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OCR for page 107
6
Environmental Policy Making:
Act Now or Wait for More Information?
JEFFREY E. HARRIS
Environmental policy making is a dynamic process. Rarely do regula-
tory agencies make once-and-for-all choices between action and inaction.
Instead, they choose, again and again, between degrees of action and wait-
ing; making decisions that are based on information scientific, economic,
political that changes continually.
This dynamic quality of environmental decisions poses serious prob-
lems for benefit~ost analysis. 1b evaluate a contemplated regulatory in-
tervention, it is no longer enough to compare the intervention's currently
estimated benefits and costs. In fact, it is insufficient to assess the whole
future stream of expected benefits and costs. Environmental decisions also
require estimates of the benefits and costs of regulating in the future as
opposed to acting now. If the regulatory agency decides to act now, its
experience with implementation may be informative about the costs and
benefits of later policy choices, including future rescission of the regulatory
action. In deciding to act now, the environmental decision maker thus
needs to assess the future benefits and costs of correcting or rescinding
policy mistakes.
The idea that policy choices are dynamic is harder new. Most public
policy decisions-in fact? most individual decisions are dynamic ones.
When a public utility commission disapproves a requested rate increase,
it contemplates the benefits and costs of approving the increase later on.
When stockholders decide not to sell their holdings, they consider the
benefits and costs of selling later. The same is true for individuals who are
seeking another job or deciding to go on a diet.
Jeffrey E. Harris is associate professor, Department of Economics, Massachusetts Institute of
Technology, and physician, Primary Care Program, Medical Services, Massachusetts General
Hospital.
107
OCR for page 108
108
ENVIRONMENTAL POLICY MAKING
Environmental policy, however, is an extreme case of dynamic decision
making because regulatory decisions about environmental hazards are rou-
tinely made in the face of huge uncertainties uncertainties in estimates
of health risks, mechanisms of disease, the extent of exposure, or the
costs of risk control. Under such extreme uncertainty, the appearance of
even a modicum of new data can swamp the decision maker's prior beliefs
concerning the costs and benefits of regulatory intervention. As a result,
regulatory action on suspected hazards can be triggered or stifled by the is-
suance of preliminary toxicological findings, by false alarms concerning the
measurement of environmental contaminants, or by leaks of draft reports
of blue-ribbon panels.
In the conventional research models, repeated measurements tend
to improve the precision of estimates of benefits and costs. With the
extreme uncertainties encountered in environmental decisions, however,
new research findings can pose unexpected contradictions, thus enhancing
rather than reducing uncertainty.
My task in this paper is to explore, at least in a preliminary way,
these dynamic complications of environmental policy making. My method
of analysis is essentially anecdotal; that is, I offer some generalizations
and then cite selected case studies for support. The hypotheses put for-
ward in this paper need independent and more systematic testing using a
representative sample of decisions faced by regulatory agencies.
In the next section, I establish the central, paradigmatic problem
in the dynamics of environmental decision making that is, the problem
of timing. Do we act now, or do we wait for more information? The
frequently voiced preference for waiting, I would suggest, is based upon
a strong but unstated assumption: environmental policies are irreversible,
and interventions by regulatory agencies impose large, sunken costs on
private firms and consumers that cannot later be recovered.
I then inquire further into the realism of the irreversibility assumption.
I find that in many cases, a contemplated environmental policy can grow
more irreversible with continued delays. There are two mechanisms for this
phenomenon of growing irreversibility. First, an environmental problem in
its early phases may be amenable to partially reversible interventions (e.g.,
restrictions on use or access, product labeling, or pollution fees). If the
problem gets worse later on, however, then truly draconian, irreversible
actions may be required. Second, regulation is a game between govern-
mental agencies and the private sector. The longer the regulatory agency
delays action, the more time private agents have to make large, sunken
investments in the prevailing technology. If the agency delays too long, the
stakes become too high.
In a subsequent section, I probe further into the issue of "research."
Although a strategy of delay is often coupled with a decision to invest
OCR for page 109
JEFFREY E. HARRIS
109
in new data collection, I suggest that research is just as compatible with
regulatory intervention. In fact, some regulatory actions are themselves
a form of research because they provide essential information about the
benefits and costs of future regulatory decisions. In principle, regulatory
action can often be a better investment in knowledge than pure research
without intervention.
I thus propose that policy makers consider two types of questions
when contemplating the benefits and costs of a proposed regulatory action:
How irreversible is intervention? How informative is the intervention? In
general, my analysis points toward a style of regulation in which agencies
take small, incremental regulatory steps at the early stages of a problem.
These small steps would be designed to impose minimal sunken investments
in compliance and still provide essential information on the uncertain
benefits and costs of intervention.
IRREVERSIBILITY ANI) THE BIAS TOWARD WAITING
All too often, one hears the following refrain from scientists and policy
makers: "We do not yet have sufficient information to take regulatory
action. We would prefer to wait for better data to come in. We need more
research."
This bias in favor of waiting and against action has been articulated in
many forms. The following examples are illustrative.
It may be that a proportion of lung cancers in man are induced by
tobacco smoke; at the moment we do not know, but let us be sure of
our evidence before we scare our public. (Passey, 1953)
Linus, I conclude that in my personal view, given the current information,
the banning of saccharin at this point in time is counterproductive, and
I believe the ban should not be instituted until or unless some "safer"
nonnutrient sugar substitute is available. (Isselbacher, 1977)
DES tdiethylstibestrol] could have been taken off the market immedi-
ately, without a hearing, if the FDA [Food and Drug Administration]
had declared it to be an imminent hazard to health. That is the only
statutory basis for immediate withdrawal of a drug from the market
without first offering a hearing. The agency went to the National Cancer
Institute [NCI] on this issue, and the NCI said that, in its judgment,
DES was not an imminent hazard. The government's own scientists
concluded that the risk was not of that magnitude. Therefore, there was
no legal basis for taking that action. (Huts, 1977)
EPA [Environmental Protection Agency] did not immediately suspend
these uses [of ethylene dibromide as a grain and fruit fumigant] despite
the carcinogenic potential because EPA management did not believe
enough was known at the time about the risks from residues on food,
OCR for page 110
110
ENVIRONMENTAL POLICY MAKING
the risks from substitute fumigants, or the risks from leaving crops and
foodstuffs unprotected.... It decided to await the results of studies
then in progress. (Russell and Gruber, 1987)
Each of these statements is a variant on the same basic theme: im-
mediate action may be too costly in comparison to waiting. In Passey's
view, the costs arose from scaring the public. For Isselbacher, the cost
would be the absence of an alternative to saccharin. In the case described
by Hutt, it was too costly to bypass standard regulatory procedure and
ban diethylstilbestrol without a hearing. Russell and Gruber's discussion of
ethylene dibromide suggested several types of costs, including the risks of
substitutes for ethylene dibromide (EDB).
All of the examples contain an implicit benefit-cost calculation. The
benefits of a determination that smoking causes lung cancer, Passey argued,
did not outweigh the costs of "scaring" the public. The cancer risks of
saccharin, Isselbacher contended, were outweighed by its benefits as a
nonnutritive sweetener.
There is more to each of these examples, however, than a one-time
benefit-cost analysis. In each case, the decision to act or wait recurred. In
analyzing the benefits and costs of action and inaction, each writer needed
to consider how such benefits and costs might change over time. The
benefits and costs of action were really the benefits and costs of acting
immediately as opposed to acting later.
Thus, Hutt's description does not imply that DES carried no dan-
ger but rather that, in NCI's opinion, the danger was insufficient to act
immediately. Isselbacher likewise did not deny saccharin's cancer-causing
potential. Instead, he urged action later, once a substitute was available.
EPA did not deny the carcinogenicity of EDB. Instead, the agency believed
there were insufficient data for immediate suspension of use of the fumigant
chemical.
This dynamic view of the decision-making process begs some hard
questions: What prevented FDA from banning DES immediately in 1971?
If subsequent evidence proved contradictory, the ban could have been
modified or lifted. What prevented EPA from immediately suspending
the use of EDB as a fumigant? Again, if subsequent data had shown
extremely low residues in foodstuffs, the ban could have been modified.
What prevented the medical community (and manufacturers of cigarettes)
from warning the public immediately in 1953 (and even earlier) of the
serious, legitimate evidence that cigarette smoking may cause lung cancer?
If further research had shown otherwise, a superseding statement of opinion
could have been issued.
Implicit in these examples is the assumption that an action taken now
cannot be rescinded-or, more precisely, that undoing an action is quite
OCR for page 111
JEFFREY E. HARRIS
111
costly. Thus, implicit in Passey's argument is the contention that it would
be quitely costly for the public to recover from a false alarm about smoking
and cancer. Implicit in Hutt's description is that the act of bypassing the
normal hearing process on DES would have been a costly administrative and
political error. In these instances, an unstated assumption of irreversibility
creates a bias toward waiting.
The concept of irreversibility of decisions has not been considered in
the literature on environmental policy making. Yet economists have made
a number of attempts to spell out its consequences, especially in recent
theoretical work in financial economics (Henry, 1974; Cukierman, 1980;
Roberts and Weitzman, 1981; Baldwin, 1982; Bernanke, 1983; McDonald
and Siegel, 1986; Maid and Pindyck, 1987~.
In the economic models, a decision maker is assumed to be contin-
uously faced with three types of choices: (1) invest in, (2) proceed with,
or (3) abandon a hypothetical project. Investing, on the one hand, is a
noncommittal action. It may accelerate the arrival of new information
about a project's benefits and costs, but the project's ultimate fate remains
undecided. On the other hand, the decisions to proceed with or to drop
the project are assumed to be irreversible.
The assumption of irreversibility has a number of simple consequences
in the economic models. In particular, conventional, static benefit-cost
analysis is rendered misleading (Maid and Pindyck, 1987~. Even if the
expected benefits of a project exceed its expected costs at a particular point
in time, the decision to proceed may be unwarranted. Instead, the decision
criteria should be modified to take into account the benefits and costs of
waiting for more information. The modified decision rule is to take action
only when expected benefits exceed costs by a fixed, predetermined amount.
(Strictly speaking, this rule is applicable only when the stochastic process
that generates new information is stationary; see, for example, Roberts and
Weitzman [1981~.) Put differently, the expected net benefit of the project
has to exceed an "option value" of waiting for more information.
These stylized, economic models of the wait-or-act decision have gen-
eral application. The financial decision to proceed with or abandon a
project is analogous to the public policy decision to approve or disapprove,
let us say, a new drug application or cleanup technology. The financial
decision to invest parallels the regulatory decision to send the drug or
technology back for more study.
The critical issue in applying the economic models, however, is the
validity of their assumption of irreversibility. It is counterproductive to
jump to label an environmental regulation as irreversible until the sunken
costs that must be expended to comply with the regulation are actually
measured.
OCR for page 112
112
ENVIRONMENTAL POLICY MAKING
In conducting such an empirical inquiry, what is needed is a typology
of sunken costs. As a preliminary scheme, I shall suggest three classes:
(1) producer compliance costs, (2) consumer compliance costs, and (3)
credibility costs. The first two categories reflect responses by producers and
consumers, respectively, to environmental policy decisions. Thus, banning
saccharin might result in a permanent and costly shutdown in saccharin-
producing facilities. Prohibiting the use of DES as a livestock fattening
agent might result in permanent and costly changes in the consumer diet.
Credibility costs, the third category, arise because policy decisions are
interdependent. Consumers' and producers' responses to environmental
policies depend on the credibility of the policy-making entity. If the FDA
banned saccharin or DES immediately and if the action turned out to be
mistaken, then the agency's ability to enforce subsequent regulatory actions
might be destroyed.
Still, we need to ask for hard evidence to ensure that capital in
the saccharin industry was, indeed, nontransferable. We need to inquire
whether consumers could go back to leaner meats if and when DES were
reintroduced. We also need to ask whether the credibility costs of policy
mistakes in reality all argue in favor of waiting.
WAITING AND SUNKEN COSTS
The argument in favor of regulatory delay, we have seen, hinges
critically on the proposition that government intervention may impose
irreversible, sunken costs on private agents. In this section, I suggest that
the irreversibility argument can be turned upside down: waiting can have
equally irreversible consequences.
When a potential environmental hazard is first recognized, its control
may be amenable to~partially reversible interventions (e.g., restrictions on
access or use, product warning or labeling, pollution fees). If the hazard
later becomes quite large, however, then such small-scale interventions may
be ineffective, and only large-scale, irreversible interventions may be worth
considering. Thus, the regulator who waits for more data runs the risk that
only the most extreme, irreversible measures will be available in the end.
Acid rain and toxic waste disposal may be good examples of the problem
of increasingly narrow regulatory choices.
It is no accident of nature that the costs of effective intervention grow
larger when regulatory agencies delay action. Private economic agents,
especially business firms, have an incentive to make intervention costly.
The longer the regulatory authority waits, the more "breathing time" firms
may have to commit themselves to the suspect technology.
OCR for page 113
JEFFREY E. HARRIS
113
Diesel Emissions
Since the l950s, the condensates from diesel fuel-burning engines have
been known to cause cancer in laboratory animals. These particulate emis-
sions are further known to contain carcinogenic polyaromatic hydrocarbons.
Yet, there has been little sound epidemiological evidence available on the
cancer risks of workers exposed to such emissions.
In the late 1970s, in the face of increasing pressures for fuel economy,
American automobile manufacturers announced plans to convert 25 percent
of their light-duty passenger car fleet from gasoline-to diesel fuel-burning
engines. The result of such a conversion would have been an increase
in population exposures to particulate emissions by an estimated factor of
1,000. The auto makers' proposal stimulated new research into the combus-
tion process and the physical chemistry of the particulate matter contained
in diesel and other emissions. By 1979, EPA scientists determined that the
organic solvent extracts of diesel Articulates were highly mutagenic in the
Ames mutagenicity assay. Directly mutagenic nitroaromatic compounds
were identified as the likely culprits.
EPA lauched a major research program that included laboratory testing
of fossil fuel combustion products. The carcinogenicity and mutagenicity of
diesel and other emissions were confirmed in multiple laboratory models.
Mathematical extrapolations suggested a small individual risk of cancer,
but the estimated number of exposed persons was quite large. There was
renewed interest in epidemiological studies of exposed workers but very
little hard evidence available on the effects of emissions on humans. A
study of London transport workers was negative, but was of sufficiently
low power that some lung cancer risk from diesel emissions could not be
excluded (Harris, 1983~.
A scientific panel of the National Research Council could do no
more than reiterate the substantial existing uncertainty about the health
risks of the proposed diesel technology (National Research Council, 1981~.
Moreover, although the biological data base gradually became more refined,
the uncertainty about population exposures grew. Changes in the relative
prices of diesel and gasoline fuels, as well as unanticipated changes in
consumer preferences, made the large-scale introduction of diesel passenger
cars less likely. What is more, there were continued uncertainties about
the feasibility of effective, low-cost particulate control technologies for disel
engines.
In the face of all of these uncertainties, EPA proposed immediate
particulate emission standards for diesel cars (at a level of 0.6 gram per
mile). This action hardly settled the issue, for it remained unclear whether
the proposed standards should remain in effect or whether they should
be tightened in the future. At the time, a stricter standard (0.2 gram per
OCR for page 114
114
ENVIRONMENTAL POLICY MAKING
mile) was contemplated. Even if particulate standards were to be tightened,
however, the agency still needed to know when to impose them.
By the early 1980s, EPA could reasonably conclude that diesel emis-
sions had at least the potential to cause cancer in humans. With virtually
no solid epidemiological evidence, however, the agency could not draw
definite conclusions about the extent of human cancer risk. From a purely
scientific standpoint, the prudent decision was to wait for the results of
newly commissioned epidemiological studies. Concrete results from such
studies were expected within five years.
EPA's decision was not as simple as it might appear, however. The
planned conversion to a diesel-driven auto fleet would require a major
investment in a new engine technology. Auto makers could not simply
modify the existing production technology for gasoline-burning engines. If
diesels were to constitute as much as 18 percent of new car sales by 1990,
investments on the order of $3-$4 billion would be required. Moreover, it
was unclear whether auto makers might later be able to convert the diesel
technology to the production of gasoline-burning engines. As the National
Research Council reported, 'based on the current state of knowledge, an
irrevocable decision by the EPA . . . could run a danger of costly mistakes"
(National Research Council, 1982~.
Anyway what did the agency really expect from the additional planned
research? EPA could reasonably conjecture that by 1985, retrospective
studies of workers exposed to diesel emissions might show an elevated risk
of lung cancer. Such studies might bolster the case for regulation of diesel
particulates. Still, the results of high-dose exposures in the workplace could
not be simply extrapolated to low-dose ambient exposures from tail pipe
emissions. Moreover, detailed laboratory studies of the composition and
biological action of diesel particulate emissions still might not settle a key,
lingering question: Did the apparently unique nitroaromatic constituents
in the particulate extracts make diesel fumes a uniquely dangerous species
of emissions?
What made EPAs regulatory dilemma so acute was not the laboratory
discovery that diesel emissions were mutagenic, and not the paucity of
direct, human evidence, but the announced intention of manufacturers to
sink billions into a new diesel technology.
In fact, the agency was engaged in a prototypical regulatory game with
the car makers. The longer EPA waited for new information, the further
down the diesel road the car makers would be. The investment in diesel
technology would not be instantaneous but gradual over a period of a
decade or more. By the time EPA had sufficient information to satisfy the
blue-ribbon scientific panels, the industry might have invested so much in
diesel technology as to make tight emission controls too costly.
OCR for page 115
JEFFREY E. HARRIS
115
In this regulatory game, both EPA and the car makers knew the
dilemma the agency might soon face. Hence, car makers had a strong
incentive to accelerate their investments in diesel technology; that is, to
build up their sunken costs as rapidly as possible. While EPA and some
auto companies were conducting their own biological research, information
on the likely pace of such research was common knowledge. On the other
hand, the car makers possessed far more information on the irreversibility of
investments in diesel production technology. In fact, EPA: s lack of expertise
in this area was perhaps its central difficulty in reaching a regulatory
· · -
aeclslon.
In the end, EPA stuck with its proposed emission controls, if only
to avoid more drastic interventions later. As it turned out, however, the
anticipated major demand for diesel cars never materialized, and the agency
bought more time to wait for new data.
Cyanazine
1b obtain registration for a pesticide under the Federal Insecticide,
Fungicide, and Rodenticide Act or FIFING (7 U.S.C. 136 et seq.), an
applicant for registration must demonstrate, among other things, that the
pesticide performs its intended function without causing "any unreasonable
risk to man or the environment, taking into account the economic, social,
and environmental costs and benefits of the use of any pesticide" (Section
2[bb]~. EPA, the enforcing agency for the act, interprets this standard to
require "a finding that the benefits of the use of the pesticide exceed the
risks of use, when the pesticide is used in compliance with the terms and
conditions of registration or in accordance with widespread and commonly
recognized practice" (U.S. Environmental Protection Agency, 1988:795~. If
at any time EPA should determine that this benefit-cost standard has been
violated, then the administrator may modify the conditions of registration
or cancel the registration entirely.
In April 1985, EPA initiated a "special review" of all pesticide products
containing the active ingredient cyanazine (U.S. Environmental Protection
Agency, 1985~. The review (formerly called the "Rebuttable Presumption
Against Registration" or RPAR process) was instigated following the re-
cent finding that cyanazine produced teratogenic and fetotoxic effects in
laboratory animals. EPA proposed that a warning be added to the pesticide
label concerning c~ranazine's potential to cause birth defects in laboratory
animals. Moreover, because the main route of occupational exposure was
through skin contact, the product label was to specify that cyanazine's use
was restricted to certified applicators or to persons under their supervision.
EPA was also concerned about groundwater contamination from agri-
cultural uses of cyanazine. Preliminary monitoring studies had identified
OCR for page 116
i
116
ENVIRONMENTAL POLICY MAKING
residues of cyanazine in a small percentage of sample wells from five states.
Although most positive samples showed cyanazine concentrations of 0.2
part per billion (ppb), a small percentage showed levels close to 1 ppb.
The agency thus noted:
Cyanazine has the potential to move (leach) through the soil and contam-
inate ground water which may be used as drinking water. Cyanazine has
been found in surface and ground water as a result of agricultural use.
The Agency does not have the data necessary to assess the health risks
associated with consuming drinking water which has been contaminated
with cyanazine. (U.S. Environmental Protection Agency, 1985:14151)
Accordingly, the agency imposed labeling requirements that advised users
not to apply cyanazine to highly permeable soils or to areas in which the
water table was close to the surface. It also required registrants to conduct
groundwater and surface water monitoring studies.
In a January 1987 review, the agency proposed a number of additional
requirements for cyanazine registration, including the use of protective
gloves, closed loading systems, and chemical-resistant aprons. The pesticide
label was to include statements regarding the cleaning of protective gloves
and separate laundering of protective clothing. In addition, the label was to
state that cyanazine was classified for restrictive use because it Alas caused
birth defects in laboratory animals and has been found in ground water"
(U.S. Environmental Protection Agency, 1987a:589~.
By early 1988, however, new data suggested that cyanazine was not as
serious a threat to groundwater as had been supposed. In particular, further
sampling from 200 wells in hydrogeologically vulnerable areas revealed no
detectable residues. The agency thus lifted its prior restriction on the
spraying of cyanazine in areas in which the water table was high or the soil
was highly permeable.
C7
As a result of newly generated monitoring data and the previously avail-
able data, the Agency no longer believes that cyanazine has significant
ground water contamination potential. Therefore, EPA no longer be-
lieves that ground water contamination should be a reason for classifying
cyanazine for Restricted Use. Therefore, all cyanazine labels will include
a statement that cyanazine products have been classified for Restricted
Use only because cyanazine has caused birth defects in laboratory ani-
mals. However, because some instances of contamination were reported
in the earlier studies, the Agency believes the ground water advisory
statement should remain on the label. (U.S. Environmental Protection
Agency, 1988:795)
In the case of cyanazine, EPA altered its position several times as new
evidence accumulated on the pesticide's potential toxicity and the routes
of environmental exposure. The agency in fact reversed itself on the issue
OCR for page 117
JEFFREY E. HARRIS
117
of groundwater contamination. The only clear effect of these multiple
regulatory changes, however, was to alter the contents of the pesticide's
warning label.
Ninety-six percent of the cyanazine produced in the United States was
used as a herbicide on corn. About 3 percent was used on cotton, and less
than 1 percent was used on sorghum and wheat. About 1~16 percent of
the total U.S. corn acreage was treated with cyanazine in 1982. Several
close substitutes for cyanazine were readily available, and there was little
evidence that switching to these substitutes would be costly.
EPA was thus in a position to make a series of incremental changes
in its regulation of cyanazine use without imposing large sunken costs on
the private sector. Users of cyanazine were required to make investments
in closed loading systems and protective equipment, but none of these
investments was specific to a single chemical. Producers of cyanazine were
required to reissue warning labels. In the absence of an outright ban on the
use of cyanazine, however, the question of irreversible, cyanazine-specific
investments did not arise.
Ethylene Dibromide
Table 1 traces scientific developments concerning ethylene dibromide
(EDB) from 1910 to 1976. EDB was first used by producers of lead
antiknock compounds for gasoline in the 1920s. By the late 1940s and early
l950s, the compound was widely employed as a fumigant of imported fruits
and vegetables, grain, storage silos, and grain-milling machinery.
Data on EDB's acute and subacute toxicity go back to the early 20th
century. The evidence on EDB arose from reports of accidental human
exposure and from studies of ingestion, inhalation, and decimal exposure in
various laboratory animals. By the mid-1960s, additional reports appeared
on EDB's reproductive toxicity in farm animals. Still, residues of EDB
remained essentially undetectable in the food supply.
In the early 1970s, two developments-the linking of EDB to muta-
genicity and carcinogenicity and the improvement of the technology for
detecting EDB brought increased attention to and concern about the
compound. In 1971, EDB was found to be a direct-acting mutagen in
the Ames mutation assay. By 1974, the chemical's genotoxicity had been
confirmed in other experimental systems. At this time, scientists were in-
creasingly interested in the possible role of genotoxic events in the genesis
of cancer. The finding that EDB was a mutagen stimulated whole-animal
carcinogenicity studies by the National Cancer Institute (NCI).
NCI's preliminary results showed that EDB was carcinogenic when
it was directly instilled into the stomachs of rodents. ~ be sure, there
was concern that the NCI results were somehow artifactual because the
OCR for page 123
JEFFREY E. HARRIS
TABLE 2 Continued
123
Year Scientific Developments
Regulatory Developments
reported levels in flour
range from nondetectable
to 4.2 ppm.
1982 Publication (in March) of the
final results of the NCI
inhalation study in rats
and mice: EDB is found to be
carcinogenic. EPA
scientists are notified (in June)
that three wells in
Seminole County, Georgia,
are contaminated with EDB
levels as high as 100 ppb.
SRI International
publishes a NIOSH-
commissioned risk
assessment based on NCI
and NIOSH inhalation
studies in rats and mice
(June); chronic exposure
to 130 ppb is predicted to
yield 4-26 percent lifetime
human cancer risk. CDFA
(June 2) revises estimates
of EDB residues in fumigated
citrus fruits up to
210-880 ppb. Wade and Sakura
report two acute lethal reactions
among workers exposed to EDB.
1983 The National Toxicology
Program reports that
inhalation of EDB (10~0
ppm) in Fisher 344 rats
produced testicular
degeneration. An EPA-
commissioned study of
groundwater contamination
by CDFA issues its preliminary
report (Spring), finding
EDB at concentrations
between 0.1 and 31 ppb in
the soil at depths greater
than 20 feet, moving down
to groundwater. A follow-
up report (June) reveals
groundwater levels
between 0.02-5 ppb in
16 counties in 4
OSHA interprets the Supreme
Court ruling as permitting
mathematical risk
assessment in support of
agency regulations
(Federal Register, April
9~. Cal/OSHA's emergency
standard of 15 ppb is rejected
by California Office of
Administrative Law;
California adopts as a
permanent regulation a
standard of 130 ppb.
EPA issues Position
Document no. 4 (September
27), with revisions in
its mathematical risk
assessment methodology.
EPA issues an emergency
suspension of its soil
fumigation with EDB; it gives
notice (September 28) of
intent to cancel
registration of EDB as a
grain and fruit fumigant
under the "unreasonable
hazard" standard of FIFRA.
EDB use in fumigation is to
be eliminated by 1986. The
state of Florida issues
emergency regulations
restricting EDB in
OCR for page 124
124
TABLE 2 Continued
ENVIRONMENTAL POLICY MAKING
. . .
Year Scientific Developments
Regulatory Developments
states. A new EPA risk
analysis is issued as part of
Position Document no. 4.
The original one-hit model of
Position Document no. 2/3 is
modified to include
"Weibull timing.H The
estimated average EDB
content of grains is
revised upward markedly to
31 ppb. CAG's new estimate
of lifetime cancer risk
from a dietary burden of EDB
is 3.3 per 1,000, based
on lifetime consumption
of current levels of EDB
in grain products.
1984 Grocery Manufacturers of
America (GMA), modifying
the Rains and Holder (1981)
detection methodology,
find that 79 percent of
ready-to-eat, grain-derived
products contain EDB
levels below 1 ppb; GMA also
reports on the disappearance
of EDB through cooking raw
grain products. Environ
Corporation, under GMA
sponsorship, issues
(January 20) risk
assessment of exposures to
EDB residues in consumable
grain products, based on
NCI oral gavage assay and
assumptions of no further
grain fumigation and of the
depletion of EDB in grain
stores by 1986; the upper
limit of lifetime cancer
is estimated to be 1 in 4
million. Temple, Barker &
Sloane, Inc., and Economic
Perspectives, Inc. issue an
economic analysis of the
impacts of immediate removal
of EDB from the food supply,
if 50-60 percent of stored
uncooked grain products to
1 ppb (level of detection).
EPA announces (February 3)
immediate suspension of
further use of EDB in the
production of grain
products and recommends
guidelines to states for
acceptable levels of EDB
in foods, including 900 ppb
in raw grain products,
150 ppb in processed
products requiring further
cooking, and 30 ppb in
ready-to-eat foods.
The Massachusetts Department
of Public Health
recommends (February 6)
emergency regulation at
10 ppb for all food
products, with transition
in 30 days to 1 ppb. ("The
Department's position is
that the only safe level
of exposure to a
carcinogen is one that is
zero or near zero. The
Department therefore
believes that it is
appropriate to move
rapidly to levels of EDB
in food of less than
1 ppb.")
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JEFFREY E. HARRIS
TABLE 2 Continued
125
Year Scientific Developments
Regulatory Developments
grains and 67 percent of
grain products were
immediately restricted
from any use, they
conclude, grain prices
would nearly double, with
consumer expenditure
increases of $35 billion
and grocery manufacturer
losses of $2.8 billion in
inventories.
EPAs suspensions of the use of EDB in 1983 and 1984 were not the
first regulatory actions taken with respect to the pesticide. Nor did 1983
see the first instance of damning evidence on EDB. The question arises:
What exactly happened between 1977 and 1983?
By 1977 the International Agency for Research on Cancer had already
classified EDB as an animal carcinogen and mutagen. A review by the
National Institute on Occupational Safety and Health (NIOSH) noted that
EDB was able to interact chemically with deoxyribonucleic acid (DNA),
the basic genetic material. Still, EDB had thus far been found to be car-
cinogenic in only one incomplete animal experiment. Moreover, attempts
to identify elevated cancer rates among EDB-exposed workers were unsuc-
cesful. If EDB in fact posed a cancer threat at low doses, the magnitude
of the cancer risk remained uncertain.
In the face of this uncertainty, the Occupational Safety and Health
Administration (OSHA) proposed a tightening of its EDB exposure stan-
dard for workers. EPA, in parallel, began a special RPAR review under
FIFED The linchpin of EPAls regulatory analysis was a risk assessment,
performed by its Carcinogen Assessment Group (CAG).
CAG's initial risk assessment proved to be problematic. The initial
dosages of EDB in the NCI oral gavage study-on which CAG relied
_ . ~ . . ... ~ . .
proved to be too toxic, so the dosage schedule had to be reduced in
the middle of the experiment. This changing dosage schedule complicated
CAG's attempts to extrapolate from high-dose to low-dose effects and risks.
The CAG analysis also predicted a substantial cancer risk from long-term
EDB exposures at the levels seen among chemical workers; limited surveys
of EDB-exposed workers, however, showed no evidence of a significant
cancer increase.
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126
ENVIRONMENTAL POLICY MAKING
Yet by 1979, additional laboratory studies had confirmed EDB's car-
cinogenicity. The chemical caused cancers by skin painting in mice, and
a NIOSH-sponsored study showed cancers by inhalation in rats. By 1980,
EDB was found to be carcinogenic in a separate NCI-sponsored inhalation
study of rats and mice. In that year, the American Conference of Gov-
ernmental Industrial Hygienists also classified EDB as a suspect human
carcinogen.
EPA:s special RPAR review continued in 1980. An internal study
estimated the probable residue level for EDB in wheat bread made from
fumigated grain to be less than 0.1 ppb, with a realistic worst-case residue
of 31 ppb. Based on such exposure estimates and extrapolating from the
original NCI oral Savage experiment in rodents, CAG projected a 0.03
percent increased lifetime cancer risk owing to the dietary burden of EDB.
The agency proposed cancellation of EDB's use as a fumigant of stored
grains, milling machinery, and fruits and vegetables by mid-1983. It also
ordered studies of potential groundwater contamination.
By 1981, new measurements of EDB residues in fruit and grain prod-
ucts suggested that previous estimates had been misleading. One study
found EDB residues of 36 ppb in biscuits. Another found 57 ppb in the
edible portions of fumigated fruits. Concurrently, OSHA proposed fur-
ther tightening of the occupational standard for EDB exposure; California
imposed a temporary emergency occupational standard.
By 1982, EDB levels as high as 100 ppb had been found in three wells
in Georgia. The California Department of Food and Agriculture (CFDA)
estimated that fumigated citrus fruits contained EDB residues of up to
21() 880 ppb. By spring 1983, CFDA had found EDB concentrations of
0.1-31 ppb at depths greater than 20 feet. By June 1983, EDB had been
detected at levels of 0.02-5 ppb in 16 counties.
EPA moved in September 1983 to suspend soil fumigation immediately.
Based on the new exposure data, as well as a reanalysis of the NCI oral
gavage experiment, CAG revised the estimated lifetime risk from dietary
EDB to 0.3 percent. In February 1984, the agency suspended further use
of EDB in the production of grain products, although it did not order
an immediate ban on the sale of all EDB-containing products. Instead, it
issued recommended guidelines to the states for acceptable levels of EDB
in currently marketed foods.
Why did EPA wait six years (from its initial review in 1977 until its
emergency suspension in 1983) to take action on EDB? The evidence of
EDB's toxicity was long-standing: its mutagenicity was established in 1971,
and its carcinogenicity was reported by 1977. Although the initial NCI
study required confirmation, independent findings of carcinogenicity were
available by 1979. Initially, EDB was thought to be virtually undetectable in
the food supply; yet contrary evidence was available by 1981. Groundwater
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JEFFREY E. HARRIS
127
contamination was an issue as early as 1980, when EPA commissioned a
study by CDF~ Residues were found in wells as early as June 1982.
Perhaps it is unfair to juxtapose EPAs regulation of cyanazine during
1985-1988 with the agency's drawn-out response to EDB during 1977-1984.
By the mid-1980s, the agency had improved its handling of procedural
and notification burdens built into FIFRA, which was enacted in 1972.
Still, the cyanazine case shows the agency moving quickly in incremental,
reversible steps to establish warning labels and restrictions on use. In
the case of EDB, the agency essentially found itself having to ban the
pesticide late in the game, years after other federal and state agencies had
moved on the problem. Had EPA accelerated the information-gathering
process, especially in the measurement of food residues and groundwater
contamination, less extreme measures might have been necessary.
By 1984, the sunken investment in EDB had become enormous: $29
billion in grain stocks and $4.3 billion in manufacturer and retail inventories
of grain products and baked goods. It was likely that between 50 and 60
percent of stored grains and grain products contained detectable levels of
EDB. Commingling of grains during storage, transport, and manufacture
raised the possibility that nearly all such products had detectable levels of
the chemical Temple, Barker and Sloan, Inc., and Economic Perspectives,
Inc., 1984~. Immediate removal of EDB-containing foods would have been
quite costly. In the end, EPA chose an intermediate course: suspension of
use of the compound without confiscation of existing stocks of potentially
EDB-contaminated food.
REGULATION AS RESEARCH
Scientists and policy makers may recommend delaying regulatory ac-
tion until they see the results of current research. Yet the need to perform
more research does not preclude concurrent regulatory intervention. EPA
imposed a groundwater advisory on pyanazine's label even as it sought
further testing of pesticide residues. The agency imposed a standard on
particulate emissions from diesel-powered cars even as it awaited the results
of epidemiological studies on diesel workers. Although EPA did not restrict
EDB until 1983, earlier action should not have barred further toxicological
and exposure studies.
In fact, there is no clear dividing line between regulatory intervention
and research. The reason is that knowledge can be gained from the
experience of regulatory intervention. In some instances, the best way
to assess the benefits and costs of regulation is to regulate and see what
happens. By contrast, further delay may bring little or nothing in the way
of new information.
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128
ENVIRONMENTAL POLICY MAKING
The nation's experience with environmental controls may provide the
best source of information and sometimes the only source of informa-
tion-on the costs of complying with even stricter controls. At issue here
is whether the public or private sectors are best suited to perform the
necessary research on new control technologies. When the development
of new controls entails highly specialized or proprietary knowledge, it may
be impractical for regulatory agencies to fund public research into cleanup
technologies. Instead, the most effective way to instigate the necessary
research is to impose environmental controls, thus changing the incentives
of private firms.
Conversely, experience with regulatory controls may be the best or only
means of assessing the benefits of environmental regulation. Laboratory
experiments can measure small-scale individual effects, whereas environ-
mental controls operate on a large scale. Thus, laboratory experiments and
meteorologic modeling can offer only imprecise gauges of the aggregate
effect on acid rain of curbing sulfur oxide emissions. Measurement of in-
dividual tail pipe emissions, in combination with dispersion modeling, may
be inadequate to predict the aggregate effect of installing auto pollution
control devices.
The main point is that small-scale "micro" models and experiments
may be inadequate to understand or predict the "macro" consequences of
large-scale policy interventions (Harris, 1985~. At best, basic research and
data acquisition can only disentangle individual mechanisms; they cannot by
themselves show the interaction of multiple mechanisms of environmental
damage and multiple routes of toxic exposure. The only way to assess
such large-scale effects is by natural experiments; that is, by regulatory
intervention.
CHLO RO FLU O RO CARB O NS
In 1974, Molina and Rowland proposed that long-lived, stable chlo-
rofluorocarbons (CFCs) could slowly migrate to the stratosphere, where
they would release chlorine following contact with high levels of radiation.
The resultant free chlorine could in turn act as a catalyst to break apart
ozone molecules. Thus, CFCs might be steadily depleting the stratospheric
layer of ozone, the shield that stops ultraviolet-B radiation from penetrating
to the earth's surface.
The ozone depletion hypothesis was taken seriously by the scientific
community, and early work on the topic Includes a 1976 report by the
National Academy of Sciences. In 1977, Congress amended the Clean
Air Act (42 U.S.C. 7457ib]) and authorized EPA's administrator to issue
regulations for controlling substances or activities "which in his judgment
may reasonably be anticipated to affect the stratosphere, especially ozone
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JEFFREY E. HARRIS
129
in the stratosphere, if such effect in the stratosphere may reasonably be
anticipated to endanger public health or welfare. Such regulations shall take
into account the feasibility and the costs of achieving such control." The
statutory language permitted EPA to act in the face of scientific uncertainty
(U.S. Environmental Protection Agency, 1987b).
In 1978, EPA and the U.S. Food and Drug Administration moved to
ban the use of CFCs as aerosol propellants in all but "essential applications."
During the early 1970s, aerosol propellants constituted about 50 percent
of total CFC use in the United States. Thereafter, CFC use in propellants
declined markedly.
Largely in response to a series of National Research Council studies
in the late 1970s, in 1980, EPA issued an Advance Notice of Proposed
Rulemaking under the Clean Air Act. The notice proposed that the
production of certain CFCs be frozen and suggested the possible use of
marketable permits to allocate CF~ production among various industries.
In the early 1980s, however, new data and models suggested that many
other factors contributed to ozone depletion in the stratosphere. Carbon
dioxide and methane, two atmospheric gases that have been increasing in
concentration in recent years, appeared to buffer the ozone-depleting effects
of CFCs. Moreover, although CFCs continued to be used as foam-blowing
agents, refrigerants, and solvents, the decline in CFC aerosol propellant
use resulted in a leveling off of worldwide CFC production.
Beginning in about 1983, the demand for nonaerosol uses of CFCs
accelerated. Total production expanded to such a point that it now exceeds
1974 levels. Levels of CFC-ll (primarily used as a foam-blowing agent)
and CFC-12 (primarily used as a refrigerant) are now rising at 5 percent
annually, while CFC-113 (mainly used as a solvent for electronics and metal
cleaning) has risen an estimated 10 percent annually. Moreover, there have
been increases in demand for certain brominated compounds that are also
thought to deplete stratospheric ozone (e.g., Halon-1211, which is used in
specialized firefighting applications). These changes have been paralleled
by continued increases in carbon dioxide and methane.
In 1985, the World Meteorological Organization (WMO) conducted a
review of all ground- and satellite-based atmospheric ozone measurements
to date. WMO concluded that ozone levels in the upper atmosphere had
in fact decreased by 0.2-0.3 percent annually during the 1970s. Moreover,
these decreases were offset by increases in ozone in the lower atmosphere,
so that the total "column" ozone had remained unchanged.
In May 1985, however, Farman, Gardiner, and Shanklin reported that
ozone levels in Antarctica, which were measured during the months of
September to November, had declined by 40 percent since 1957, with
most of the decline occurring since the mid-1970s. The discovery of this
Antarctic ozone hole was completely unexpected; a 40 percent decline
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130
ENVIRONMENTAL POLICY MAKING
was not predicted by current atmospheric models of ozone depletion. By
1987, additional measurements of a key compound-chlorine monoxide-
suggested that anomalous chlorine chemistry may have played a role in the
development of the Antarctic hole. Such findings left open the possibility
that seasonal declines in ozone above Antarctica were idiosyncratic and
not reflective of global chemistry. Still, researchers have yet to determine
the exact mechanisms responsible for the high levels of chlorine monoxide
in the Antarctic hole and whether such unknown mechanisms are, indeed,
unique to Antarctica.
Moreover, recently published evidence (Kerr, 1987) has challenged the
conclusion that total column ozone is stable. Ground-based and satellite
measurements now suggest a 3-5 percent annual decline during the 1980s.
As in the case of the Antarctic ozone hole, these measurements fall outside
of the uncertainty bounds computed from current atmospheric models,
which predict that column ozone should not have decined by even 1 percent.
A review of the newer data has now been instituted by the National
Aeronautics and Space Administration and the National Oceanographic
and Atmospheric Administration.
Why did the models fail to predict the 1987 results? One possibility is
that the results are artifactual (e.g., misinterpreted satellite measurements).
Another is that the models have failed to consider adequately the solar
cycle or volcanic activity. Still, the main problem is that current models,
which now include approximately 50 chemical species and simulate over
140 different reactions, may not be able to replicate atmospheric chemistry
accurately. Have they failed to predict the limits by which the lower
atmosphere can compensate for stratospheric ozone losses? Have they
failed to predict the buffering effects of carbon dioxide and methane? Are
estimates of the half-lives of certain CFCs (75 years for CFC-ll and 110
years for CFC-12) inaccurate?
On September 16, 1987, the United States and 23 other nations signed
the Montreal Protocol on Substances That Deplete the Ozone Layer. The
agreement set forth a timetable for reducing specified ozone-depleting
chemicals, including a freeze on production at 1986 levels, followed by
reductions during the 1990s. EPA, in anticipation of U.S. ratification of the
Montreal Protocol, has already mandated the reporting of 1986 production,
imports, and exports by American firms (U.S. Environmental Protection
Agency, 1987b).
Formal benefit-cost analysis of CFC regulation is a formidable task.
Models are needed to estimate the future decline in stratospheric ozone
levels; the possible compensating increase in lower atmospheric ozone lev-
els; the potential adverse effects of changes in atmospheric ozone, including
increased incidence of skin cancers and cataracts, damage to aquatic or-
ganisms, and accelerated weathering of outdoor plastics; and the overall
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JEFFREY E. HARRIS
131
effects of global warming. In addition, the economic dislocation resulting
from restrictions of CFCs and haloes must be determined, including losses
in refrigeration, foam production, cleaning of electrical equipment, and
firefighting applications.
Still other information is also required. Can regulations really wait
for better data and models on atmospheric chemistry ozone depletion?
What will be the future evolution of such scientific information? Will
implementation of CFC and halon controls now provide a critical source
of data in understanding the ozone problem?
Regulation of CFCs and haloes is hardly an all-or-none proposition.
Should the Montreal Protocol go into force, and should the United States
ratify it, EPA will be required to implement the 1986 production-level freeze
and the planned reductions for the 1990s. The agency currently proposes
to use a system of marketable licenses. Production or use charges are also
under consideration. It is unlikely that EPA can project the consequences
of these proposed regulatory schemes. Accordingly, in choosing which
scheme to adopt, the agency needs to ask what near-term interventions are
likely to provide information about future regulatory designs.
CONCLUDING COMMENTS
In environmental decision making, inconclusive scientific evidence is
a commonplace occurrence. Still, regulatory agencies continue to make
decisions in the face of such uncertainty.
In evaluating regulatory choices, it is hardly enough to assess the static
benefits and costs of each regulatory option. Instead, regulatory agencies
need to solve the problem of timing, which means assessing the benefits
and costs of intervening now versus intervening later.
~ attack the problem of timing, I have suggested that regulatory
agencies ask two types of questions: Will we be able to take back the
regulatory action? Will intervention be informative about future regulatory
choices?
Environmental regulation takes many forms: requiring private firms
to conduct studies or report data, suspending some uses of a chemical
while permitting others? mandating or changing warning labels, issuing
emergency suspensions, and scheduling phaseouts. In general, my analysis
points toward a style of regulation in which agencies take small, incremental
regulatory steps at the early stages of a problem. These small steps would be
designed to impose minimal sunken investments in compliance, yet provide
essential information on the uncertain benefits and costs of intervention.
The supporting evidence for the success of this style of regulation,
however, has been largely anecdotal. I have cited a few possibly unrepre-
sentative examples. 1b assess the results of past environmental decisions
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132
ENVIRONMENTAL POLICY MAKING
and to formulate guides for future choices will require a much wider array
of case studies.
Still, I see broad application of the idea that environmental decision
makers often wait too long to take action in the face of uncertainty. The
reasons for delaying action, I suggest, are at best poorly articulated. As-
sertions that proof is not yet available, or that intervention will distract
attention from more fundamental causes, or that the public will be need-
lessly alarmed, should be subject to more careful scrutiny. The refrain that
"we need more research before we can act" likewise needs to be questioned.
It is unfair to state the problem as "regulation versus research" when the
main issues are, instead, the synergies between regulation and research.
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Representative terms from entire chapter:
grain products
