The objective of this case study is to provide a practical example of how digital technologies and data transparency tools can be used as part of a broader strategy to improve the flexibility and robustness of regulatory environmental programmes.
Digital Opportunities for Better Agricultural Policies
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Chapter 10. Case Study 5. Digital technologies applied by USEPA to achieve innovative compliance
Abstract
Context: The policy environment
The United States Environmental Protection Agency (USEPA) implements national environmental law by writing and enforcing regulations, setting national standards that US states and tribes enforce, and assisting regulated entities to understand the requirements (USEPA, date na). As such, USEPA (together with the United States Department of Agriculture (USDA)) is one of the key national bodies tasked with implementing US agri-environmental policy. USEPA administers a range of US federal legislation relevant to agriculture, which has both regulatory and non-regulatory components (see additional description below).
Use of digital technologies to support
The problems
Evaluation of compliance and enforcement programmes is an important activity for any regulator. During 2010-2013, USEPA self-identified a range of issues or areas for applying innovative compliance approaches, including: “gaps in information about the compliance status of regulated entities, unacceptably high rates of noncompliance, deficiencies in state enforcement of delegated programmes, and substantial shortcomings in managing (collecting and transmitting) compliance-related information” (Markell and Glicksman, 2015[1]).
These problems are not unique to USEPA, and relate to fundamental challenges caused by transactions costs, information gaps, information asymmetries, and incentive misalignment between the regulator and the regulated community.1
The solutions
To address these gaps in the existing compliance and enforcement approach and improve the cost-effectiveness of USEPA’s compliance programme, USEPA began systematically exploring innovative compliance tools in 2012 and activities such as the use of optical gas imaging cameras, electronic reporting, and working to improve the effectiveness of regulations and permits, have become more commonplace. Types of tools are:
Advanced monitoring and information technologies:2 real-time continuous monitoring generates actual measurements (as opposed to estimates), which reduces information gaps and information asymmetries between the regulator and the regulated entities (see Box 10.1 for additional explanation).
Electronic reporting: e-reporting saves time, reduces error, enables automatic checks & triaging to help target monitoring and enforcement activities, reducing transaction costs of compliance and enforcement activities. The use of two-way digital communication between regulator and regulated entity could allow the regulator to provide targeted compliance assistance.
Transparency—public disclosure requirements: increased public disclosure provides incentive for entities to improve their environmental performance via reputation effects. Examples include USEPA’s ECHO database3 and EnviroAtlas,4 developed collaboratively by USEPA, United States Geological Survey (USGS), United States Department of Agriculture (USDA) and LandScope America (USEPA, 2017[2]). However, care must be taken to ensure no privacy interests are compromised.
Rule and permit design—“Compliance-ready” technology and rules with “compliance built in”: recognising that enforcement action alone will not produce full compliance in every instance, this component entails promoting the use of technology, transparency, and other tools. Similarly, rules can be designed to require use of certain technology or processes by upstream manufacturing rather than attempting to regulate the use of technology by end users, e.g. auto manufacturers are required to install pollution control devices rather than requiring automobile buyers to do so (Giles, 2013[3]).
Box 10.1. Potential uses and use tiers of advanced monitoring data
(Performance and quality requirements for these uses may vary)
Directly Support Regulatory Programmes
Permitting: Part of record for issuance of rules or permits.
Regulation and Compliance: Identification of nonattainment areas/impaired waters; removal of designations when conditions improve; self-monitoring pursuant to a permit or an applicable rule.
Enforcement: Evidence in an enforcement action.
Aid or Supplement Regulatory Action
Action Prioritisation: Targeting, development, and prioritisation of enforcement actions.
Problem Identification: Hot-spot identification and characterisation, or analysis for programme planning purposes or future regulatory action.
Additional Data: Supplement current regulatory monitoring for planning.
Emergency Response: Pollutant identification, characterisation of conditions and risks, response action planning, and status assessment following a response.
Temporary Source Monitoring: Temporary monitoring (e.g. construction sites).
Educate/Inform the Public
Programme Evaluation: Evaluation of research, programmes, and other policy outside of regulatory actions.
Transparency: General information made available to the public about their environment.
Other Uses
Facility Self-Monitoring: Use to inform operational control by facilities (e.g. drinking water systems).
Personal Health: Personal exposure monitoring and crowdsourced networks.
Education: Use of technology as a teaching tool (e.g. Science, Technology, Engineering, and Math [STEM] education).
Research: Use by universities and others for research purposes.
Hazard Alert Systems: Alert building occupants of a problem.
Note: While all of these uses of advanced monitoring data can be applied to the agri-environmental context, discussion in the original article was not sector specific.
Source: Reproduced from Hindin et al. (2016[4]), Table 1, p.3.
How does innovative compliance apply to agriculture in the United States?
Use of innovative compliance tools for agri-environmental policy implementation can broadly be separated into applications in regulatory (permit) and non-regulatory (voluntary) contexts. These are discussed in turn below, with primary emphasis given to the regulatory context.
Permitted agricultural operators and chemical input suppliers
In the US agriculture sector, some concentrated animal feeding operations (CAFOs5) such as certain feedlots, dairies and poultry houses are “regulated by EPA under the Clean Water Act in both the 2003 and 2008 versions of the ‘CAFO rule’” (40-CFR) (NRCS, date NA). These regulations underpin a permitting system known as the National Pollutant Discharge Elimination System (NPDES). Innovative compliance tools are applied for NPDES permittees6 via several avenues:
Electronic reporting: in September 2015, USEPA introduced electronic reporting for NPDES permittees (USEPA, date na). This is being implemented in two phases, the first of which became operational in December 2016 (40 CFR § 122.41(l)(4)(i)). Permittees are required to submit certain documentation via an online portal known as NetDMR.7 Data reported electronically is made available to the public via the USEPA’s ECHO website.8
Innovative compliance components in permitting: permits (e.g. NPDES permits) generally operate on a five-year cycle.9 As permits are renewed, innovative compliance elements such as data reporting requirements or use of new technologies could be introduced into the permit. Innovative compliance elements have been introduced for certain non-agricultural permittees. Law or regulatory changes may be required to facilitate broader adoption of innovative compliance approaches in permits.
Innovative compliance tools used in rule-making: innovative compliance components could be introduced into rules applying to regulated agricultural enterprises (e.g. NPDES-permitted CAFOs), for example by updating rules to allow or require regulated businesses to make use of state-of-the art technology, to require more transparency via public reporting, or to design new compliance pathways. However, USEPA’s Office of Water (USEPA OW), who administers the CAFO-related rules under the Clean Water Act, has no CAFO-related rulemaking underway at this time, and hence an opportunity to consider the application of innovative compliance principles in this arena has yet to arise.
Agricultural operators participating in voluntary programmes and initiatives
Agricultural enterprises that are not required to obtain a permit may nevertheless choose to participate in a range of voluntary agri-environmental programmes, such as cost-share programmes administered by the USDA Natural Resource Conservation Service (NRCS), water quality trading programmes, and other federal, state or local programmes which aim to incentivise production of environmental goods on working agricultural lands and/or the conversion (or “retirement”) of agricultural to other land uses such as forest or wetland.
In this voluntary context, when a producer enters into a voluntary contract for provision of environmental goods, innovative compliance tools can be used in much the same manner as in a regulatory context, with compliance with the terms of the contract taking the place of compliance with a permit. Certification programmes (e.g. organic labelling) can also implement innovative compliance tools as part of the certification process. Programme administrators and producers can also make use of some of the innovative compliance tools—particularly electronic reporting in conjunction with transparency—to foster public support for entirely voluntary environmental efforts (i.e. even those which do not use contracts or any other form of legal enforcement mechanism).
Beyond this, USEPA is also active in a range of initiatives to advance technologies which reduce environmental impacts from agriculture. Examples include:
USEPA’s Office of Water is involved in a voluntary partnership effort with USDA and animal agriculture industry to find innovative solutions to recycling nutrients.10
USEPA is assisting the Nebraska Department of Environmental Quality and Kansas Department of Health and Environment on the initiative “Use of Next-Generation Molecular Tools for Harmful Algal Blooms and Microbial Source Tracking to Support Watershed Restoration in Kansas and Nebraska”. This initiative aims to improve microbial source tracking and harmful algal bloom assessments using the PhyloChip, an innovative monitoring technology.11
Lessons learned for the application of innovative compliance tools in agri-environmental contexts
Lesson 1. Design principles for EPA’s innovative compliance
The first lesson comprises key design principles on which the innovative compliance initiative was based, such as:
Be sure regulated entities, the public, and the government can easily identify who is regulated and what they need to do to comply with the requirements. Where possible, use physical design, feedback technology, and/or self-implementing consequences to make compliance easier than non-compliance.
Require regulated entities to monitor factors that affect compliance and take steps to prevent noncompliance.
Provide the public and government agencies with real-time information on regulated entities’ emissions, discharges and key factors that affect compliance and outcomes, leveraging accountability and transparency.
Use market forces, benefits of demonstrated compliance, and other incentives to promote compliance.
For more information, see Hindin and Silberman (2016[5]).
Lesson 2. Good regulatory practices can be transferrable across different kinds of regulations
Case study participants noted that one of the earliest activities in the innovative compliance initiative was to consider what kinds of innovations in enforcement and compliance techniques were being pursued by other regulators, both within the US and internationally. Case study participants commented that the innovative compliance effort reviewed academic literature and engaged directly with many regulators, but that judgement was needed to identify which tools could be adapted to the USEPA context.
For example, the research identified that the use of third party reporting by the United States Internal Revenue Service (IRS) to improve compliance with US taxation law is a tool that can be also used by USEPA in the context of enhancing compliance with environmental law. They also drew on MIT research in Gujarat India which found that third party auditors must be independent and have results checked to produce reliable audits (Duflo et al., 2013[6]).
Lesson 3. Technological change offers new possibilities for improved monitoring and compliance. However, there needs to be clear and fit-for-purpose processes for demonstrating suitability of advanced monitoring tools for regulatory purposes, which may differ from existing processes. This may be challenging to achieve in a context of fast-paced technological change
Technology requirements, whether the technology is used to address or monitor pollution, are not a new feature of environmental regulation. Recent technological innovations are delivering new technologies for monitoring regulated entities’ environmental performance and compliance with regulatory requirements. New monitoring devices are often smaller and more portable technologies, and are declining in cost. Further, the real innovation is that these technologies can be linked to information communications technology (ICT) that delivers data in real time, and can allow for the automating of alerts (e.g. via mobile telephones) that can help a facility fix problems before noncompliance occurs.
Regulations can shape the uptake of technologies in several ways, including by mandating use of a particular technology in a certain context (technology mandate) or setting standards that technologies are required to meet (technology performance standards). It is acknowledged that some USEPA programmes generally now use performance standards that technologies must meet, rather than mandating use of specific technologies.12 Technological requirements, or standards that technologies must meet (in a regulatory context), are generally specified via USEPA rules and in manuals (e.g. the NPDES permit writers’ manual13). Rule-making processes can be lengthy and costly.
Interest in using new technologies for monitoring the environmental performance of agriculture, particularly continuous monitoring systems, is rising, not only in the United States but elsewhere. For example, the EU Commission recently introduced regulations to permit use of remote sensing technologies to supplement (or eventually substitute for) on-the-spot-checks of environmental and other conditions under the Common Agricultural Policy.14
Given this interest, and the rapid pace of technological change of relevant technologies, existing processes for vetting new technologies for regulatory purposes, particularly ones which take several years to complete, need to become more agile. Environmental regulators and policy administrators could better engage with the regulated community, the private sector and researchers to develop “testbed” environments for assessing the potential of technological advances in regulated contexts. Further, processes for vetting new technologies should be clear for all participants and allow for unanticipated technological change (e.g. new types of sensors currently un-envisaged).
Regulators could also consider providing incentives for the regulated community to voluntarily participate in testing and adoption of new technology for both monitoring and reducing environmental impacts.
Lesson 4. Take a holistic approach: use of digital technologies complements non-digital, and regulatory efforts can work alongside voluntary efforts
As detailed above, USEPA’s efforts to improve regulatory compliance are being complemented by efforts to support agriculture to improve its environmental impact outside the regulatory context. While this particular approach reflects the legislative and policy environment specific to the United States—particularly the fact that, to a large extent, agriculture is exempted from a range of environmental regulatory requirements that are placed on other industries (Breggin and Myers, 2013[7])—having a coherent approach across regulatory and non-regulatory contexts can have a wide range of benefits (OECD, 2008[8]). These include ensuring that voluntary approaches such as emissions or water quality trading are not stymied by rigid regulatory requirements (see (Stephenson and Shabman, 2017[9]) for a discussion), and allowing sharing of enforcement experience and expertise between regulators and voluntary programme administrators (who may, for example, need to enforce conservation contracts in agri-environmental payment schemes or verify credit creation in trading schemes).
Also, advances in digital technologies (e.g. the PhyloChip technology) are being pursued alongside other technologies which may have no digital component. It is important to recognise that in many cases digital tools are a way to encourage farmers and others to take environmentally beneficial non-digital actions. That is, better measurement, especially when connected to IT communication tools, can help focus attention and actions where they will be most effective. As such, investment in digital tools should be seen as a complement to, not a substitute for, non-digital technologies or other non-technological innovations which directly improve environmental outcomes.
References
[7] Breggin, L. and D. Myers (2013), “Subsidies with Responsibilities: Placing Stewardship and Disclosure Conditions on Government Payments to Large-Scale Commodity Crop Operations”, Harvard Environmental Law Review, Vol. 37, https://heinonline.org/HOL/Page?handle=hein.journals/helr37&id=495&div=18&collection=journals (accessed on 19 July 2018).
[6] Duflo, E. et al. (2013), “Truth-Telling By Third-Party Auditors And The Response of Polluting Firms: Experimental Evidence From India”, Truth-Telling By Third-Party Auditors And The Response of Polluting Firms: Experimental Evidence From India, pp. 1499-1545, http://dx.doi.org/10.1093/qje/qjt024.
[3] Giles, C. (2013), Next Generation Compliance, The Environmental Law Institute, Washington DC, http://www.eli.org. (accessed on 16 August 2018).
[4] Hindin, D. et al. (2016), “Advanced Monitoring Technology: Opportunities and Challenges Advanced Monitoring Technology: Opportunities and Challenges A Path Forward for EPA, States, and Tribes”, EM Magazine, Air & Waste Management Association, http://e-enterprisefortheenvironment.net/ (accessed on 9 August 2018).
[5] Hindin, D. and J. Silberman (2016), “Designing More Effective Rules and Permits”, George Washington Journa of Energy and Environmental Law, Vol. 103, https://gwujeel.files.wordpress.com/2016/05/completed_jeel_vol7_issue2_designingmoreeffectiverulesandpermits.pdf.
[1] Markell, D. and R. Glicksman (2015), “Next Generation Compliance”, Natural Resources & Environment, Vol. 30, p. 22, https://heinonline.org/HOL/Page?handle=hein.journals/nre30&id=160&div=&collection= (accessed on 16 August 2018).
[8] OECD (2008), Implementing Regulatory Reform: Building the Case Through Results. Proceedings of the Meeting of the Group on Regulatory Policy, OECD Regulatory Policy Division, Directorate for Public Governance and Territorial Development, https://www.oecd.org/gov/regulatory-policy/44683291.pdf (accessed on 17 August 2018).
[9] Stephenson, K. and L. Shabman (2017), “Where Did the Agricultural Nonpoint Source Trades Go? Lessons from Virginia Water Quality Trading Programs”, Journal of the American Water Resources Association, http://dx.doi.org/10.1111/1752-1688.12565.
[2] USEPA (2017), EnviroAtlas Factsheet, https://www.epa.gov/sites/production/files/2015-07/documents/enviroatlas_projectfactsheet.pdf (accessed on 16 August 2018).
Notes
← 1. While this case study focuses on USEPA’s activities in the regulated context, it is worth noting that many elements discussed here are relevant to non-regulatory contexts. For example, to improve the efficiency and effectiveness of voluntary programmes.
← 3. See https://echo.epa.gov/, accessed August 2018. The Enforcement and Compliance History Online (ECHO) database provides “integrated compliance and enforcement information for over 900 000 regulated facilities nationwide. Its features range from simple to advanced, catering to users who want to conduct broad analyses as well as those who need to perform complex searches.” Specifically, ECHO allows users to find and download information on specific facilities; find EPA enforcement cases; analyse compliance and enforcement data; access data services and inform EPA.
← 4. See https://www.epa.gov/enviroatlas, accessed August 2018. EnviroAtlas is an interactive online platform comprising “tools [that] allow users to discover, analyse, and download data and maps related to ecosystem services, or the benefits people receive from nature.”
← 5. USEPA’s regulatory definition of “CAFO” is found in the federal regulations at 40 CFR § 122.23. See https://www.gpo.gov/fdsys/granule/CFR-2011-title40-vol22/CFR-2011-title40-vol22-sec122-23, https://www.epa.gov/npdes/animal-feeding-operations-afos and https://www.epa.gov/sites/production/files/2015-08/documents/sector_table.pdf, accessed September 2018.
← 6. Note that NPDES applies to more than CAFOs, however this case study focusses on the agriculture sector.
← 7. See https://cdxnodengn.epa.gov/oeca-netdmr-web/action/login, accessed August 2018.
← 8. See https://echo.epa.gov/, accessed August 2018.
← 9. Source: https://www.epa.gov/npdes/npdes-permit-basics, accessed August 2018.
← 10. See https://www.challenge.gov/challenge/nutrient-recycling-challenge, accessed August 2018.
← 11. See https://www.epa.gov/newsreleases/epa-announces-innovative-research-across-country-address-state-environmental-issues, accessed August 2018.
← 12. For further information see, for example, https://www.epa.gov/clean-air-act-overview/setting-emissions-standards-based-technology-performance, accessed August 2018.
← 13. See https://www.epa.gov/npdes/npdes-permit-writers-manual-0, accessed August 2018. See Chapter 8 for Monitoring and Reporting Conditions, including specification of minimum requirements for monitoring and testing methodologies.
← 14. EU Regulation 2018/746. See https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX%3A32018R0746, accessed August 2018.