As its preamble states, the purpose of the joint agreement is to “establish a clear pathway and decision-making process for state innovations that have encountered federal barriers or need greater attention to help them succeed.” Toward this end, the draft agreement outlines (1) a set of general principles that will govern regulatory innovation activities that EPA and the states will manage jointly; (2) a process that EPA and the states will use to identify which innovation proposals to pursue, including the establishment of a mechanism for making decisions about how to manage innovation proposals that do not fit into ongoing reinvention programs; and (3) guidelines for EPA and the states to evaluate the success of innovation activities carried out under the agreement. Issues Needing Clarification

As might be expected with any such agreement, a number of practical questions and procedural issues will need to be clarified. Negotiators for EPA and ECOS debated the extent to which riskier projects should be held to higher environmental performance standards than other projects. On the first issue, the agreement provides that while “innovations may be designed primarily to improve the cost-effectiveness of achieving environmental goals, these projects must ensure that there is no adverse impact on environmental protection. Broader Issues to Address If Reinvention Efforts Are to Succeed

As pointed out in our July 1997 report, a number of broader issues still need to be effectively addressed if the agreement is to have its intended effect, and if, in the long run, environmental regulation is to be truly “reinvented.”

		Difficulty in Managing a Large Number of Initiatives

Successful reinvention efforts require a clear understanding of an organization’s mission and of the role that individual efforts play in achieving that mission. The problem is further compounded by confusion both within EPA and among other stakeholders over the primary purpose of some of the agency’s most important initiatives. Difficulty in Achieving Agreement Among All Stakeholders

Under EPA’s reinvention strategy, the agency’s goal is to share information and decision-making with all stakeholders, including those “external” to the agency, such as state regulators and representatives of industry and environmental organizations. They cite the need for a more sustainable process that distinguishes between problems that can be resolved at lower levels within the agency and those that require senior management’s attention. EPA has, in fact, made some progress in measuring the effectiveness of its reinvention initiatives. However, the framework does establish standards that lead to many of the existing regulatory and behavioral practices the agency is seeking to change. Consequently, as we and other organizations have noted in the past, EPA will be limited in its ability to achieve major changes in environmental regulation within the legislative framework as presently constructed. In summary, Mr. Chairman, the EPA-ECOS agreement helps to clarify some of the difficult issues that have arisen in defining EPA’s and the states’ roles in promoting reinvention. We believe these barriers, discussed in our July 1997 report, will need to be addressed before environmental regulation can be substantially reinvented. Additional copies are $2 each.
Why GAO Did This Study

GAO discussed the Environmental Protection Agency's (EPA) and the states' roles in promoting and implementing innovative methods of environmental regulation, focusing on: (1) a draft agreement between EPA and the Environmental Council of the States (ECOS) on environmental regulation; and (2) the findings of a GAO report on EPA's and the states' efforts to reinvent environmental regulation.

What GAO Found

GAO noted that: (1) the draft EPA-ECOS agreement provides a useful framework in two key respects; (2) it attempts to clarify EPA's and the states' roles in promoting and implementing innovative regulatory projects; (3) in particular, the agreement addresses sensitive issues that had been the subject of much debate between EPA and many states, such as the extent to which innovation projects must demonstrate improved environmental performance; (4) the agreement attempts to help EPA manage a growing number of innovation projects by establishing a process that distinguishes between those projects that can be handled at lower levels within the agency and those that require senior management's attention; (5) as with any such agreement, there are a number of practical questions and procedural issues that need to be clarified--some of which may be fully addressed only after EPA and ECOS have had experience implementing the agreement; (6) beyond these practical considerations, however, a number of broader issues need to be addressed effectively to create a climate in which regulatory innovation can succeed and in which environmental regulation can be truly be reinvented; (7) among these barriers are: (a) many key stakeholders in the reinvention process have expressed concern over the large number of complex and demanding initiatives now being undertaken--as well as confusion over the underlying purpose of some of the agency's major initiatives; (b) EPA has had difficulty achieving buy-in among the agency's rank and file, who have grown accustomed to a regulatory structure that has largely been in place throughout the agency's 27-year history; (c) the agency has had difficulty achieving agreement among external stakeholders in a number of its reinvention efforts, particularly when stakeholders perceive that unanimous agreement is required before progress can be made; and (d) EPA has an uneven record in evaluating the success of many of its initiatives; (8) in addition, today's environmental laws impose requirements that have led to, and tend to reinforce, many of the existing regulatory and behavioral practices that EPA is seeking to change; and (9) as a consequence, the agency will be limited in its ability to reinvent environmental regulation within this existing legislative framework.