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their solution, absent some form of government regulation, intervention in the market, or public commitment. Unless an "environmental goal" or "environmental technology" goal is accompanied by regulatory action, the goal may remain elusive. This is why the apparent division between environmental regulatory agencies and environmental technology programs may be a problem.

Linking Goals, Regulation, and Action

Regulations can create markets. If the cost of disposing of wastes in accord with RCRA rules is high, firms will search for less expensive ways to treat, reduce, or prevent their waste. Cooperative technology programs favor emerging technologies that will fit into niches created by regulatory standards because the markets are well established. State technology programs have capitalized on these regulatory-driven markets even when they did not have technology programs specifically dedicated to environmental problems.

Different regulatory approaches will have different impacts on technological innovation. EPA's traditional regulations have often had the result of establishing a particular technology as the norm for many years while inhibiting further innovation. As many economists have maintained, market incentives of many types could reduce the aggregate costs of environmental controls while encouraging technological innovation. This message has not been lost on the states. Illinois has recently created a market for tradable air pollution permits and expects to save industries millions of dollars while reducing pollution levels. Nevertheless, relatively few states have aggressively pursued market approaches to environmental risk reduction, and the topic rarely surfaces in the numerous technology plans consulted for this paper.

Many policy-makers23 are calling on the federal and state governments to rely more on performance standards than technology design standards to control pollution. In a performance-based system, firms, cities, or even whole states would be told how much they may pollute and then given broader latitude than today in deciding how to achieve the standards.

EPA and state environmental agencies are using the same idea to redefine their oversight relationships. Under the "Performance Partnership" program adopted in the spring of 1995 by the states and EPA, EPA will back away from some of its more prescriptive process-oriented requirements and instead focus on the overall performance of the state in protecting the environment. The approach will require states and EPA to agree on performance measures—including environmental indicators as described above. Each state and the federal government will be negotiating on short-term environmental goals as defined by the indicators and performance measures they select. In these negotiations, the experts within the agencies will clearly dominate the selection process, though the growing reliance on indicators should gradually open the regulatory arrangements to public view.

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