problems. Prescriptive Regulations

Often Discourage Pollution Prevention Techniques

Chapter 3: Key Factors Affecting the Use of Pollution Prevention Techniques

Page 41 GAO- 01- 283 Pollution Prevention

Although such standards do not necessarily preclude companies' use of
pollution prevention, ELI notes that such standards can discourage pollution
prevention in a number of ways. For example, they can emphasize, or even
dictate, end- of- pipe compliance solutions instead of process or other
pollution prevention solutions. Even in cases where other preventive
solutions are not explicitly prohibited, the lack of time, resources, and
willingness to accept risk may lead state permit writers to disapprove
methods of reducing emissions other than through established control
technologies. ELI also notes that fixed rate standards do not provide
incentives for further progress. Consequently, firms that have installed
end- of- pipe control technologies may have little reason to pursue
pollution prevention efforts and instead focus mainly on staying in
compliance. ELI summarizes the effect of prescriptive standards by noting
that they “may severely limit innovation, creating higher costs than
necessary.”

While acknowledging that such regulations are framed to some extent by their
governing statutes, ELI also asserts that many of the problems in the
current system could be avoided by better designed regulations- ones that
set overall performance standards while allowing for greater flexibility on
how to achieve those standards. ELI cites the history of regulation of
sulfur dioxide emissions by electric power plants as perhaps the best
example of the problems with technology prescriptions. ELI notes that cost
estimates for mandated scrubbers “which allows no room for innovation
except in scrubber technology” were about $7 billion per year. By
contrast, the use of a performance standard (adopted in 1990)- which
included an emissions cap for facilities which could be achieved flexibly
through emissions trading, switching to less- polluting fuels, and other
innovative techniques- was estimated to cost about $2.5 billion.

Another example raised by state regulatory officials we contacted focused on
a key aspect of EPA's Maximum Achievable Control Technology (MACT) policy.
Referred to as EPA's “once- in, always- in” policy, this
requirement permanently subjects firms to detailed administrative
requirements. According to an EPA guidance issued in May 1995, facilities
classified as major sources of hazardous air pollutants on the first
compliance date after a new MACT standard is promulgated are permanently
required to comply with the requirements for major sources, even if their
emissions are subsequently reduced below the “major source”
threshold. EPA explains that a facility's reduced emissions would not be
federally enforceable, and that emissions may not always stay below the MACT
threshold once they go below it. According to the State and Territorial Air
Pollution Program Administrators and the Association of

Chapter 3: Key Factors Affecting the Use of Pollution Prevention Techniques

Page 42 GAO- 01- 283 Pollution Prevention

Local Air Pollution Control Officials (STAPPA/ ALAPCO), however, the policy
discourages pollution prevention methods, such as new manufacturing
techniques, which could lower emissions well below specific MACT standards.
Moreover, there is no incentive for a facility to consider further
reductions or to investigate new, less- polluting technologies, since they
remain subject to the MACT standards regardless of their emissions. In a
1998 letter to EPA, the STAPPA/ ALAPCO Pollution Prevention and
Sustainability Committee cited an example of a furniture manufacturing
facility that switched from solvent- based to ultraviolet light- cured
coatings, and thereby reduced its emissions of hazardous air pollutants from
50 tons to 200 pounds annually, below the MACT threshold. Had the switch
been made before the MACT compliance date, the facility would still have
been subject to the MACT requirements. The Committee further stated that the
ultraviolet light curing technology should increasingly be available to
other sources. However, due to the

“once- in, always- in” policy, there was no incentive for a
source to commit capital to changing its processes since it would still be
subject to the MACT threshold. While EPA has not yet resolved this issue,
the agency is currently considering several rulemaking approaches to address
the problems identified by state regulators, including regulatory language
that can be included in existing and future MACT rules.

Beyond the impacts of any particular regulation on pollution prevention, an
Intel representative also suggested that the cumulative effect of numerous
regulations might have an additional dampening effect on companies' use of
these practices. He stated that the sheer volume and complexity of these
regulations often overwhelm environmental staffs, whose primary job is to
keep their firms in compliance. Their efforts to comply with regulations
often divert them from focusing on preventive approaches that could help
them achieve more optimal environmental results. Several other state and
industry officials we contacted echoed these sentiments. For example, a
representative of a printing industry trade association said that many firms
see pollution prevention as a way of going “beyond compliance,”
but that they may have little incentive to do so. He explained that if they
must devote time and money to meet detailed permit requirements, they see no
compelling reason to go further.

Thus, while the goal of pollution prevention has broad support within and
outside EPA, and is explicitly supported by the Pollution Prevention Act,
agency regulations have sometimes had the unintended effect of discouraging
these practices. In recognition of the problem, the act required the EPA
Administrator, as part of a strategy to promote source reduction, to
“review regulations of the Agency prior and subsequent to

Chapter 3: Key Factors Affecting the Use of Pollution Prevention Techniques

Page 43 GAO- 01- 283 Pollution Prevention

their proposal to determine their effect on source reduction.”
Importantly, the provision does not preclude the adoption of regulations,
such as those discussed above, but rather requires that pollution prevention
be considered in their development, and that they be reviewed to determine
their effect on pollution prevention.

Yet according to EPA officials, the agency has not systematically tracked
its implementation of this provision and therefore cannot identify the
extent to which source reduction has been considered in the promulgation of
EPA regulations. A 1996 EPA study, however, suggested that consideration of
source reduction in the development of regulations has been, at best,
inconsistent. 17 The report, which examined the agency's efforts to
incorporate pollution prevention in a sample of its regulations, concluded
that “pollution prevention approaches are still not used consistently
in EPA rule development and implementation,” and that in the case of
many rulemakings, goals are set “in a way that discourages people from
seeing [pollution prevention] as their principle of first choice in the
environmental management hierarchy.”

The report noted that requirements of other statutes have the potential to
preclude or discourage wider consideration of pollution prevention in
rulemakings. 18 However, it also cited instances where the belief among
staff that statutes prohibit pollution prevention approaches may in fact be
unwarranted. It noted, for example, that “the lack of explicit
direction in statutory language in [the Resources Conservation and Recovery
Act and the Clean Water Act] on prevention fosters a perception that these
statutes do not make prevention a priority, but it is not clear whether they
pose actual barriers.” Indeed, the report cited a number of obstacles
other than the statutes that “detract from a consistently strong
multi- media and [pollution prevention] perspective in rulemaking.”
Among the obstacles discussed were the lack of incentives for multi- media
coordination in planning and budgeting, difficulties in promoting pollution
prevention process changes and innovative technologies within the agency, a
lack of understanding about cross- media impacts, and the lack of clarity as
to

17 Environmental Protection Agency, Preventing Pollution Through
Regulations: The Source Reduction Review Project, February 1996. 18 For
example, the report cites the Clean Air Act's requirement to address 189
Hazardous Air Pollutants, noting that “the inflexibility of this
requirement can often mean requiring expensive control devices even when
prevention options exist.”

Chapter 3: Key Factors Affecting the Use of Pollution Prevention Techniques

Page 44 GAO- 01- 283 Pollution Prevention

how leadership for pursuing pollution prevention should be shared among all
major EPA offices.

Given the prospect that pollution prevention may be used as an option more
frequently than currently recognized by agency rulemakings, we believe it is
all the more important for the agency to ascertain its compliance with the
Pollution Prevention Act's requirement that it determine the effect of its
regulations on source reduction efforts.

Many of the factors that influence a company's decisions concerning
pollution prevention practices are beyond the purview of government policy.
Whether to undertake pollution prevention is typically a business decision
that is influenced largely by a company's judgment as to whether an
investment in pollution prevention will benefit it financially.

One notable exception, however, is in the design of environmental
regulations, some of which have had the unintended consequence of
discouraging pollution prevention practices. In some cases, EPA may have no
means to address them. The design of some regulations, for example, may be
constrained by their governing statutes. In other cases, however, EPA may be
better able to take the national goal of promoting pollution prevention into
consideration in developing its regulatory proposals.

To encourage greater consideration of pollution prevention in development of
EPA regulations, the Pollution Prevention Act requires EPA to review its
regulatory proposals to determine their effects on source reduction.
However, the agency has not systematically tracked the implementation of
this provision, and therefore does not know the extent to which source
reduction has, in fact, been considered in the promulgation of EPA
regulations. Anecdotal evidence suggests that, at best, such consideration
is provided on an inconsistent basis.

While it may be impossible to promote pollution prevention in all of the
agency's regulations, a greater awareness of these practices in the agency's
rulemaking process can help significantly to further this important national
goal. Accordingly, we believe it would be useful for EPA to undertake a
systematic analysis to determine its compliance with this provision, and if
necessary, develop a plan to improve its compliance.

We recommend that the Administrator, EPA, systematically determine the
extent to which the agency is complying with the Pollution Prevention
Conclusions

Recommendation

Chapter 3: Key Factors Affecting the Use of Pollution Prevention Techniques

Page 45 GAO- 01- 283 Pollution Prevention

Act's requirement that EPA “review regulations of the Agency prior and
subsequent to their proposal to determine their effect on source
reduction.” If warranted by the results of the agency's analysis, we
further recommend that the Administrator develop a plan to improve the
agency's compliance.

EPA commented that our report could mention a variety of agency programs and
other activities initiated to promote pollution prevention. While our draft
report had touched on several of these activities, we added a fuller
discussion of them to this chapter. We also recognized the role of many
state programs in encouraging pollution prevention.

The officials also noted that in characterizing the impacts of its
regulations on pollution prevention, it is also important to consider the
impacts on pollution prevention of permitting, inspections, enforcement, and
other activities associated with the implementation of regulations. They
further noted that the Pollution Prevention Act encourages consideration of
pollution prevention in permitting, inspection, and enforcement; and that
consequently, any recommendation concerning the consideration of pollution
prevention in the development of regulations should also address the way
pollution prevention is taken into account in these implementation- related
activities as well.

The draft report had acknowledged that these implementation activities can
significantly affect pollution prevention efforts. It cited the enforcement
process as an example, noting that innovative pollution prevention measures
are often included in enforcement settlement agreements. Our recommendation,
however, focused on EPA's development of regulations (as opposed to their
implementation) because it was that part of the process that was most
frequently cited as a disincentive within the regulated community to engage
in pollution prevention. That said, we acknowledge the value of any EPA
effort to encourage greater consideration of pollution prevention in
permitting, inspection, and other aspects of regulatory implementation.
Agency Comments

Appendix I: GAO Contacts and Staff Acknowledgments

Page 46 GAO- 01- 283 Pollution Prevention

Steven Elstein, (202) 512- 6515 In addition to the individual named above,
Mike Hartnett and Stephanie Luehr made key contributions to this report.
Important contributions were also made by Chuck Bausell, Tim Guinane, David
Henry, Karen Keegan, and Jonathan McMurray. Appendix I: GAO Contacts and
Staff

Acknowledgments GAO Contact Acknowledgments

(160530)

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