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3.2.5. Reporting Requirements

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Savings from Economic Incentives


Although SARA Title III is not typically thought of as an air program, it does provide incentives to reduce air emissions (as well as releases to water and land). For that reason, it will be discussed as contributing to each of the major program areas. Since air emissions are treated first in this assessment of economic incentives, SARA Title III will be explained in detail here and only summarized briefly in subsequent treatments.

Enacted in 1986 as Title III of the Superfund Amendments and Reauthorization Act (SARA), EPCRA requires emergency planning and disclosure of information on releases and transfers to disposal facilities of hazardous chemicals. Section 313 of EPCRA requires certain businesses to report each year on the amounts of toxic chemicals that their facilities release into the environment and transfer to disposal facilities. The data distinguish between releases and transfers. A release is an on-site discharge of a toxic chemical to the environment, whereas a transfer is a movement of waste to another facility for recycling, energy recovery, treatment, or disposal. As a result of the 1990 Pollution Prevention Act, reporting requirements were expanded beginning in 1991 to include source reduction and recycling information. Data for a given year normally must be submitted by July 1 of the following year. EPA then compiles the information and makes it available to the public as the Toxics Release Inventory (TRI).

TRI reporting is required of all manufacturing facilities with ten or more employees in the Standard Industrial Classification (SIC) codes 20 through 39 that manufacture, process, or otherwise use one or more of the listed chemicals above certain threshold amounts. Thresholds are 25,000 pounds per year for manufacturing and processing and 10,000 pounds per year for otherwise using. Federal facilities were also required to submit their first TRI reports by July 1, 1995 for the 1994 calendar year.

The number of listed chemicals was originally set at 320 but has since been increased. (A few chemicals have also been deleted from the list.) The most significant expansion took place in 1994, when EPA added 286 new chemicals to the list effective for the 1995 calendar year, bringing the number to 654. Individuals and organizations can petition EPA to add or remove chemicals from the list.

Also in 1994, EPA streamlined reporting requirements for small businesses. Facilities that have a total annual reportable amount of 500 pounds or less of a TRI chemical, and that manufacture, process, or use 1 million pounds or less of a TRI chemical can now submit a shorter, annual certification statement in lieu of the longer Form R. These streamlined requirements became effective for the 1995 calendar year. "EPA believes that this rule strikes a positive balance between maintaining the community's right-to-know about toxic chemical releases, and the economic costs (both to EPA and industry) of collecting the information." Ibid, p. 5. EPA estimates that the streamlining will result in annual cost savings of about $17.3 million for industry and $700 thousand for EPA. 1994 Toxics Release Inventory, p. A11.

After expanding the number of listed chemicals in what it referred to as phase 1 expansion, EPA turned to phase 2, intended to expand TRI requirements to other industries that have significant releases of listed chemicals and which are related to facilities currently subject to reporting. The proposed expansion for 1998 would extend reporting requirements to the following seven industries: metal mining, coal mining, electric utilities, commercial hazardous waste treatment, petroleum bulk terminals, chemical wholesalers, and solvent recovery services.

A third phase will focus on expanding the types of data to be collected for the TRI. New data could include chemical use and materials accounting information. This third phase is intended to provide more information on topics such as the results of companies' source reduction efforts and the amounts of chemicals in companies' finished products.

EPA has sought to make TRI information available to industry, environmental groups, and the general public so that they can know about facilities' toxic releases and transfers off-site. This information is available via several media, including printed reports, CD-ROM, and the Internet.

The emergency planning component of EPCRA calls for the creation of state and local emergency response bodies to plan for toxic releases. It also requires facilities to inform these bodies of the existence of certain hazardous substances on their premises, give immediate notice of accidental releases, and develop response plans to be implemented in the event of such accidents. Information provided by facilities is available to the public.

Trends in TRI Data:

Reported TRI releases have decreased 44.1% since 1988. Decreases are observed in most industry SIC codes. Although the data suggest significant reductions in toxic releases, there are several reasons why they may not be equal to actual decreases in releases. EPA points out that TRI increases and decreases can be "real changes" or "paper changes." 1994 Toxic Releases Inventory, p. 201. The latter result from errors, changes in facilities' estimation or calculation techniques, changes in reporting guidance and facilities' interpretation of that guidance, and facilities' use of exemptions. Companies generally determine their TRI release amounts through estimation rather than monitoring. EPA guidance has not been issued for all aspects of TRI reporting, and companies can sometimes lower reported releases by using different estimation techniques.

EPA says that estimation errors are more likely for releases such as fugitive air emissions and complex wastewater for which little monitoring data are available. However, EPA audits have found companies' estimation techniques to be reasonably accurate. An audit of 1987 data at selected facilities led to the conclusion that releases had been underreported by 2%, but a 1988 audit found that companies reported about the same amount as the auditor's own estimate. (Ibid, pp. C2-C3.)

Another potential problem is that most chemicals have not been subject to TRI requirements. A 1994 GAO study stated that over 70,000 chemicals are used commercially in the United States, of which only 320 had been included in the TRI. "Consequently," the study added, "the companies may maintain or even increase their usage of toxic chemicals while concurrently reducing the chemicals that are reported to EPA." GAO (September 1994), p. 14. The original list focused on the most important toxics, and, as noted above, EPA included another 286 chemicals in TRI requirements effective 1995. However, some highly toxic chemicals have not been included because they are generated in amounts that are too small to meet criteria for inclusion.

In addition, a number of small sources in SIC codes 20-39 and all sources outside that code range are currently excluded from the TRI. It is not known what percentage of releases are currently exempt from reporting. As noted above, however, EPA intends to include other SIC codes in the system.

Releases are not weighted according to toxicity or the dangers posed by various methods of disposing of various types of chemicals and do not indicate exposure or potential effects on human health and the environment. Moreover, the TRI does not include information on the quantity of toxic chemicals in products leaving the facility. Such products themselves can eventually be released into the environment.

Incentive Effect of the TRI:

The incentive effect of the TRI on polluters cannot be assessed solely on the basis of reported decreases in releases. A number of factors, including command-and- control regulations and other economic incentive mechanisms discussed in this report, have affected releases. Pollution prevention is also influenced by a number of factors unrelated to the TRI.

Nonetheless, the TRI is widely believed to have a significant impact on polluters. EPA has called it "one of the most powerful tools in this country for environmental protection" EPA (March 1995), p. 3. and "one of the most successful policy instruments ever created for improving environmental performance." DEN, October 10, 1995, p. E1. Vice-President Gore called the annual TRI publication "the single most effective common-sense tool" to promote environmental protection. Wall Street Journal, June 27, 1996, p. B12. Shortly after the first TRI was released in 1989, citizen groups placed a full-page advertisement in the New York Times listing "the corporate top ten" land, water, and air polluters. Several of these polluters subsequently promised the EPA that they would improve their environmental performance, effectively beginning the 33/50 voluntary releases reduction program described in the next Section. Arora and Cason (1995), p. 9. Monsanto, for example, promised 90% reductions of 1987 air emission levels by 1992. "The Nation's Polluters - Who Emits What, and Where," New York Times, October 31, 1991, as reprinted in ELI (June 1993). AT&T said it would halt all TRI air emissions by the end of the century. "For Communities, Knowledge of Polluters is Power," New York Times, March 24, 1991. Dow said it planned to reduce overall emissions by 50% by 1995, and Dupont promised to cut air emissions by 60% by 1993 and cancer-causing components by 90% by the year 2000. In Minnesota, public outcry over revelations that an electronic circuits manufacturer was emitting methylene chloride led the facility to promise 90% reductions in emissions by 1993. "Right to Know: A U.S. Report Spurs Community Action By Revealing Polluters," Wall Street Journal, January 2, 1991. After 1987 TRI data found an IBM facility in California to be the state's largest emitter of CFCs, a public interest group organized a campaign and IBM subsequently promised to end the use of CFCs at the plant by 1993. 1994 Toxics Release Inventory, p. D-2.

TRI data also appear to influence investors. Some of the investor interest may be attributed not so much to socially responsible investing but rather to the belief that companies with relatively high emissions might face mounting environmental costs in the future.

Hamilton (1995) found that companies' 1988 TRI performance (as reported in June 1989) was of interest to journalists and investors. The higher a firm's TRI pollution figures, the study found, the more likely journalists were to write about the firm's toxic releases, especially for firms previously less associated with pollution. Those companies that reported TRI releases underperformed the market during the five days after the data were released. The more chemicals for which a company submitted data, the greater its underperformance. The underperformance was less signficant, however, for companies previously associated with pollution.

The Investor Responsibility Research Center has analyzed TRI data to provide clients with environmental profiles of companies. The Clean Yield investment portfolio management group compares companies' TRI data with industry-wide averages of releases per unit of sales. Fortune magazine has used TRI data in its "green index" of American manufacturers, assigning scores of zero to 10 in 20 performance categories, including toxic emissions per unit of sales. Ibid, pp. D7-D8.

Although EPCRA's emergency planning element briefly described above has received less attention than the TRI as an incentive mechanism, it could also have a significant effect on polluters' behavior. Firms might reduce the amounts of hazardous substances on their premises if forced to disclose these amounts to local emergency response bodies and (indirectly) to the public. They might also manage hazardous substances more safely if required to plan for and give immediate notice of accidental releases.

Reporting requirements afford industry flexibility in how (or whether) a firm responds. Many firms want to show progress in lowering reported emissions and to avoid being compared unfavorable with other firms in their industry. Several accounts describe these firms as actively seeking to identify control measures that can be adopted relatively inexpensively. Because firms effectively have infinite choice in which measures are adopted, the cost-effectiveness of options selected is likely to be quite good. Thus, it appears reasonable to assume that incremental control costs for releases to air eliminated as a consequence of SARA Title III would average $2,000 per ton ($1 per pound) less than command and control regulations that accomplished the same reductions.

It is possible to project emission reductions attributable to SARA Title III from recent reporting trends. From 1988 to 1994 reportable air emissions were reduced from 2.595 billion pounds to 1.556 billion pounds, a compound annual rate of decrease of just over 8 percent, saving an estimated $1.04 billion in compliance costs, based on the assumed savings of $1 per pound. Projecting impacts to the year 2000 at the same rate of 8 percent per year, one obtains a cumulative reduction of about 64 percent relative to 1988 levels. Assuming average savings of $1 per pound, annual savings by the year 2000 would be about $1.66 billion.

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