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Chapter 6


Appendix A: Climate Change

Climate Change Speakers and Topics

Tulsa, Oklahoma Council meeting (September 1997)
Daniel Albritton, National Oceanic and Atmospheric Administration: Climate science.
Rosina Bierbaum, Office of Science and Technology Policy: Expected consequences of climate change.
Robert Repetto, World Resources Institute: The costs of climate protection: A guide for the perplexed.
Joseph Romm, Department of Energy: An EERE technology portfolio that addresses the potential for carbon stabilization of U.S. emissions by 2010.
Nancy Skinner, International Council of Local Environmental Initiatives: Innovative community and state strategies to reduce greenhouse gas emissions.

Atlanta, Georgia Council meeting (November 1997)
Community Forum: Quality-of-life and Climate Change

Michael McCracken, U.S. Global Change Research Program: Science of climate change.
Cory Berish, U.S. Environmental Protection Agency: Potential impacts of climate change.
Dan Lashof, Natural Resources Defense Council: Energy innovations.
Nancy Kete, World Resources Institute: A user's guide to the costs and benefits of climate protection.

Public Meeting
Harry West, Atlanta Regional Commission; Helen Tapp, Regional Business Council;
Dennis Creech, Southface Energy Institute; Jackie Ward, Southern Organizing Committee; Gail Marshall, Atlanta Public School System: Report outcomes from community forum.
Cory Berish, Environmental Protection Agency: Emission sources (What? Where?)
Amory Lovins, Rocky Mountain Institute: What's possible to achieve with technology.
Susan Maxman, American Institute of Architects: Building technologies.
Neal Elliott, American Council for an Energy Efficient Economy and Dave Buzzelli, Dow Chemical: Industry perspective.
Kent Fickett, US Generating Company: Power Generation Technologies
Dan Sperling, Institute for Transportation Studies, UC Davis and
Bob Purcell, General Motors: Transportation Technologies.

Washington, DC Council meeting (June 1998)
Steve Percy, British Petroleum America;
Fred Krupp, Environmental Defense Fund; and
the Honorable D. James Baker, National Oceanic and Atmospheric Administration: The importance of incentives for early action.
Scott Bernstein, Center for Neighborhood Technology: The role of communities in climate protection strategies.
The Honorable Morton Downey, Deputy Secretary, Department of Transportation

Washington, DC Economic, Regulatory, and Voluntary Measures Working Group meeting (June 1998)
Robert Friedman, The John H. Heinz III Center for Science and the Environment;
Joseph Goffman, Environmental Defense Fund;
Richard Morgenstern, Resources for the Future (on leave from the U.S. Environmental Protection Agency);
The Honorable Shirley Scott, City of Tucson, Arizona; and Mark Trexler, Trexler and Associates, on behalf of the Coalition to Advance Sustainable Technology: policies to encourage early action.

Pittsburgh, PA Council meeting (September 1998)
Tom Karl, National Oceanic and Atmospheric Administration: Observed climate changes and variations: Early signs of global warming?

Washington, DC Technology Working Group meeting (October 1998)
S. William Becker, Peter Ciborowski, Kenneth Colburn, and Arthur Williams on behalf of State and Territorial Air Pollution Program Administrators and Association of Local Air Pollution Control Officials: State and Local strategies to reduce greenhouse gas emissions.

APPENDIX B: Environmental Management

B-1: Environmental Performance Indicators:

The Need for Common Measures
The value of environmental performance information is possibly under threat of being diminished by the proliferation of differing approaches. It is often difficult to develop sufficiently comparable information on environmental performance across a single company, let alone a whole sector, or nation. The problems are compounded further by differing definitions from one country to another. One of the most important challenges ahead is to devise metrics that serve specific needs of users while simultaneously contributing to greater comparability across firms, communities, industries, states, and nations. There is no single simple answer to this.

Note, for example, that "compliance with regulations" is often predicated on definitions of how performance is measured (e.g., pollutant concentrations in wastewater discharge, total rates of pollutant releases, or effects on ambient levels). Also, overhauling US EPA's own information management systems -- building in some core metrics across air, water and waste programs, for example, could help focus corporate and public attention on key elements of performance. We should also be mindful of the important (sometimes counter-productive) role created when locally developed metrics are too insular or do not reflect accepted standards or national goals.

Different Types of Information
For the purposes of this report there are at least four different types of information to consider. Essentially, how and who will build the necessary information architecture to collect, manage, analyze and disseminate information will depend on the specific types of information:

  • Environmental performance metrics/indicators that measure potential human stresses on the environment (e.g., pollutant releases, transportation, natural resource depletion, etc.).

  • Environmental management indicators which measure efforts to reduce or mitigate environmental effects (e.g., regulatory programs, corporate environmental performance, community, state or nation).

  • Environmental condition indicators which measure environmental quality (e.g., ambient air or water quality -- these can again be at the local, state, or national level).

  • Environmental accounting information -- there is also the important issue of natural resource accounting at the level of country -- i.e.,. the green GDP equivalent.)

Varying reporting initiatives are under development and moving in different directions both domestically and worldwide. Most begin with voluntary corporate environmental performance reporting or a specific set of indicators: ISO 14032 (Environmental Performance Evaluation), World Business Council for Sustainable Development, the Environmental Defense Fund's Scorecard, and CERES (Coalition for Environmental Responsible Economies), the National Report Card initiative, to name a few.

Responding to the question of whether a standardized reporting framework can be achieved, the Global Reporting Initiative (GRI) is being spearheaded by a multi-stakeholder coalition, that includes NGO's, Accounting Associations, UNEP, and business. The initial objective of GRI is to develop a set of common performance metrics for voluntary corporate environmental reporting (approximately 1500 companies now report worldwide), but the design goal is to develop a standardized reporting guideline reflecting the three dimensions of sustainability. Indicators for economic and social aspects would be added as agreement for such indicators is reached.

A possible example of U.S. leadership is in the OECD on the development of "Pollutant Release and Transfer Registers, " essentially the development of TRI-like reporting systems in other countries. Other international agreements, such as the Montreal Protocol (on ozone depleting substances), the newly signed Rotterdam Convention on prior informed consent for trade in chemicals and pesticides, the Kyoto agreements on climate protection, and the biodiversity convention also afford opportunities for developing consistent metrics for "keeping score" on environmental performance.

Financial Materiality
In September 1998, the Environmental Management Task Force co-hosted a roundtable discussion with US EPA Region IX's Merit Partnership for Pollution Prevention on the financial and environmental performance aspects of environmental management systems (EMSs). Approximately sixty operating companies who participated in an EMS survey sponsored by the Merit Partnership joined in a one-day meeting directed toward discussing how companies approach environmental management as a business and financial matter with particular attention to the emergence and adoption of environmental management systems, including ISO 14001. The meeting, which emphasized the goals of sustainable development, identified general recommendations about working with aspects of the financial industry to further develop material environmental management indicators; the potential relevance of EMSs to performance-based regulatory programs; and the need to distinguish between the adoption of EMSs and the development of environmental performance evaluating criteria.

Environmental Management Systems (EMSs) and ISO 14001

A diverse group of organizations, associations, private corporations and governments has been developing and implementing various EMS frameworks for the past 30 years. For example, the Chemical Manufacturers Association created their own standard called Responsible Care. In addition, the English, French, Irish, Dutch, and Spanish governments developed their own voluntary EMS standards.

The possibility that these diverse EMS frameworks could result in barriers to international trade led to a heightened interest in formulating an international consensus standard for EMSs. To that end, the International Organization for Standardization (ISO), consisting of representatives from industry, government, non-governmental organizations (NGOs), and other entities, finalized the ISO 14001 EMS standard in September 1996. The intent of this standard is, “to provide organizations with the elements of an effective environmental management system which can be integrated with other management requirements to assist organizations to achieve environmental and economic goals.”

A product of this standards development effort is a single format for EMSs, which can accommodate varied applications all over the world. ISO 14001 is unique among the ISO 14000 standards because it can be used to objectively audit internal management systems for the purposes of self-declaration or third-party certification of the system.

Because the use of EMSs including ISO 14001 has the potential to affect our shared environment, their implementation is of concern to public policy makers. Efforts are underway to gather credible and compatible information of known quality to adequately address key public policy issues. The following categories are areas of concern to public policy makers.

1. Environmental Performance
The impact a facility has on the environment is of paramount importance to regulators' assessment of EMSs. Thus, it is critical to measure any change in a facility's environmental performance that might be attributable to implementation of an EMS.

2. Compliance Implementation of an EMS has the potential to improve an organization's environmental compliance with regulatory requirements. The goal of collecting compliance information is to be able to measure the relationship between an EMS and compliance with local, state and federal environmental regulations

3. Pollution Prevention Pollution prevention is a significant public policy goal. The reduction, elimination, reuse, recycle, and treatment of waste can have an impact on an organization by reducing costs and risk. These actions also enhance the quality of the work environment and ecosystem. Therefore, better understanding the relationship between an organization's overall performance and the role of pollution prevention in the organization's EMS has social, economic, and environmental implications.

4. Environmental Conditions
In order to understand the impact of an EMS on the environment, it is necessary to know something about the status of the ambient environment surrounding the facility prior to EMS implementation. An analysis of this nature not only helps evaluate the effectiveness of the EMS, it also provides a basis for facility managers to prioritize their environmental aspects and shape their environmental policies and objectives. Data on environmental conditions will assist all parties in determining the sustainability of certain human activities from an environmental, economic, and social perspective.

5. Costs/Benefits to Implementing Facilities
There has been much speculation and assertion about the relative costs and benefits associated with the implementation of an EMS. More organizations that are implementing EMSs need to collect cost data, which should answer questions concerning possible net financial benefits that might accompany improved compliance and increased environmental performance, and whether or not higher levels of environmental performance are cost prohibitive.

6. Stakeholder Confidence
The perceived success or failure of an EMS is based in large part on external stakeholder evaluation of the effort. It is important to look at the amount and degree of stakeholder participation in both the development and implementation of an organization's EMS.

7. Third Party Audits and Certification
Potentially, the assessment of environmental performance and an EMS can be conducted by third-party auditors and certifiers. Agreement needs to be reached among the audit and certifying profession, companies being assessed, and the regulatory bodies on how the process for certification can be developed to ensure consistency in the knowledge, skills, and competency of those conducting the audits. Certification processes should include a review of procedures, staff qualifications, documentation, and audit processes. These certification processes need to be developed to ensure competency and that a consistent process is being applied in all certifications.

APPENDIX B-3: Next Generation Reports

The convergence of ideas on how to modernize the current system of environmental protection is summarized in a recent article by Karl Hausker, the former Project Director of the Enterprise for the Environment at the Center for Strategic and International Studies:

With permission of the author, all rights reserved: Hausker, Karl: THE CONVERGENCE OF IDEAS ON IMPROVING THE ENVIRONMENTAL PROTECTION SYSTEM (1998).

In recent years, there has been a remarkable convergence of ideas on how the nation should improve its environmental protection system. The ideas have emerged from reports by Presidential and Congressional commissions, consensus-building forums, expert panels, and individual authors. All of these reports call for evolutionary change in the nation's environmental protection system. Without such change, the reports argue, the U.S. will be unable to meet the environmental challenges of today, nor those looming in the next century.

Various authors have described this evolutionary change as regulatory “reinvention” or “innovation” or “reform.” Other authors have described it as the “next generation” or “second generation” of environmental policy . . . Unlike reports or policy dialogues that focus on a particular environmental statute or problem,
1 next generation reports addressed systemic issues concerning how the nation protects the environment.

. . . [E]nvironmental progress requires more of the evolutionary change that is already underway as the next generation of environmental protection takes shape. The current system, consisting mainly of end-of-pipe, technology-based regulations, is inadequate for the challenges ahead, despite its many accomplishments over the past three decades. The challenge for the U.S. and for all nations is to protect and restore the natural environment while providing for the economics needs of a population that will grow by at least several billion more people. This will require, among other things: that pollution be limited not by the “best available technology” or some variant thereof, but by limits determined by human and ecological health; that industry undergo a “green revolution” resulting in products and processes that generate dramatically less waste and that channel remaining wastes back into production rather than into the environment; and that society find far more effective means of reducing the environmental impact of the day-to-day decisions of billions of people in their roles as consumers, workers, drivers, farmers, etc. We will fail in these tasks unless the environmental protection system evolves in the directions outlined by next generation reports: toward a more performance-based, information-rich, technology-spurring, flexible, accountable regulatory system; toward a broader array of policy tools that promote continuous environmental improvement, including environmental taxes, subsidy reform, emissions trading, and information disclosure; and toward stronger private sector management systems that internalize the same stewardship ethics embodied in environmental statutes.

The PCSD expressed the need for change as follows:

For the last 25 years, government has relied on command-on-control regulation as its primary tool for environmental management. In looking to the future, society needs to adopt a wider range of strategic environmental protection approaches that embrace the essential components of sustainable development.... We, as a Council, have concluded that this will require the nation to a develop a new framework for a new century.2

Learning to use new approaches to achieve interrelated goals simultaneously will be an evolutionary process. It needs to build on the strengths and overcome the limitations of the current economic and regulatory systems and recognize the interrelationships between economic and environmental policies. This will require pursuing change concurrently on two paths: making the existing regulatory system more efficient and more effective, and developing an alternative system of environmental management that uses innovative approaches.3

Report Summaries:

The [“next generation”] reports listed by no means present identical recommendations. Each is unique in its scope and emphasis, and each has a certain flavor reflecting the composition of its authorship, and whether the report was the output of an expert panel or a stakeholder process:4

1995 - Setting Priorities, Getting Results: A New Direction for EPA,5 National Academy of Public Administration (NAPA) (this report stemmed from EPA's FY 1994 appropriations bill which directed the Agency to engage NAPA to review EPA's processes for priority setting and resource allocation; organizational structure; and relationships with states and communities).

1996 - Sustainable America, the President's Council on Sustainable Development (PCSD) (President Clinton created the PCSD in 1993 and charged it with producing consensus recommendations on how to pursue sustainable development. The original Council had 25 members made up of cabinet heads, and leaders from business, environmental, civil rights, labor, and Native American organizations. A wide range of issues are addressed in Sustainable America, and many were relevant to the environmental protection framework. The PCSD's report is notable particularly for the fact that it is consensus document endorsed by four major national environmental NGOs6 ).

1996 - The Alternative Path: A Cleaner, Cheaper Way to Protect and Enhance the Environment, Aspen Series on the Environment in the 21st Century (this report reflected a two year long stakeholder process, but not a formal consensus-building effort. The report sets forth broad principles constituting a foundation for a new system of environmental protection, and also a number of more focused recommendations on an “alternative path” of regulation intended to experiment with more performance-based, flexible approaches to reducing pollution).

1997 - Resolving the Paradox: EPA and the States Focus on Results,7 NAPA (like the earlier volume, this report resulted from a directive by Congress, in this case, to review key initiatives in federal, state, and local environmental protection, and examine the responses by EPA and the Congress to the 1995 NAPA report).

1997 - Thinking Ecologically, Next Generation Project at the Yale Center for Environmental Law and Policy (this project brought together a number of experts writing on the common theme of charting a new course for environmental policy; the project took input and comment from some 250 people over two years in a series of workshops and conferences).

1998 - The Environmental Protection System in Transition: Toward a More Desirable Future,8 the Enterprise for the Environment (E4E) (issued it final report entitled E4E was an explicit consensus-building project involving over 80 participants including: a bi-partisan group of members of Congress, state and local government officials, and former EPA Administrators; the current Deputy Administrator of EPA; and leaders from business, the environmental community, and academic and research institutions. As a consensus process, E4E was notable particularly in its bi-partisan composition and its involvement of all levels of government, though several participants chose not to endorse the final report9 ).

There are many convergent themes in the reports, as discussed in the sections below:

The Environmental Protection System, Past and Future

  • All of the reports recognize that the current system has brought about a much cleaner environment over the past three decades, largely through application of technology-based regulations10 on large point sources of pollution and through national standards applicable to various products, processes, and substances.

  • At the same time, the reports argue that the current system is not well-equipped to address the environmental challenges that remain or that loom on the horizon.

  • Several of the reports describe the current system as likely being in a zone of “diminishing returns,” where further tightening of technology-based regulations will produce modest environmental improvement at very high cost.11

  • The reports call for evolution, not revolution. None of the reports call for a dismantling of the current regulatory system; rather they recommend building on it. The reports recommend modifying and supplementing the existing system, experimenting with new approaches, and carefully evaluating the results.
    In E4E, the metaphor for this evolution was the use of “stepping stones” to cross a river. The E4E report stated that this evolution would require “experimentation, prudent risk taking, mistakes, learning, adaptation, and a rebuilding of trust.”12 In a similar vein, the Aspen Institute concluded, “The Alternative Path supplements the current regulatory system rather than replacing it. The current system is needed to serve as a benchmark for performance as new methods are tested.”13

  • Most next generation reports emphasize the need for the nation to set clear, measurable environmental goals to guide the environmental protection system.14

    The PCSD set forth ten interrelated goals that it felt were essential in guiding the nation toward sustainable development; and it offered suggestions of indicators to measure progress toward each goal.15 One of the Aspen Institute's eleven broad, underlying principles developed in The Alternative Path is: “Environmental protection goals should underlie a new system and be clear and measurable.”16 E4E's vision for the future recommended that an improved environmental protection system “set and pursue clear environmental goals and milestones for the nation, states, localities, and tribes, and use understandable indicators to measure progress.”17

  • None of the next generation reports suggest that environmental goals (or milestones) obviate the need for regulations or non-regulatory policy tools to bring about reductions in pollution or other changes necessary to protect the environment.

    Information and Data

    Next generation reports stress the need for greatly improved information and data systems.18 Information and data relevant to the environmental protection system encompass those related to ambient conditions, emission sources, and risks to human health and ecosystems, as well as measures of Agency resource use and impacts, and broader social and economic impacts.

  • The improved environmental protection system called for in next generation reports requires better information and data than does the current system. A system focusing on environmental goals as described above requires better monitoring and tracking of environmental conditions. . .[and] more sophisticated information systems than traditional technology-based regulations.

  • The PCSD, E4E, and NAPA reports contain recommendations to strengthen the base of scientific knowledge; increase its use by decision-makers and the general public; and improve the quality, collection, management, and accessibility of environmental information.19

    Evolution of the Regulatory System

  • Next generation reports call for evolutionary change in the regulatory system, with an emphasis on performance-based standards (rather than technology-based standards) and with regulated entities having more flexibility in meeting these standards while maintaining high standards of accountability.20

  • This evolution would also include a more integrated, multi-media regulatory structure; more encouragement of pollution prevention; and more streamlined reporting requirements.

  • The PCSD's conclusion in this area represented a breakthrough: for the first time, a prominent group of national environmental organizations and business leaders jointly endorsed the
    ...growing consensus that the existing regulatory system may be greatly improved by moving toward performance-based policies that encourage pollution prevention. Regulations that specify performance standards based on strong protection of health and environment -- but without mandating the means of compliance -- give companies and communities flexibility to find the most cost-effective way to achieve environmental goals. In return for this flexibility, companies can pursue technological innovation that will result in superior environmental protection at far lower costs. But this flexibility must be coupled with accountability and enforcement to ensure that public health and the environment are safeguarded.21
  • Several next generation reports address the thorny issue of “superior environmental performance,” i.e., whether regulators should offer more flexible, cost-saving approaches only if regulated entities provide greater environmental protection than that achieved by current regulations. The conclusions are very similar: superior environmental performance should not be required of each and every improvement to the regulatory system. The PCSD distinguished between general streamlining and improvement of the regulatory system (expected to produce cost savings and/or incremental environmental improvement), and bold experiments in alternatives to the current system that would require superior environmental performance as a condition for a far greater range of flexibility for the regulated entity.22 This distinction is echoed in The Alternative Path and the E4E report.23

  • Many next generation reports cited the desirability of regulatory approaches that encouraged pollution prevention across all media.24

  • Many reports emphasize the desirability of improving the collection, organization, and dissemination of information to reduce duplication and streamline reporting requirements while enhancing access to relevant information by regulators and the public at large.25

    Expanded Set of Policy Tools

    Next generation reports call on government to expand the set of policy tools it uses to protect the environment.26 Examples include greater use of :

  • pollution taxes, often discussed in the context of a revenue-neutral tax shift in which taxes on labor and/or capital would be reduced;
  • pricing of various services that reflects their environmental impacts, e.g., transportation and waste disposal;
  • reform of subsidies that encourage environmental degradation
  • tradable permits, such as the Clean Air Act's sulphur dioxide allowance trading system, the RECLAIM program for controlling air pollution in the Los Angeles air basin, various water effluent trading programs, and land-oriented tradable permits (e.g., wetlands mitigation banking);
  • information disclosure requirements, such as the Toxics Release Inventory and California's Proposition 65.
  • systems of extended product responsibility in which designers, producers, suppliers, users, and disposers accept responsibility for environmental effects through all phases of a product's life.

    Federal - State Partnerships

  • Several next generation reports address the nature of the federal-state partnership in protecting the environment. Next generation reports generally embrace the principle that EPA should differentiate its oversight responsibilities based on a state's environmental performance.27

    The PCSD recommended differentiated oversight based on performance:

    Federal agencies should develop effective partnerships with state governments to administer environmental regulatory programs. These partnerships should eliminate duplicative activities and greatly reduce federal oversight of state programs that have a proven track record.28

    Federal Policy Integration

  • Next generation reports emphasize the need for better policy integration at the federal level. The policies of many federal departments and agencies have a significant impact on the environment through their influence on the activities of various sectors of the economy. Consistent with this theme, the PCSD report contains sections addressing many of these sectors.29

  • Several next generation reports recommend environmental concerns be better integrated into federal agencies through revitalization of the National Environmental Policy Act.30 E4E also cited the need for stronger coordination among agencies in dealing with problems ranging from water quality to endangered species to climate change, and argued that responsibility for this ultimately lies with the President who can choose to empower the Council on Environmental Quality or another White House office to perform the leadership and coordination function.31

  • Several reports call on Congress to better integrate its fragmented committee structure to improve both its legislative and oversight functions in the area of environmental protection.32

    Other Themes in Next Generation Reports

  • Several next generation reports emphasize the key role of private sector stewardship in protecting the environment.

      The PCSD recommended adoption of a voluntary system that ensures responsibility for a product's environmental effects by all firms involved in the product's lifecycle.33

      The E4E report contained recommendations including: development and better metrics and indicators for stewardship; more extensive private networks of information sharing on pollution prevention and environmental stewardship; and industry adoption of a set of environmental best practices that promote both environmental protection and improved profitably.34
    Industrial ecologists recognize that environmental protection in the coming century will require systemic changes in materials use, production processes, product formulation, product use, and disposal practices.

    [S]ociety requires a novel kind of regulation to make a true industrial ecology possible. Frustrations with regulation frequently arise because we have fostered and developed environmental laws that attempt to deal with one problem at a time.... [W]ell-meant environmental regulation can have the bizarre effect of increasing both the amount of waste created and the amount to be disposed, because it puts up high barriers to reuse.... A priority for the future will be a cleanup of that aspect of the nation's regulatory machinery.35

    Environmental regulatory processes and regulations have defined and expanded the demand for technology-based products and services related to the environment. Nevertheless, most critical barriers to environmentally beneficial technology innovation and diffusion arise within the U.S. environmental management system.36

    APPENDIX C: Metropolitan and Rural Strategies

    Strategic Opportunities Can be Supported at Many Levels

    Several hundred community initiatives around the country are working on these fronts of sustainable community development. Through sheer imitative and fortitude many communities are already realizing the benefits of sustainable community development. Although sustainable community development is a locally driven process, the goals and objectives of communities in metropolitan and rural areas can be enabled and supported at many different scales, including neighborhood, village, city, regional, state, national, and global.

    • Austin's Casa Verde Builders: Located in Austin, Texas, Casa Verde Builders is a program organized by the American Institute for Learning, the U.S. Department of Housing and Urban Development, YouthBuild, Americorps, the City of Austin, the U.S. Department of Energy, and the State Energy Conservation Office. In this program, at-risk youth learn hands-on construction skills and applied academics by building energy-efficient, sustainable, and affordable housing in low-income neighborhoods. Casa Verde homes are at least 35 percent more energy efficient than traditionally built affordable housing. Casa Verde Builders also perform other community service activities, such as weatherization and disability access remodeling. The proceeds from home sales and remodeling go back into the program to ensure than other young people and families can benefit. As of 1995, the program's 64 members have built twelve 1,400 square foot homes.

    • Savannah's Grants for Blocks: After noticing a falling-off in city-run neighborhood improvement programs, the city of Savannah decided to surrender control of improvement money to residents. The city's Grants to Blocks program gives residents money--up to $500--to do whatever they wanted to improve their block. From 1993 to 1997, residents completed more than 700 beautification projects and over 1,500 local individuals attended training workshops on community building or leadership development. Resident and city staff conducted visioning sessions together. City government supported the process by targeting services and improving the infrastructure. Citizens increased their citizenship responsibilities. And financial institutions increased their investments in inner-city neighborhoods once they perceived that risks were reduced.

    Local city, town, or village:
    • Young's Bay, Washington: Salmon is a bellwether of ecological health in the Pacific Northwest. Shorebank Pacific, a nonprofit affiliate of a bank holding company, has lent $5 million to 50 high-risk projects, 70 percent of them in the lower Columbia and Willapa watersheds. Each of these projects is designed to change the interaction among natural systems, markets, and communities. For example, the bank has worked with a group of individual gill-net salmon fishers in Young's Bay at the mouth of the Columbia River. These fishers are also taking steps to protect its habitat. Through one of its client companies, Shorebank purchased about 50 percent of the catch in Young's Bay and brought it to high-end markets in Seattle, Portland, and San Francisco, serving as a critical intermediary for the gill-netters.

    • Philadelphia: For more than 50 years, Cardone Industries has pioneered the automotive parts remanufacturing industry in Philadelphia. Cardone Industries employs 3,500 people in Philadelphia, many of whom come from the inner city and can walk to work. The workforce is highly diversified, with as many as 18 different languages spoken in the plant. As a remanufacturer, Cardone Industries is not only making a major contribution in terms of materials, energy, labor, and capital equipment conservation. By restoring worn or non-functioning products to like-new condition, Cardone prolongs the lifetime of automotive components. It preserves the value embodied in products during their manufacture, making it possible for automobile owners to acquire replacement parts at reasonable prices and to keep their vehicles in better condition over longer and longer lifetimes.

    • Florida Eastward Ho! Initiative: As part of the major effort to save the Everglades ecosystem, the Eastward Ho! Initiative created a joint state-local effort to revitalize an 85-mile long urban corridor stretching from West Palm Beach to Miami by encouraging infill and redevelopment of lands not adjacent to the Everglades watershed. The effort has been successful in large part because of the collaboration of Federal, State, and local natural resource agencies. The ultimate goal is to create sustainable communities in Southeast Florida “by accommodating new residents, maintaining unique local character, revitalizing the urban core, protecting the water supply, ecosystems, and quality of life, and making increasing cultural diversity a strength,” according to researcher Julia Parzen who has studied the initiative.

    • New York Watershed: Faced with investing $7 billion in conventional water treatment technology to correct for the agricultural contamination of its upstate watershed, New York City instead formed a partnership with the watershed's farmers to improve their agricultural practices and to purchase upstate farmland at a cost of $1 billion. In this win-win solution facilitated by a “smart rules” set of regulatory incentives through a network of Federal and State agencies, New York City avoided $6 billion in unnecessary capital investment, and upstate farming communities gained access to new capital.

    • Maryland Smart Growth Program: This program marks the State of Maryland's determination that public development dollars are most wisely spent when they are targeted to “Priority Funding Areas.” These are locally defined and state certified areas where growth is planned, infrastructure is already in place, and criteria established by the Smart Growth and Neighborhood Conservation Act are met. By investing funds only in these areas, the State will save taxpayer dollars, protect open space from sprawl development, preserve its heritage, and encourage re-investment in older communities. The Maryland Office of Planning provides analytical tools and technical assistance to help counties define their Priority Funding Areas. The program does not prohibit development in non-priority areas, but it does prohibit the use of state development dolars for such projects. In addition to this geographic targeting of State funds, the State of Maryland has adopted several programs specifically designed to support projects that implement Smart Growth. Examples include the Rural Legacy program, the Neighborhood Business Development Program, Live Near Your Work, the Neighborhood Partnership Program, and the establishment of the Revitalization Center in Baltimore City.

    • New Jersey State Development and Redevelopment Plan: The New Jersey State Development Commission works to integrate State and local planning to conserve natural resources, revitalize urban centers, protect the environment, and provide affordable housing and services to communities. New Jersey voters in 43 cities and six counties decided to raise their taxes to buy and preserve open space in the November 1998 election. Statewide, by a two-to-one margin, voters also approved spending nearly $1 billion over 10 years to buy half of New Jersey's remaining open space.

    • Oregon Statewide Planning Program: Oregon has a program dating from 1973 to save farm and forest lands, manage urban growth, and protect natural resources. Most recently, the Governor established “quality development objectives” to guide State agency programs and investments. The objectives include reducing urban sprawl, producing mixed development, encouraging choices of energy-efficient transportation, providing cost-effective public services, protecting the environment, and creating a balance of jobs and affordable housing.

    • Brownfields Initiative: The Brownfields Initiative supports local efforts to clean up and redevelop brownfields -- properties where resuse is complicated by real or perceived environmental contamination. The Brownfields Initiative has provided grants to more than 200 communities and technical support to hundres more. Through the Brownfields National Partnership, created in 1997, more than 20 Federal agencies work together to provide financial and technical support for brownfields revitalization activities. The centerpieces of the Ntional Partnerhsip are 16 Bronfields Showcase Communities, models of multi-agency collaboration including both major metropolitan areas and small towns. In 1997, the President signed into law a $1.5 billion brownfields tax incentive for the cleanup and redevelopment of brownfields.

    • Transportation Equity Act for the 21st Century: TEA-21 will allocate over $200 billion to support intermodal transportation. TEA-21 builds on the Intermodal Surface Transportation and Efficiency Act of 1991, which emphasized inclusive planning and decision-making, flexible funding, and integration of transportation with land use and environmental concerns. Communities all over the country have taken advantage of this flexibility. In the first five years of ISTEA, more than $2.4 billion in what used to be highway money was reprogrammed for public transportation. ISTEA's flexibility has allowed those areas with a local consensus around public transportation to do so.

    • National associations and networks: Many associations have begun to educate their members on the options and benefits of sustainable development. The Joint Center for Sustainable Communities, a partnership between the U.S. Conference of Mayors and the National Association of Counties, provides education and technical assistance and information about the nation's best sustainable practices. [If we are going to mention the EPA sponsors the Smart Growth Network, we should also mention that several Federal agencies support the Joint Center.] Most importantly, the center identifies ways that cities and counties can work together. The Smart Growth Network, supported by U.S. Environmental Protection Agency, the International City/County Managers Association and others, serves as an invaluable resource on smart growth to counter the negative impacts of sprawl and community disinvestment. The Sustainable Communities Network, formed by a coalition of non-profits, is a vast, growing resource of website links, topical gateways, case studies, bibliographies and appendices for use by local communities.

    • The National Coastal Zone Management (CZM) Program: The CZM program is a model voluntary partnership between the Federal government and U.S. coastal states that affects communities throughout the country with Federal funding levels for 1997 through 1999 at $50 million annually. It is designed to: Encourage theparticipation, cooperation, and coordination of thepublic, Federal, State, local, interstate and regional agencies, and governments affecting the coastal zone; Preserve, protect, develop, and where possible, restore and enhance the resources of the Nation's coastal zone for this and succeeding generations; Assist the states to promote wise use of land and water resources of the coastal zone, giving full consideration to ecological, cultural, histroic, and esthetic values as well as the needs for compatible economic development. Since 1974, a toal of 27 coastal states and five island territories have developed CZM programs. Together these programs protect more than 99 percent of the nation's 95,000 miles of coastline.

    • The International Council for Local Environmental Initiatives (ICLEI)' Cities for Climate Protection Campaign: ICLEI was instrumental in the adoption of Local Agenda 21 at the Earth Summit. Agenda 21 identifies specific objectives that can be used to guide sustainable development efforts. Since then, the U.S. branch of ICLEI has helped local governments assume a major role in sustainability efforts, and have developed “one-stop” guides on technical assistance and funding sources, and other references. ICLEI has calculated that if all 55 cities and municipalities participating in its Cities for Climate Protection Campaign meet their voluntary goals, their emissions reductions will be equivalent to 10 percent of the U.S. obligation under the Kyoto Protocol.

    Tailoring the Tools for Strategic Opportunity Areas

    "Green Infrastructure"- Goal: Promote place-based approaches to conserve, protect, restore, and manage local and regional networks of natural, living, and environmental resources and amenities.

    Objectives: To establish a long-term strategy to plan for, conserve, protect and restore a network of natural and environmental resources and amenities (open space, farms, timberlands, green corridors, wildlife habitat, parks, brownfield restorations, landscaping of development parcels, backyards. etc.) that will provide an attractive and functionally useful setting for future development; to encourage "win-win" approaches for conservation and development; promote community initiated place-based approaches to land use and growth that combine the concepts of ecosystem management with new economic and community dynamics (i.e., "human ecology").

    Tools Actions
    • Link green infrastructure into national public marketing campaigns on quality of life, sustainable communities, and smart growth issues.
    • Use GIS to demonstrate how green infrastructure planning can be used with "buildout" analysis to determine how to avoid growth conflicts, regenerate vacant inner city areas, and promote voluntary conservation and revitalization actions.
    • Convene a "green infrastructure" forum to bring practitioners together to gain a deeper and more complete understanding of successful community approaches to green infrastructure.
    • Use partnerships between practitioners to identify collaborative opportunities to implement green infrastructure actions.
    • Develop and make available a Learning Tool-kit which community leaders can use for implementing sustainable community opportunities for green infrastructure.
    Economic Mechanisms and Incentives
    • Encourage localities to integrate land conservation, resource management, and green urbanism into economic and community development planning, local jobs and small business creation.
    • Develop small business opportunities tied to resource use, conservation, restoration and waste re-use, pollution prevention and environmental protection; possible instruments include conservation easements, farmland rental agreements, stream restorations, climate protection zones, roof-top gardens, and urban forests.
    • Research the potential impacts of common asset programs for improving environmental quality and resource stewardship. The programs would cap use, auction permits, and collect and distribute proceeds to communities as dividends.
    • Support tradeable development rights and other ways to protect farm, forest, and range land and encourage stormwater treatment, habitat creation, stream restoration, and landscaping.
    • Target Federal, State, and local programs, such as the Conservation Research Program, Forest Legacy Program, the State Revolving Fund, and State open space funds, to leverage additional funding in order to provide awards, tax breaks, and other incentives to identify, plan, and act.
    Financial and Technical Intermedi-aries
    • Smart Growth Network
    • APA's Growing Smart Clearinghouse
    • Federal, State, and local government, including the Joint Center for Sustainable Communities
    • Economic development and small business organizations
    • Research institutes
    • NGOs (i.e., American Farmland Trust, The Conservation Fund, Land Trust Alliance, American Forests, etc.) and foundations
    • Urban forestry, agriculture, architectural, engineering, and landscape architecture organizations
    Partnerships and Local Capacity
    • Use existing sustainable development leadership organizations to develop a Learning Tool-kit and train local and regional leaders on how to design "green infrastructure" into larger community-based green urbanism education strategy in order to foster local job creation and small businesses, provide natural amenities and non-vehicular travel routes. Examples include "green gardens", which train minority communities in ecological gardening; The Conservation Funds' Sustainable Careers Internship Program for young adult training and employment; and the Roedale Institute's Farm Link program to help new farmers get started.
    • Reinforce efforts of pro "green infrastructure" financial and technical intermediaries.
    • Link conservation and environmental interests with development interests to foster sustainable community initiatives.

    Land Use and Development - Goal: Promote smart growth strategies to enhance the livability and sustainability of metropolitan and rural communities.

    Objectives: To promote sustainable development patterns to prevent ecological degradation and promote a "sense of place;" to protect farm, forest, and range lands and open spaces; to reverse abandonment of older, central cities and "inner-ring" suburban areas; to appropriately value vacant and underutilized land and create small business and local jobs.

    Tools Actions
    • Launch national public marketing campaign on smart growth issues.
    • Promote use of GIS to identify most appropriate places for future development, revitalization, or restoration as well as the impacts of growth. GIS mapping efforts could make use of HUD's Community 2020 software, the National Center for Resource Innovations "Green, More or Less" approach, and APA's current Land Based Classification System, which documents data on land cover, land use, and property rights.
    • Create or bolster mechanisms for people to gain better information and share successes.
    • Use "build-out" analysis to determine where and how much development will in the future and to target areas for community conservation and revitalization action and assistance.
    • Develop and encourage the use of analytical methods that regions can use to assess the relationship between investments in growth and investments in poverty reduction.
    • Promote the wide distribution of findings from HUD's Partnership for Advanced Technology in Housing (PATH).
    • Promote the adoption of model state legislation developed through HUD's Growing Smart initiative.
    Economic Mechanisms and Incentives
    • Implement demonstrations and pilots of location efficient mortgages.
    • Support tradeable development rights and conservation easements to protect farm, forest, and range land.
    • Support local and regional food systems in ways to protect farmland surrounding urban areas to create local jobs and provide quality food for urban and suburban residents.
    • Support air quality credits for sustainable communities.
    • Implement conservation incentives of the 1997 Taxpayer Relief Act.
    • Implement a location policy for Federal facilities that supports smart growth.
    • Leverage Federal, State, and local programs to provide awards, tax breaks, and other incentives to identify, plan, and act.
    • Support second round of Empowerment Zones - 15 urban and 5 rural.
    • Strengthen the Farmland Protection Policy Act to reduce federally funded development of good farmland.
    Financial and Technical Intermediaries
    • Smart Growth Network
    • Joint Center for Sustainable Communities
    • APA's Growing Smart Clearinghouse
    • Federal, State, and local government
    • Developer associations, such as National Homebuilders Association
    • Urban Land Institute and other such institutes
    Partnerships and Local Capacity
    • Use civic leadership organizations and programs to help train local and regional leaders on a whole array of techniques relating to sustainability, including smart growth.
    • Reinforce efforts of pro "smart growth" financial and technical intermediaries.
    • Provide Federal support for local public and private farmland and open space protection initiatives.

    Community Revitalization and Reinvestment - Goal: Promote methods that build on local and regional economic, ecological, and social assets to reinvigorate and revitalize metropolitan and rural communities.

    Objectives: To attract sustainable investment in metropolitan and rural communities; to integrate sustainable concepts into economic and community development activities; to build strong and diversified local economies while also linking them to regional and global markets.

    Tools Actions
    • Develop and promote methodologies to map local social, environmental, and economic assets (such as local purchasing power, infrastructure) that can recognize local resources and attract reinvestment and revitalization.
    Economic Mechanisms and Incentives
    • Implement demonstrations and pilots to assess the impacts of location efficient mortgages.
    • Identify and promote new market tools for financing reuse of assembled and serviced land (such as financial incentives to clean up and economically develop brownfields).
    • Develop programs that promote investment in areas with existing rights of way and serviceable transportation and communications infrastructure and outside of green infrastructure.
    • Allow the premature write-off of non-productive assets to avoid creating stranded investments
    • Create incentives for businesses which hire and train local people for new sustainable jobs.
    • Support the creation and implementation of Individual Development Accounts in conjunction with the Treasury's EFT-99 initiative.
    • Support the creation of secondary financial markets for community and economic development loans.
    • Ensure that transportation and training programs associated with welfare-to-work are linked to address the spatial mismatch between jobs and housing.
    • Provide incentives to encourage energy efficiency in housing and other community building programs.
    • Provide incentives for public and private partnerships, which achieve environmental protection, social equity, and economic prosperity.
    • Implement sustainable communities provisions of the Transportation Efficiency Act for the 21st Century (TEA-21).
    • Focus Federal financial and technical assistance on new market opportunities and small business creation in distressed urban and rural communities.
    Financial and Technical Intermediaries
    • Community reinvestment loan funds
    • Private sector--firms and finance
    • Chambers of commerce
    • Federal, State, and local government agencies
    • Community development corporations
    • Foundations
    Partnerships and Local Capacity
    • Convene forums to link private sector with community development agencies on community reinvestment needs and opportunities.
    • Use civic leadership organizations and programs to help train local and regional leaders on a whole array of techniques relating to sustainable community development.
    • Link job training and workforce development to sustainability initiatives.
    • Develop partnership matrices that link Federal resources to community initiatives.
    • Promote green building and equity programs that teach young people how to build and maintain energy-efficient and affordable homes

    Rural Community and Enterprise Development - Goal: Promote innovative economic enterprises and opportunities that can strengthen and diversify rural economies and promote sustainable community development.

    Objectives: To improve rural communities' access to markets, build assets, and facilitate networking opportunities; to develop strategic alliances between rural and urban markets; to promote diversified "mixed-income" strategies that can supplement traditional economic activities, such as farming or resource extraction; create non-farm jobs to support family farms.

    Tools Actions
    • Develop an information and communication infrastructure to encourage electronic and person-to-person communication, mentoring between outside experts and local leaders, and learning about successes.
    • Advance strategic research on the micro-economics of rural enterprise development, particularly in identifying how to overcome barriers to credit.
    • Advance timely research and development of potential markets for rural goods.
    • Deliver education campaigns aimed at urban consumers on rural concerns.
    • Develop more sophisticated technical analyses of sustainable alternatives.
    Economic Mechanisms and Incentives
    • Identify creative financing to support innovative technologies and techniques.
    • Incorporate planning and diversity requirements to rural development funding.
    • Enable flexible funding to support sustainable economic alternatives.
    • Integrate or coordinate Federal, State, and local programs to enable regional approaches
    • Implement the recommendations made by the Commission on Small Farms.
    • Promote regional and local food systems as a way for consumers to support local farmers and keep food buying dollars in their community, such as developing incentives to support community supported agriculture.
    Financial and Technical Intermediaries
    • Regional centers for rural development
    • NGOs and private foundations
    • Federal agencies (such as USDA, Dept. of Commerce, SBA)
    • State and county agencies
    • Joint Center for Sustainable Communities
    • Private-sector brokers and retailers
    • National Co-operative Association
    • Watershed alliances
    • Natural Rural Partnership
    • Land-grant universities and other academics
    Partnerships and Local Capacity
    • Use civic leadership academies and programs to help train local and regional leaders on rural sustainability.
    • Build the capacity of rural-based NGOs through leadership training.
    • Broker strategic alliances to link rural and urban markets.
    • Convene a workshop to identify elements of success of local and regional food systems.
    • Move farm clubs beyond just "farmer-to-farmer" to involve the entire community.
    • Use local eco-system alliances to highlight urban-rural interdependencies.
    • Support sustainable resource based industries, which support small businesses and by coordinating the efforts of Federal, State, and county natural resource agencies with community development agencies.
    • Link natural resource based efforts to community and economic development strategies.

    Material Use and Reuse - Goal: Promote strategies that conserve resources and minimize waste by retaining, recycling, reusing, and remanufacturing the embedded material assets found in metropolitan and rural communities.

    Objective: To enable job creation as a result of material reuse and recycling, particularly in communities that need work; to integrate materials conservation and remanufacturing into Federal, State, and local economic and community development; to promote eco-industrial development to promote resource efficiency and minimize pollution and waste.

    Tools Actions
    • Support feasibility studies of the market for salvaged materials.
    • Develop methodologies that can inventory the nature and value of the built and manufactured assets in a community.
    • Fund marketing efforts to increase public acceptance of reused building materials and remanufactured goods.
    • Fund education efforts to teach architects and contractors about the quality and adaptability of reused materials.
    • Evaluate potential feasibility of deconstruction.
    • Conduct and support research on how costs of disposal of construction and demolition waste impact materials reuse.
    • Conduct and support research on setting-aside funding for federally-funded demolition projects to promote better materials reuse.
    Economic Mechanisms and Incentives
    • Support the implementation of deconstruction pilots initiated by public housing agencies.
    • Identify incentives that can enable eco-industrial development to be integrated into regional and local economic planning.
    • Review how the Resource Conservation and Recovery Act can overcome barriers to waste exchange between firms.
    • Review Federal, State, and local tax and procurement policies as they relate to encouraging materials reuse or remanufacturing.
    Financial and Technical Intermediaries
    • Local economic development agencies
    • Federal, State, and local government
    • Interagency Working Group on Environmental Technology
    • DOE's Industries of the Future Initiative
    • Associations aimed at architects and building contractors
    • USDA's Forest Products Laboratory
    Partnerships and Local Capacity
    • Develop a network of "centers of excellence" for materials reuse, remanufacturing, recycling, and eco-industrial development.
    • Train architects and contractors on how to use reused materials.
    • Link job training to materials reuse and remanufacturing programs.

    APPENDIX D: International

    Multilateral Agreement on Investment Idea Forum Summary

    February 10, 1998

    Opening Comments by Dianne Dillon-Ridgley, Task Force Co-chair

    Why convene an MAI Idea Forum?

    The PCSD, like other National Councils on Sustainable Development, is paying attention to the MAI negotiations, as the members have always acknowledged and understood the global nature of sustainability. However given the enormous challenge of charting a path toward sustainability for our country, our government and our communities, the PCSD has primarily focused on domestic issues during its first four years. With the new Executive Order of April 1997, the PCSD was given an opportunity and a responsibility to make the connection between international issues and their domestic ramifications. MAI not only embodies this challenge, it is precisely in this kind of forum where the PCSD can be of greatest assistance in convening all stakeholders. The task force decided not to take a position on the MAI deliberations but rather would investigate the MAI's impact on promoting sustainable development.

    Jeffrey Hunker, U.S. Deparment of Commerce

    Key issues:
    • MAI brings an important link to the forefront -- the investment and environmental agenda
    • large and growing amount of private capital flows into developing countries in the last ten years, magnifying the importance of the private sector
    • large domestic economic growth partially due to export growth
    • strong link between overseas investment and US exports

    The two latter points are especially significant due to the magnitude of investment in energy infrastructure at present and in the future -- 90% of the energy structure in India and China has yet to be built. This can be seen as a blessing or a curse, but certainly renders the MAI important to climate change considerations.

    Al Larsen, U.S. Department of State

    Mandate by Congress to strengthen the rules on international investment carries two concerns:

    • market access is complete and successful, and
    • agreement includes investment protection and provisions for the environment and labor.

    These have become a controversial part of the MAI, and the right balance must be sought. The goals of the environmental provisions are to protect the US ability to enact and enforce its own environmental protection laws, and to foster solid environmental standards in developing countries that balance economic and environmental goals. The negotiated text contains a provision, similar to an article in NAFTA, that countries cannot lower standards to promote investment. There is a need for binding provisions not just guidelines. European delegations want commitments to be binding.

    Specific provisions to address the environment are similar to NAFTA.

    • recognition that countries have the ability to improve environmetal laws and existing standards
    • language "in like circumstances" -- look into cases to determine like circumstances to prevent discrimination (e.g. zoning issues are case specific)
    • language should underscore countries' ability to speak with private entities about their environmental regulations and management systems.

    Other important provisions: OECD has done a lot of environmental work in recent years, creating provisions on hazardous waste, and principles of environmental decision making. All countries that sign MAI should be obligated to the same principles and laws agreed to by OECD countries. The MAI should include non-OECD countries in the OECD Environmental Policy Committee Review of principles.

    Labor Issues:

    • readiness criteria to get agreement on labor to stand
    • create investment incentives to impose discipline on governments at the local, state, and national levels that lure investment that is too costly or lowers worker standards. Federal government is not in a position to impose limits on states. However, there is a need to gather data on how the state governments currently subsidize foreign investment.

    Conclusion: OECD provides interesting venues and should continue to solicit advice for integrating sustainable development principles into the private sector.

    John Audley, National Wildlife Federation

    Three main reasons that NWF is involved in the MAI discussion:

    1) the desire to balance economic and environmental rule of law,

    2) the relationship to the democratic decision-making process, and

    3) the implications for its partners in the developing nations of Latin America.

    Three points of contention with MAI:

    1) direct and indirect expropriations run contrary to U.S. "takings laws"

    2) dispute proceedings provisions do not embody a democratic process of negotiations, the text targets non- OECD nations, preventing decisions made at the state or local level

    3) doesn't meet the OECD test to balance environmental and economic goals: MAI permits disputes over just compensation for government takings of private property dispute process occurs in front of a panel, not in state or country where dispute occured no recourse for citizens affected by an investment dispute shifts state and local land rights to federal rights, which threatens the common home owner, in conflict with the wealthy land owner imposes unfair financial burdens on municipal entities

    Other issues:

    - Much of the agreement viewed as being negotiated "in secret". Contentious elements were decided prior to public pressure to engage NGOs in negotiations.

    - OECD developing a new Environmental and Energy Committee to revamp problems with countries' legislation and democratic process. New standard created for linking environment and economic policies should be enough to recreate MAI.
    Conclusion: NWF opposes MAI and will make its opposition public through letters and demonstration. International rules are vital for what NWF is trying to achieve -- a direct connection between rules of law and environmental protection.

    Steve Canner, United States Council for International Business

    The goal of his presentation was to give an international business community perspective and clear up misinformation. The big question: Can MAI and rules for environmental protection coexist?

    Some statistics cited by Mr. Canner:

    - $300 billion in annual investment flows. US is largest exporter AND importer of capital.

    - 90% of international investment is in industrialized countries - there has been a slow down of investment into LDC

    - 90% of goods and services produced abroad, stay abroad (not imported back into US)

    - 25% of US exports occur between US businesses and their counterparts abroad

    1) What is MAI all about?

      Economist perspective: grow the US economy by growing markets for US goods and services abroad. In the past, growth occured mostly through trade. Now growth is largely through investment in affiliates and joint ventures. MAI is about growing markets abroad and making rules to guide this growth.

    2) What should the rules be?

      A) Business wants to invest abroad with no barriers to actions or discrimination. Investors want to operate under national treatment provisions in trade rules.

      B) Business wants to establish an enterprise in an environment that is free from government regulations and standards, or conditions, and to avoid host government mandates or regulations that prevent investor from operating most efficiently (i.e. performance standards).

      C) Investor wants legal assurance of transfer implying that a host government will be bound to international standards of expropriation with appropriate compensation.

      D) Investor should have the right to dispute settlement in cases argued between governments, investors, and between governments and investors. This provision is embodied in existing bilateral investment treaties.

    3) How do rules to protect the environment fit in?

      Agenda 21 recognizes that the free flow of capital and trade liberalization are essential for growth and development. MAI is likely to produce this result.

    4) Addressing environmental and labor arguments made against the MAI:

      MAI imposes on state sovereignty

      -- Not so, state laws are grandfathered in. MAI will limit ability of state/local governments to protect the environment and health

      -- Not so, as long as standards are set in a non-discriminatory way. Nothing in MAI that won't allow state to protect itself. MAI only applies to monetary damages. Countries that impose regulation that reduces corporate profits can be seen as a "takings"

      -- Not so, MAI will not give foreign government more rights.

    Antonio Parra, World Bank

    International Center for Settlement of Investment Disputes (ICSID) arbitrates settlements among parties of ICSID convention. Existing bilateral investment treaties (BITs) and multi-lateral treaties (NAFTA, ASEAN) include agreements over disputes similar to MAI. Arbitration of investor-state settlements will take precedence over state-state settlements. MAI implies several methods of arbitration, recourse to local courts, and allows aggrieved investors to specify form of arbitration. The treaty should offer access to less specialized forms of arbitration, institutional forms of arbitration, fewer jurisdictional constraints. Different forms of arbitration have different procedural rules. Disputes over similar issues have diverse outcomes with different forms of arbitration. MAI seeks to bring together arbitration and common provisions on remedies that arbitrators can grant in order to prevent this problem.

    David Schorr, World Wildlife Fund

    MAI deals with investor rights and obligations -- importance of issue is how capital flows have a significant impact on the environment. WWF poses these key questions: What is appropriate and possible under the MAI, from the standpoint of environmental inclusion in investor protection treaties? Are these issues separate? Can one protect both the environment and investors?

    • Good environmental policies are good economic policies. Mission: to alleviate bad environmental management in the context of investment.
    • Obligations of investors: fine line between private actors and public, as private actors make policy through their actions. How does voluntary compliance as another method of protection besides "command and control" fit in?

    • Three pillars of good environmental governance:

        1. Good standards

        2. Access to environmental information

        3. Access to justice -- people can apply information to language and enforce standards.

    Information issues - general principles:

    • Private entities providing information. Classic tools applied to the government, like EIS (environmental impact statements), should also be applied to private actors. MAI could include this.
    • Toxic release inventories. U.S. Laws require corporations to release this information.
    • Quality of information -- ensure it is in useful and accessible form.
    • Corporate transparencies across boundaries to see who shareholders are, ensure FCC compliance, apply ISO 14000, move beyond compliance.

    Access to justice issues:

    • MAI creates access to justice and addresses the need for ICSID to save dispute settlement from developing countries' local lack of government. However, must equally ensure individuals' right to relief, citizens' ability to have access to justice.
    • Relevance of NAFTA: important to set up international environmental justice so that citizens have a right to bring complaints to an international body and corporations are held accountable.
    • One way to create citizen rights is to give citizens of one country standing rights in another country where the corporation is based, in effect extending jurisdictional limits.
    • Adherence to corporation codes and OECD guidelines should be reviewed, as well as adding a certification system so that if a company doesn't meet a "beyond compliance" standard, the company will not participate in dispute settlement.

    Response by Amb. Larsen to panel presentations

    • Takings: unnecessary in US context because of our strong consitutional tradition, but could be issue for our country in other countries. The State Department wants to ensure that governmental action impacting corporate profit is not considered to be a "taking".
    • Relationship between dispute settlement and state and local governments: corporation challenges state law on incompatibility with other states, corporation has same rights being in the country. This law is incompatible with treaty obligations, state cannot deal with those cases. Federal government would become the defendant in that case.
    • Interest from other countries that want to be a part of agreement: this is a good opportunity to get more countries to have high standards for investment, environmental and worker protection.
    • Access to justice: open to additional approaches on provision of information and access. There is a good case to be made to allow consideration of amicus briefs, role for private parties to voice their agreement.
    • Good ideas: getting countries to sign on to OECD environmental standards, EIS approach.

    Conclusion: Need to discuss the balance of concerns that brings a consensus. They have received a lot of mail that says the negotiations are bad and to stop MAI immediately. All sides were negligent in not opening a dialogue at an earlier stage. Public response, labor attacks, provide impetus for the PCSD to turn the discussion to how we move globalization forward, incorporating the aspects currently missing. Thanked the ITF for convening a dialogue focusing on the democratic process and how to set up a global process for responsible international investing. July 27, 1998
    White House Conference Center
    hosted by the International Task Force
    of the President's Council on Sustainable Development



    The following is a summary of the presentations and breakout group discussions. If you would like more detailed information please contact the coordinator, Catherine McKalip-Thompson, at PCSD (202) 408-5040.

    Marty Spitzer, President's Council on Sustainable Development (PCSD), provided an overview of the work of the PCSD and challenged the participants at the forum to identify policies that mitigate greenhouse gas emissions while simultaneously promoting sustainable development.

    Dianne Dillon-Ridgley, International Task Force co-chair , mentioned current areas of the task force work: to support and interact with other national councils on sustainable development; to examine international capital flows in light of sustainable development, and recommend policies to encourage investment abroad that is consistent with the principles of sustainable development.

    She noted that the purpose of the forum was to further dialogue and understanding, not to try to reach consensus. The CDM has potential to contribute to the achievement of sustainable development goals while meeting climate objectives and creating partnerships between developing countries, developed countries and private entities.

    Melinda Kimble, U.S. Department of State, emphasized to participants that in light of the somewhat difficult history of the climate change regime, focusing on one aspect of the Kyoto Protocol, the CDM, is important. The CDM will be seminal if implemented because it would frame a clearinghouse structure to promote private participation in technology transfer, and because it promotes sustainable development and Aleapfrog technologies@ in less developed countries, while reducing atmospheric levels of greenhouse gases.

    Activities that sequester carbon as well as those that reduce emissions must be part of the package. The process of developing mechanisms for sinks projects is taking longer than projected. AGetting the CDM right@ is very important, since these mechanisms will provide the key to domestic and international efforts to mitigate the negative impacts of climate change. In the coming years, policy-makers must work toward:
    • ensuring that benefits of mitigating greenhouse gas emissions are real and lasting;
    • assuring transparency, efficiency, and accountability;
    • identifying organizations to work on certification, marketing reductions, and finding project funding;
    • administering adaptation funds; and
    • determining the Executive Board membership.

    David Sandalow, White House Council on Environmental Quality and National Security Council, spoke on the potential of the CDM to promote sustainable development, reduce greenhouse gas emissions, help developing countries adapt to climate change, and promote U.S. business opportunities abroad. He pointed out two key issues with the CDM thus far: lack of agreement regarding operational entities, and the problem of additionality.

    Panel 1 - Opportunities and Benefits

    Robert Dixon, U.S. Initiative on Joint Implementation (USIJI), presented USIJI=s goal to encourage the development of international voluntary JI projects that reduce or sequester greenhouse gas emissions under the UN Framework Convention on Climate Change Activities Implemented Jointly pilot. USIJI has established operational modalities and nine primary criteria for these projects including the acceptance by the host country and the long-term reduction of greenhouse gas emissions. These projects, primarily energy efficiency, renewable energy and forest management activities, open the door for U.S. businesses to help meet the financial and technological needs of developing countries while protecting the global environment. Additional financial assistance will be catalyzed by emission reduction credits, but no crediting is allowed under the FCCC pilot. Lessons learned from the USIJI experience could be a useful tool in the development of the CDM.

    Mark Hall, Trigen Energy Corporation, gave one industry perspective of the CDM. Some projects that may qualify are: utility infrastructure, manufacturing process modifications, transportation infrastructure and carbon sequestration. He promoted combined heat and power as a more efficient means of providing power but warned that all technologies are not suited to every area due to fuel availability and resource constraints. He offered some opportunities and benefits of the CDM:
    • improves the value of the overall investment
    • It may allow for shorter contracts or riskier projects to move forward
    • It encourages multinational corporations and others to look at emission reduction opportunities globally rather than only in industrialized nations.

    Espen Rønneberg, Marshall Islands Delegation and the Association of Small Island States (AOSIS) gave a perspective from a developing country vulnerable to climate change and clearly set out AOSIS's priorities. AOSIS believes that small island developing states will benefit from adaptation fees and cleaner development resulting from the CDM. However, Rønneberg insisted that the focus remain on mitigation from industrialized states rather than forestry or Asinks@ projects of questionable effectiveness in developing states.

    A discussion of actions and efforts reasonably expected from developing countries must occur in the context of the priorities of poverty eradication and sustainable development as well as the threats posed by climate change. The CDM must first tackle industrial sectors and other large sectors of greenhouse gases emissions from developing countries. It is in the interest of AOSIS and other developing countries to use the avenues created by the FCCC to promote sustainable development through efforts such as renewable energy. Other issues of importance are compliance, verification, financial and environmental additionality, and reporting.

    Margo Burnham, The Nature Conservancy (TNC) outlined TNC=s Noel Kempff Climate Action Project in Eastern Bolivia's Noel Kempff Mercado National Park. Project objectives include: to ensure the integrity of biodiversity and carbon offsets, to invest in long-term funding mechanisms, and to conduct rigorous carbon monitoring and verification. Benefits from the project under AIJ include:
    • investor policy participation to stimulate learning;
    • national priorities and government offset sharing;
    • working with communities to improve the standard of living; and
    • access to parkland for sustainable economic enterprises.

    Although not a complete solution to climate change, she stated that forestry projects such as the Noel Kempff project can be an important part of the answer.

    Nancy Kete, World Resources Institute, pointed out the wide agreement in evidence among the other presentations except with regard to sinks. The main dilemma with the CDM is that no one knows how big the opportunities are; there is not even an order of magnitude estimate of how much money is involved. The magnitude of demand for carbon offsets depends upon how much trading there is and what less developed countries do. The CDM is not a substitute for foreign direct investment, though it would redirect some of that investment. Systemic changes in economic policies and infrastructure investment are needed. Local benefits exist on a community level, while global benefits can be seen in reduced greenhouse gas levels in the atmosphere.

    Discussion focused on questions of benchmarks, baselines, details of the Noel Kempff Climate Action Project, discounting, and sinks.

    Panel 2 - Key Issues

    Jeff Seabright, U.S. Agency for International Development (USAID), outlined the key issues, including methodological issues (i.e. baselines, additionality, liability, and transaction costs) and operational issues involving new and existing organizations.

    Christiana Figueres, Center for Sustainable Development in the Americas, spoke on the inherent tension in the CDM between emphasis on national priorities and reducing emissions at low cost and little interference from institutions. She sees gaps between priorities of: sustainable development and cost, climate change mitigation and economic growth, innovation and experience, credibility and efficiency, and less developed countries and the industrialized world. In order to bridge the gaps, participation of the private sector and clearly established national policies are needed.
    Host national authorities must:
    • ensure convergence with national priorities, sustainable development, technology transfer, and requirements as defined by host countries; and
    • design and implement system for approval of project within country before referral.

    Michael Marvin, Business Council for Sustainable Energy, presented goals for Buenos Aires:
    • increase understanding in the South;
    • reduce the mistrust of the North;
    • ensure an aggressive work plan for SBI and SBSTA; and
    • guarantee ex post facto credit for eligible post-2000 projects.

    The CDM must be transparent (without excessive bureaucracy), developed in cooperation with all stakeholders, usable by all, and it must allow for profit making for the host country and cost-reduction for the donor. It should rely on the private and NGO sectors as much as possible to reduce the governments= role, develop incrementally to build a knowledge base, establish clear rules on documentation and create a clear audit trail.

    He suggested the Executive Board advocate for the CDM rather than merely administer it, and should supplement, rather than supplant, other development assistance.

    John Novak, Edison Electric Institute, presented several suggestions to get the CDM operational in 2000. He outlined three ways the CDM can be used: a non-Annex I party does project and sells emission reductions; private party partners with host country to share credits; or CDM investors can give funds which the CDM invests and gives credits.

    Suggestions included drawing from the experience of USIJI, breaking out projects by sector, using a baseline/reference case for greenhouse gas benefits, monitoring, and verification, learning by doing, and adopting a bottom-up approach. He advocated getting industry more involved in the process and helping developing countries improve their understanding of the CDM.

    Norine Kennedy, U.S. Council for International Business, presented another business perspective on the CDM. The CDM will meet its goals only if widely used. Hence, businesses have to be willing to propose projects which satisfy concerns of non-Annex I countries, and non-Annex I countries have to be willing to approve those projects.

    It is important to investigate the impacts of the CDM on competitiveness, trade, investment, and its consistency with open markets and free trade. She stated the four outstanding issues for business:
    • the definition of additionality;
    • share of the proceeds;
    • operating entities and executive board; and
    • limits on the use of certified emissions reduction credits.

    Discussion centered on the possible contention between inclusivity and transparency, negotiations between host countries and Annex 1 countries, and the CDM=s relation to ISO 14000.


    The following questions were distributed to each group in varying orders. A summary of the groups' comments follow each question.
      1. In general, how do we harness or create incentives for participation in sustainable energy development in developing countries and assure good results for lenders, investors, and host country stakeholders?

      This question proved troublesome from the start due to varying definitions of "sustainable energy development." Still, some suggestions follow:
      • Get prices right: global multilateral institutions could use different discount rates for different energy types, thus giving a boost to renewable sources in cost calculations.
      • "Cost, risk, and return," the basic criteria when deciding upon any given investment, are undoubtedly the same criteria a business would use to determine whether or not to invest in a CDM project, as well as factors such as: the enthusiasm of host countries, certainty of receiving a good return (e.g. credits), assignation of responsibility for emission reductions, and the price of carbon.
      • Companies given greenhouse gas emission reduction targets would likely make a diverse set of investments to reduce their emissions: some plant, process or equipment investments, some engagement in emissions trading, and investment in a CDM project.
      • Governments or institutions could play the role of Amarket maker@ by taking on more risk initially to entice entities to participate. When enough rules and examples are in place, financial intermediaries will take over the markets.
      • Monitoring and verification must be able to assure desired results but not be so stringent as to increase transaction costs so as to inhibit participation.

      2. To accommodate complexities and not retard the development of the CDM, should a CDM program be developed incrementally or at once?

      Almost all groups agreed that a CDM program should be developed incrementally; otherwise, the process of working out the small details of the CDM would take too long. The following suggestions were made:
      • Business representatives in particular were interested in Alearning by doing@ and arriving at the best solutions through experience.
      • Creating a list of characteristics could help in judging certain projects as Awin-win.@
      • A mechanism could be created for automatic approval of certain types of projects (e.g. "clear win-win" projects) before the year 2000.
      • Some sectors are further along in terms of having projects that are compatible with CDM goals. Those should be permitted before all details are ironed out in all sectors.
      • Using provisional rules for early starter projects, and tightening rules later as knowledge is accumulated is one way to get the CDM operational.
      • The private sector would benefit from a compendium of different models to quantify reduction credits so that they can find the most suitable model for their sector or project.
      • Many participants from the private sector stated that focusing on directing mainstream capital flows in a more Asustainable@ direction would be more effective than focusing exclusively on new capital flows.

      Varying priorities were evident when trying to determine the most important details to settle within an incremental approach. These different priorities are indicative of differing fundamental approaches. Some said that monitoring and verification were most important to "get right" initially, while others said that would come as projects evolve. Verification could follow an ISO model of standards, and private auditors could receive a license to conduct audits in a predictable and standard manner. The important factors are consistency and predictability in the setting of standards and avoiding increased transaction costs.

      3. "Sharing proceeds" -- what is fair?

      Again, interpretations of this question varied. Most participants viewed "sharing proceeds" as negotiations between project sponsors and host countries over splitting project proceeds. It was unclear whether "proceeds" referred to some sort of emission reduction credits, a portion of the project value, or the value of emissions reduced. If "sharing proceeds" were part of the negotiation between investor and host, there may be a need for capacity building on the part of certain host countries to ensure their ability to negotiate a fair outcome.

      Another group took "sharing proceeds" to mean sharing the funds for the adaptation provision in Article 12. This interpretation also brought up the questions of what the "proceeds" were, and how these adaptation funds would be shared. The group thought adaptation funds should probably go to the most vulnerable (non-Annex I) countries, (e.g. AOSIS rather than the Netherlands or OPEC nations.) They also considered the question of how much of the proceeds should go to adaptation, and whether that amount should be a flat fee or a percentage. A percentage could represent a small proportion from a large amount (to generate more projects) or a large proportion from a small amount. There was concern that if this "tax" is too large, opportunities to use energy efficient or cleaner technologies will be squandered, since energy infrastructure investments will be made regardless. One suggestion was to make the "tax" very low initially in order to spur early action on the CDM.

      Finally, one group discussed "sharing proceeds" as a means of funding administration of the mechanism and adaptation, and what percentage share should be allocated for those purposes.

      4. How should "additionality" be defined?

      This question engendered the greatest amount of discussion. Some participants suggested a list of qualitative factors by sector in each country in order to encourage environmentally friendly development, but it need not be the "best available technology" as that criterion might be too restrictive. Participants raised the question of whether the assessment of additionality should change over time as technology continually improves. One group mentioned that it was important to keep "financial additionality" and "environmental additionality" separate. Most groups recognized that defining additionality depends on how baselines are calculated, a fact that brought up a second set of questions:

      • Should baselines be uniformly determined by sector? By region? By country?
      • Should each project have some sort of baseline, determined by "average or historical technology"?
      • Would baselines be fixed or raised over time?

      5. Are there different classes of CDM projects that are treated differently?

      The idea of having different classes of CDM projects seemed like a reasonable concept to many, but no clear method of delineating the classes and their distinctions emerged. Some suggested that clear-cut Awin-win@ projects (e.g. energy efficiency or renewable energy projects where no power existed) would get the most credit with the least amount of bureaucracy. Another suggestion was to use discounting through which a certain percentage of the emission reduction credits would be discounted according to environmental risk. In this way the crediting process would be more uniform and streamlined, yet it would be possible to account for differences in the environmental or sustainable development value of the project.

      In further discussions of crediting, the question of when credits would be issued surfaced? If issuance of credits would be uniform among different types of projects, would credits be issued on an annual basis or at the end of the project when the emission reductions were proven? These questions were of particular concern for land use change and forestry (LUCF) projects.

      6. What types of projects might qualify? What sort of project would be a "clear winner"?

      Criteria for "clear winners" included:
      • not planned before Kyoto Protocol signed;
      • no greenhouse gas emissions from project;
      • imprimatur of host country and wide group of stakeholders;
      • no secondary environmental impacts; and
      • rapid accrual and verification of reductions.

      Other groups mentioned examples of Aclear winner@ projects including renewable and energy efficiency projects, fuel switching (e.g. coal to combined cycle gas turbines or wind), replanting of damaged farmland or burnt forests, material reuse, and fugitive methane recapture.

      7. What should be the role of the "sustainable development community" be in the development of the CDM? What is the role of "industry?" How should these roles be made manifest?

      Few groups had time to answer this last question. One comment was that these constituencies should be as involved as they can, but ultimately governments do the negotiating. Groups with an interest should make their interests known to their respective governments.

      Some suggestions for "Next Steps" to move the CDM forward:

      • Use USIJI projects to gain an understanding of how guidelines for the CDM would be set. Would all USIJI projects prove eligible under the CDM? Why would they qualify?
      • Find projects that are "clear winners" in the eyes of leaders of developing countries to raise their interest and expertise and to get the CDM moving forward.
      • Encourage industry to come forward with case studies as a basis for examining methodologies.
      • Discuss intra-company projects and how those would work under CDM to gain incremental value from the mainstream of investment.
      • Outreach to developing countries to make issues and terms understandable.

      Some suggestions for "Next Steps" to move the CDM forward:

      • Use USIJI projects to gain an understanding of how guidelines for the CDM would be set.
      • Find projects that are Aclear winners@ in the eyes of leaders of developing countries to raise their interest and expertise and to get the CDM moving forward.
      • Encourage industry to come forward with case studies as a basis for examining methodologies.
      • Discuss intra-company projects and how those would work under CDM to gain incremental value from the mainstream of investment.
      • Outreach to developing countries to make issues and terms understandable.

      The International Task Force of the President's Council on Sustainable Development would like to thank the following organizations who co-convened the forum: the Alliance to Save Energy, the Business Council for Sustainable Energy, Edison Electric Institute, International Climate Change Partnership and the United States Council for International Business.

      [PCSD HOME]

  • Appendix - Draft

    Endnotes - Draft

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