Grantee Research Project Results
U. S. Environmental Protection Agency
Office of Research and Development
National Center for Environmental Research
Science to Achieve Results (STAR) Program
Closed - for reference purposes only
Corporate Environmental Behavior and the Effectiveness of Government Interventions
Opening Date: November 5, 2003
Closing Date: March 10, 2004
Research Questions of Interest
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SUMMARY OF PROGRAM REQUIREMENTS
Program Title: Corporate Environmental Behavior and the Effectiveness of Government Interventions
Synopsis of Program:
The Environmental Protection Agency (EPA) Office of Research and Development, National Center for Environmental Research (NCER), announces the fourth annual extramural grants competition supporting research in the area of Corporate Environmental Behavior (CEB). The solicitation will focus on research to understand the decision making behavior of regulated entities in order to comply or avoid compliance with regulations, and improving the understanding of how regulated and non-regulated entities consider environmental costs.
Matthew Clark, 202-343-9807, email@example.com
Applicable Catalog of Federal Domestic Assistance (CFDA) Number(s): 66.509
Institutions of higher education and not-for-profit institutions located in the U.S., and Tribal, state and local governments are eligible to apply. Profit-making firms are not eligible to receive grants from EPA under this program. See full announcement for more details.
Anticipated Type of Award: Grant
Estimated Number of Awards: 3 to 5
Potential Funding per Grant per Year: $50,000 to $200,000 per year for a total of up to 3 years; Total Budget should not exceed $400,000.
The sorting code for applications submitted in response to this solicitation is 2004-STAR-E1
The Environmental Protection Agency (EPA) Office of Research and Development, National Center for Environmental Research (NCER), announces the fourth grants competition supporting research in the area of Corporate Environmental Behavior (CEB) [Note: In this RFA, “Corporate” refers broadly to all regulated or potentially regulated entities, whether private, public or individuals]. The solicitation will focus on research to understand the decision making behavior of regulated entities in order to comply or avoid compliance with regulations, and improving the understanding of how regulated and non-regulated entities consider environmental costs.
Note to prospective researchers: EPA has supported similar socioeconomic research in FY 2000, 2001 and 2002 through the Corporate Environmental Performance and Effectiveness of Government Interventions, and Market Mechanisms and Incentives solicitations, and in prior years through the EPA/NSF joint program on Decision-making and Valuation for Environmental Policy. This year, subject to available funding, in addition to this solicitation, EPA is also advertising several economics and decision sciences solicitations addressing: valuation of health and ecological benefits; and market mechanisms and incentives. Information on announcements made in these competitions may be found on the Internet at: http://www.epa.gov/ncer/rfa/. The National Institute of Justice (NIJ) has sponsored similar competitions with respect to compliance with other areas of the law. Information on NIJ competitions may be found on the Internet through: http://www.ojp.usdoj.gov/nij/funding.htm. Answers to frequently asked questions regarding applications are available at: http://www.epa.gov/ncer/guidance/star_faq.html
The following are definitions of some of the terms used in this solicitation, which are intended only to clarify the present use of these terms.
Avoidance: (legal) actions taken to ensure that a facility is not subject to regulation.
Compliance: achievement of environmental performance standards set by law or regulations.
Compliance Assistance: information and technical assistance provided to the regulated community to help it meet the requirements of environmental laws.
Compliance Decision Making: decisions made by affected entities in order to comply, or appear to comply, with local, state, tribal or federal environment rules and policies.
Compliance Incentives: policies that provide positive incentives to regulated entities to voluntarily discover, disclose, and correct violations or clean up contaminated sites before they are identified by the government for enforcement investigation or response. Compliance incentives may also promote superior environmental performance.
Deterrence: the motivation of regulated entities to comply with environmental laws and regulations through consideration of the government-induced consequences of violating these laws or regulations.
Environmental Behavior: refers globally to actions taken by regulated and non-regulated entities – whether firms, facilities, municipalities or individuals – to improve or worsen environmental performance or compliance with environmental laws or regulations.
Environmental Performance: the physical environmental results of actions taken by regulated and non-regulated entities, i.e., quantities and concentrations of air emissions, water discharges, waste generation and on- and off-site health and environmental risks posed by industrial or chemical management processes. Environmental performance may exceed or fall short of performance standards established by laws or regulations. Performance is affected by pollution prevention and abatement activities.
Evasion: illegal actions taken to avoid the costs of complying with regulation.
Various authors have noted the importance of a number of motivators of corporate environmental behavior, including costs, firm profitability, corporate or industry culture, geography, competitive environment, technological capability, and government interventions. However, motivations are not the same for all firms and facilities that generate or discharge pollutants into the Nation’s water, land, and air. Fundamental behavioral, economic, management science, legal, and other social science research is needed to better understand how different individual operators, companies, and facilities respond to various influences and combinations of influences, including governmental interventions.
For this year’s CEB solicitation, EPA is interested in supporting theoretical and empirical (media-specific or cross-media) research that: (1) explains regulated and non-regulated entities’ environmental decision-making, behavior and related performance in response to local, state, tribal or federal environmental regulations or policies; (2) investigates the concepts of “environmental” costs among different regulated or non-regulated entities. To be eligible for funding, empirical research must be based demonstrably on sound theoretical models or frameworks.
Understanding of these issues is hampered by a lack of theoretical and empirical research on the factors determining corporate and other entities’ decision making in response to environmental regulations, initiatives or policies. Regulated (or non-regulated entities trying to avoid regulation) have a variety of options for meeting or evading public policy-induced environmental performance or behavioral targets. Some of these are relatively well understood by environmental managers and others are not. Behavior (and resulting performance) in response to environmental policy may diverge in unexpected ways from that predicted by analysts or policy-makers. This implies that a different set of incentives may be more cost-effective in achieving environmental goals than those analysts and policy-makers have considered.
An important factor influencing environmental decision-making is the cost of complying with, avoiding, or evading environmental requirements. However, the notions of costs actually held by businesses, farmers, or other decision-makers may differ from those typically predicted by analysts estimating compliance costs, or academics estimating social costs. For example, most rule analyses use financial costs (capital and O&M) associated with proven technologies available to meet environmental objectives. Economists have compared these financial costs with the probabilities of being detected and having to pay fines and penalties, in order to predict how frequently compliance will take place. Others have suggested that individuals or firms (entities) affected by environmental policies may consider a much broader array of costs in making compliance decisions, such as market share, legal and regulatory transaction costs, community reputation, and consistency across facilities in different jurisdictions.
Desired investigations include both theoretical research to explain
decision-making behavior and empirical research that will create data
sources and improve the
understanding of why and how environmental actors comply with regulations,
and how they perceive environmental costs. The principal topic areas: (1) regulated
(and non-regulated) entities’ environmental compliance (or avoidance)
decision-making, behavior and related; and (2) differing concepts of “environmental” costs
among different regulated or non-regulated entities and their implications
for behavior are addressed in separate sections below, although there are significant
overlaps between the two.
Interested researchers should note that EPA is also sponsoring a separate solicitation entitled, Market Mechanisms and Incentives for Environmental Management (MM&I). (See http://www.epa.gov/ncer/rfa/ for more information about this solicitation.) The MM&I RFA addresses approaches that rely on market forces, financial mechanisms, or other instruments to encourage regulated entities to reduce emissions or improve environmental performance. To avoid redundancy, research proposed in response to the present RFA should focus more directly on the motivations behind corporate environmental behavior and the effects on this behavior of the government interventions and voluntary initiatives cited in this solicitation.
(1) Why do regulated or non-regulated entities make the decisions they do to comply or avoid compliance with environmental mandates?
Environmental scholars and analysts have developed models that predict corporate behavior, and resulting costs, in response to environmental policy initiatives. Careful observation has concluded that although these models are useful, they could be extended in a number of directions to answer some important questions. Stated simply, why do affected entities do what they do to comply or avoid environmental regulation? Are the responses systematically related to type of enterprise, management structure, size, profitability, corporate policies, etc.? The answers to these questions could inform environmental managers at all levels, and suggest improved incentives and resources allocation.
Examples of related research questions include:
- What influences the choice of pesticides or application methods in response to pesticide regulations? How do pesticide users decide which pesticide/product to use (including price, rate of return) and how much they apply? Anecdotal evidence suggests that often pesticide applicators will employ distinctly different methods or chemicals in response to regulation.
- What factors determine the decision to treat hazardous substances on-site, including adopting waste reduction practices or environmental management systems, versus shipping waste off-site to a hazardous waste facility?
- How do pollution control regulations affect vertical integration, or de-integration, of firms or facilities processes? For example, some observers have suggested environmental compliance considerations have caused out-sourcing of materials whose production has undesirable health or environmental consequences to overseas suppliers, effectively de-integrating the production process.
- Why do drinking water purveyors choose the treatment technologies that they do? Some cost models predict different choices than purveyors actually make.
- What motivates some firms to improve environmental performance, while others do only the minimum to meet the letter of the law?
- What differences exist between landowner and non-landowner potentially responsible parties (PRPs) at hazardous waste disposal (superfund) sites? What motivates PRP behavior, e.g., why do some PRPs mothball sites? Why do some PRPs cooperate with clean-up efforts, while others do not?
- Do environmental compliance requirements affect the organizational structure (e.g. own and manage treatment works vs. contracting out operations) of public utilities such as drinking water purveyors or sewage treatment operators? What are the implications of organizational structures on environmental behavior?
- What, if any, environmental factors determine the siting of new facilities? Do differences in air and water quality regulations play a role?
- Do compliance behaviors (decisions) change over time in a systematic way, e.g., is experience with transaction costs or learning by doing a factor?
- What actions do firms take to avoid being subject to regulation? How common are these actions?
- How do responsible environmental officials view compliance and how do they react to regulations? Does the status and responsibility of the officials responsible for compliance decisions affect the nature of those decisions? Does the environmental decision-makers place in organizational structures matter?
- How does environmental or compliance information affect companies’ behavior, location or investment decisions?
- Do international standards or trading regimes affect environmental decisions?
- Do privately owned businesses consider different factors than public corporations in making environmental decisions?
(2) What do "environmental costs” mean to regulated entities’ decision-makers?
Regulated entities are obviously concerned with the costs of meeting environmental standards. However, how firms calculate “environmental” costs is not as obvious. Firms are also concerned with the consequences of not meeting environmental standards, including legal and monetary penalties. Some may be concerned with liability issues related to pollution damages. Other firms or facilities may reduce emissions because pollution represents a waste of resources and preventing it saves some money on production factors (reduced operations costs). Others may consider the likelihood of community pressure resulting from publication of information on plant emissions. Still others may have determined that corporate environmental stewardship pays in terms of consistent management of operations across jurisdictions and international boundaries, that is, there my be some economies of scale associated with environmentally beneficial behavior. This solicitation anticipates research that will identify how prevalent these differing concepts of environmental costs are and how significantly they affect environmental performance.
Examples of related research questions include:
- How and when is firm value (stocks) affected by changes in environmental data? What role do insurance underwriters and risk play in environmental decisions at the firm or facility level?
- How do different firms consider the threat of sanctions in evaluating environmental costs? Is reputation important? How do legal and transactions costs (dealing with regulators) affect decisions?
- Under what circumstances does the promise of increased market share or the fear of losing market share figure into environmental compliance decisions?
- How do small businesses or independent operators considerations of compliance costs differ from larger businesses? Are different financial metrics appropriate?
- Do current or newly proposed corporate accounting practices adequately value environmental risk? How would environmental compliance or performance be reflected in a company’s financial statements through either reduced liability or insurance premiums? Will SEC reporting requirements change reporting companies perspective on environmental costs?
- Is there a cost associated with the stigma of environmentally “bad” behavior or performance?
- What is the role of community pressure as a cost of non-compliance? Does this differ with ownership patterns?
In summary, EPA has a particular interest in two basic research questions:
(1) Why do regulated or non-regulated
entities make the decisions they do
to comply or
avoid compliance with
(2) What do “Environmental Costs” mean to regulated entities’ decision-makers?
EPA is seeking both theoretical and theoretically sound empirical research to investigate these questions.
The competition encourages proposals from researchers from all legal, behavioral, social, organizational, and economic sciences. It encourages collaborations with non-social science disciplines when needed to answer social science-based questions. It supports both research conducted within a single disciplinary tradition, as well as novel, collaborative, and interdisciplinary scientific efforts.
Preference will be given to research projects that result in findings that are transferable from actual experiences with existing CEB to novel situations and can be utilized for future analysis of similar research questions. The ability to generalize the research findings in order to apply the approaches or results across media types or scales of operation is highly desirable.
Several federal agencies possess large data sets with national scope that have been used to evaluate corporate environmental behavior. These datasets include: EPA’s Toxics Release Inventory (TRI), Aerometric Information Reporting System, (water pollution) Permit Compliance System (PCS), Envirofacts, Enforcement and Compliance History Online (ECHO), Online Tracking Information System (OTIS), Integrated Data for Enforcement Analysis (IDEA) and others (see at: http://www.epa.gov/compliance/data/systems/index.html); the Bureau of Census’ Longitudinal Research Database (LRD), the Pollution Abatement Control Expenditures Survey (PACE), the Annual Survey of Manufacturers (ASM), the Energy Information Agency’s Database, databases at the Departments of Transportation, Labor, Commerce and Treasury, and at several other agencies. These databases, alone or combined, provide unique and large sources of data for conducting empirical analyses. However, alone or in combination, they are constrained by reporting methods, temporal limitations, missing observations, privacy requirements and the legal context for which they were developed. Investigators who choose to use these databases in their research must demonstrate that they thoroughly understand the constraints and context of their chosen data sources and have developed sound analytical procedures to address these constraints, and that the data they propose to use can actually answer the questions of interest.
Applicants are encouraged to avail themselves of information from the following sources during preparation of proposals. The CEB research effort relates to several EPA programs, including:
- Previous research funded by EPA under Corporate Environmental Behavior, Market Mechanisms and Incentives, Decision Making and Valuation, and Futures and Exploratory Research: http://www.epa.gov/ncer/grants/
- The National Center for Environmental Economics of the Office of Policy and Innovation, Web homepage includes links to a number of economics reports: http://yosemite.epa.gov/ee/epa/eed.nsf/webpages/homepage.
- The Innovation Strategy from the Office of Policy, Economics and Innovation. The Innovation Strategy’s priority issues are innovative approaches to smog, greenhouse gases, water infrastructure, water quality, and solid waste management. The Strategy is available at http://www.epa.gov/innovation.
- Other federal, state and local environmental agencies also employ a range of interventions, traditional and non-traditional, to protect the environment. EPA welcomes research that identifies the barriers that need to be overcome as well as the changes that need to occur in order for these agencies to apply traditional and alternative approaches to environmental protection.
EPA anticipates making approximately three to five awards. The projected range is from $50,000 to $200,000 per award per year, with durations from one to three years. Field experiments, survey research, and multi-investigator projects may justify the higher funding level. Awards made through this competition will depend on the availability of funds. Requests for amounts in excess of a total of $400,000, including both direct and indirect costs, will not be considered.
Institutions of higher education and not-for-profit institutions located in the U.S., and Tribal, state and local governments are eligible to apply. Profit-making firms are not eligible to receive grants from EPA under this program.
National laboratories funded by federal agencies (Federally-funded Research and Development Centers, “FFRDCs”) may not apply. FFRDC employees may cooperate or collaborate with eligible applicants within the limits imposed by applicable legislation and regulations. They may participate in planning, conducting, and analyzing the research directed by the principal investigator, but may not direct projects on behalf of the applicant organization or principal investigator. The principal investigator's institution, organization, or governance may provide funds through its grant from EPA to a FFRDC for research personnel, supplies, equipment, and other expenses directly related to the research. However, salaries for permanent FFRDC employees may not be provided through this mechanism.
Federal agencies may not apply. Federal employees are not eligible to serve in a principal leadership role on a grant, and may not receive salaries or in other ways augment their agency's appropriations through grants made by this program. However, federal employees may interact with grantees so long as their involvement is not essential to achieving the basic goals of the grant. EPA encourages interaction between its own laboratory scientists and grant principal investigators for the sole purpose of exchanging information in research areas of common interest that may add value to their respective research activities. This interaction must be incidental to achieving the goals of the research under a grant. Interaction that is “incidental” does not involve resource commitments.
The principal investigator’s institution may enter into an agreement with a federal agency to purchase or utilize unique supplies or services unavailable in the private sector. Examples are purchase of satellite data, census data tapes, chemical reference standards, analyses, or use of instrumentation or other facilities not available elsewhere. A written justification for federal involvement must be included in the application, along with an assurance from the federal agency involved which commits it to supply the specified service.
Potential applicants who are uncertain of their eligibility should contact Thomas Barnwell in NCER, phone 202-343-9862, firstname.lastname@example.org
The Standard Instructions for Submitting a STAR Application including the necessary forms will be found on the NCER web site: http://www.epa.gov/ncer/rfa/forms/.
The need for a sorting code to be used in the application
and for mailing is described in the Standard Instructions for Submitting
a STAR Application. The sorting code for applications submitted
in response to this solicitation is 2004-STAR-E1
The deadline for receipt of the application at NCER is no later than 4:00 p.m. ET, March 10, 2004.
The application must include a plan to make available all data (including primary and secondary data) from observations, analyses, or model development under a grant awarded in this program in a format and with documentation such that others in the scientific community may readily use them. The data must be made available to the project officer in a standard exchange format without restriction and be accompanied by comprehensive meta-data documentation adequate for specialists and non-specialists alike to be able to understand how and where the data were obtained and to evaluate the quality of the data. Applicants who develop databases containing proprietary or restricted information should provide a strategy, not to exceed two pages, to make the data widely available, while protecting privacy or property rights. These pages are in addition to the 15 pages permitted for the project description.
Further information, if needed, may be obtained from the EPA official indicated below. Email inquiries are preferred.
EPA National Center for Environmental Research
Fax (202) 565-2447