Recognizing the constraints that limited public and private sector resources place on the nation's ability to meet high public expectations for environmental protection, we examined a number of approaches that the Environmental Protection Agency (EPA) and the Congress can take to make environmental programs more cost-effective. This report urges greater emphasis on setting budget priorities on the basis of health and environmental risks; measuring environmental outcomes of EPA programs; using market incentives, pollution prevention, and other nonregulatory approaches to control pollution; and addressing the environmental financing needs of state and local governments.

We are sending copies of this report to the Administrator of the Environmental Protection Agency, the Director of the Office of Management and Budget, interested congressional committees and subcommittees, and individual Members of Congress.

This work was performed under the direction of Richard L. Hembra, Director of Environmental Protection Issues, who may be reached at (202) 275-6111. Other major contributors are listed in appendix III.

Charles A. Bowler

Charles A. Bowsher
Comptroller General
of the United States

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Executive Summary

Agric

Twenty years after the first Earth Day, public commitment to protecting
the environment remains high. In a recent New York Times survey, for
example, 74 percent of those polled believed that protecting the environ-
ment is so important that improvements must be made regardless of
cost. Yet clearly the federal government, with a budget deficit estimated
at nearly $300 billion for fiscal year 1991, will be sharply constrained
by costs in its ability to address the nation's multibillion-dollar environ-
mental needs. State and local governments also face fiscal troubles, and
industry's environmental costs continue to grow.

Drawing on past GAO work and a symposium held in June 1990, as well as analyses prepared by the Environmental Protection Agency (EPA) and others, this report discusses ways in which the federal government can achieve environmental goals more efficiently and effectively.

Despite improvements, numerous environmental problems-indoor air
pollution and global warming, for example—remain. This is not for lack
of interest or investment. Over the last 20 years, the United States
(industry and government) has spent close to $1 trillion on pollution
control. EPA projects that annual spending on pollution control, roughly
$115 billion now, will grow to $160 billion by 2000.

For the economy as a whole, these expenditures need to yield maximum returns on investment. This holds especially true for federal programs because, historically, funding has not kept pace with the increase in environmental programs. Despite a growth in program responsibilities during the 1980s, EPA's operating budget-which covers all programs other than grants for Superfund, the construction of sewage treatment plants, and the cleanup of leaking underground storage tanks—fell from $1.7 billion in 1979 to $1.0 billion in 1983, and only rose back up to $1.7 billion again in 1991 (in constant 1982 dollars).

Several changes to current policies and program management could better enable the nation to achieve environmental goals with limited

resources:

Federal budget priorities should reflect an understanding of relative risks to the environment and public health, as well as the feasibility and cost-effectiveness of various approaches to reduce these risks, rather than relying so heavily on public perceptions of risk.

Executive Summary

Measuring changes in environmental conditions, rather than levels of regulatory activities, would provide EPA with a more meaningful indicator of the effectiveness of its environmental protection efforts.

An environmental control strategy that combines traditional regulatory approaches with pollution prevention and market incentives could be less costly to the economy as well as more effective in controlling pollution.

The federal government needs to better understand the financial needs of small communities trying to comply with federal environmental requirements.

Principal Findings

Setting Priorities

Measuring Progress and
Program Effectiveness

According to a recent report of EPA's Science Advisory Board, a group of eminent scientists and other experts, EPA's funding priorities are more closely aligned with public opinion about health and environmental risks than with scientific assessments. The report reviewed the results of an earlier EPA study in which a group of agency officials concluded that many environmental problems it considered to be of relatively low risk, such as contamination from hazardous waste sites, were receiving extensive public attention and federal resources, while problems the group judged to be of greater risk, such as indoor air pollution and pesticides, were receiving far less attention and resources.

This disparity between risk and priorities also stems from EPA's statutory authority, which is derived from a dozen or so environmental statutes, each with its own, and often different, philosophies and standards. As a result, EPA has little flexibility to base agencywide priorities on an assessment of risk across a spectrum of environmental problems, taking into account also the cost and feasibility of various approaches. In testimony on creating a Cabinet department for the environment, GAO stated that a unified environmental statute might make it easier to set priorities and allocate resources in response to an evolving understanding of environmental problems.

Measuring changes in environmental conditions is necessary to assess the effectiveness of programs and make decisions about resource allocations. Instead of looking at these outcomes, however, EPA has generally used activity-based indicators, such as the numbers of regulations