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U.S. Environmental Protection Agency
Office of Research and Development
National Center for Environmental Research
Science to Achieve Results (STAR) Program


Market Mechanisms and Incentives for Environmental Management

Opening Date: February 23, 2001
Closing Date: May 14, 2001

Market Mechanisms and Incentives
Relationship to Current EPA Activities
Additional Requirements
Instructions for Application Submission

Required Forms

See abstracts of similar STAR funded research.


The Environmental Protection Agency (EPA) Office of Research and Development,  National Center for Environmental Research (NCER) announces an extramural grants competition supporting research in the area of market-based mechanisms and other incentives for environmental quality management (MM&I).

EPA has supported similar socio-economic research in prior years through the EPA/NSF joint program on Decision-making and Valuation for Environmental Policy.  This year, subject to available funding, EPA also plans socio-economic solicitations addressing valuation of environmental impacts on children's health and the determinants of environmental behavior and the influence on environmental performance of governmental interventions.  Information on announcements and awards made in these competitions may be found on the Internet at: http://www.epa.gov/ncer/.



Environmental economists have suggested that MM&I approaches could improve environmental performance or reduce compliance costs when compared to traditional environmental regulation.   This has been validated by recent experience with waste water treatment fee systems, and with sulfur dioxide and nitrogen oxides trades in the United States; the former represent estimated savings of about $2 billion per year, while the latter represent savings of over $5 billion, compared to an approach that requires each facility to meet a regulatory standard.  The total relative potential savings from MM&I programs is estimated to be approximately $40 billion (Anderson, Robert. Economic Savings from Using Economic Incentives for Environmental Pollution Control, Environmental Law Institute for EPA. 1999).

This competition encourages research that will contribute to the development of practical, credible approaches for designing environmental programs that will meet the Nation's environmental goals cost-effectively.  The terms "market mechanisms" and “incentives" refer to approaches that are alternatives or complements to traditional environmental regulation and that rely on market forces, financial mechanisms, information, or other instruments to encourage regulated entities to reduce emissions, discharges and waste generation, or generally improve environmental performance.

EPA is interested in supporting research that is related to its mission, i.e., addressing environmental quality and human health.  EPA is not soliciting proposals that address market or incentive approaches to natural resource management issues that are not within the scope of the Agency’s mission.   Such issues would include water supply, forestry or agriculture, except to the extent that these affect or are affected by environmental quality, e.g., logging impacts on water quality, or impacts of air pollution on agriculture.

The competition encourages proposals from researchers from all behavioral, social, and economic sciences.  It encourages collaborations with non-social science disciplines when needed to answer social science-based questions.  It supports both research conducted within a single disciplinary tradition, as well as novel, collaborative, and interdisciplinary scientific efforts.


The U.S. experience with MM&I applications is still limited.  The various potential applications of MM&I mechanisms, as well as their efficiency advantages and disadvantages and their distributional effects need to be better understood.

This competition is soliciting proposals for theoretical and empirical research that will accomplish one or more of several related objectives:

(1) identify potential applications of MM&I to environmental quality issues that federal, state, and local agencies must address;

(2) estimate the impacts of MM&I programs on environmental quality, innovation, technological change, trade and competitiveness, and consumer or corporate behavior;

(3) estimate (ex ante) or verify (ex post) the costs, including transaction costs and cost-savings (relative to existing regulatory programs alone) of MM&I applications;

(4) identify who would likely bear the costs or realize the savings of MM&I programs; and/or

(5) demonstrate the relative effectiveness of MM&I programs in achieving environmental results in a variety of situations, compared to traditional regulatory or other approaches.

The results of this research are expected to inform policy-makers in both executive and legislative capacities, as well as members of regulated communities, the academic community, and public interest groups, all of whom will be stakeholders and participants in the debate on uses of MM&I.

Examples of research topics of interest include, but are not limited to:

  • The feasibility of trading systems for achieving water quality standards, particularly total maximum daily loads (TMDLs), through point-point, point-nonpoint, and nonpoint-nonpoint source trades.

  • The type and magnitude of administrative and other transaction costs, monitoring requirements, enforcement aspects, and paperwork burden of taxes, subsidies, fees, and trading systems, and the overall effect of these costs on efficiency.
  • The effectiveness of MM&I programs in enhancing technological innovation and diffusion to improve environmental performance.
  • The transferability of actual experiences with existing MM&I to novel situations.
  • The feasibility of applying fees and charges to achieve environmental quality standards.
  • Improved designs of trading systems for specific air pollutants, including rights distribution systems.
  • The economic and environmental effects of providing information on environmental releases or risk information to consumers, investors, and/or producers of goods and services, and
  • The effectiveness of information dissemination, including linkages between information provision and risk-reducing behavior, willingness to pay for information, the influence of information on innovation, and information asymmetries.
Relationship to Current EPA Activities

The MM&I research effort relates to several EPA programs, including:

  • the economy and environment program and the reinvention policy program of the Office of Policy and Innovation, Web homepage: http://www.epa.gov/economics/;
  • economic analysis programs in several EPA program offices.
For a list of MM&I reports see: http://www.epa.gov/economics/.  See recent report: The United States Experience with Economic Incentives in Environmental Pollution Control Policy, and follow links to: Environmental Economics Report Inventory,/Economic Incentives

For more information about other EPA programs and projects see the following Web pages:


The application must include a plan to make available all data (including primary and secondary data) from observations, analyses, or model development under a grant awarded in this program in a format and with documentation such that they can be utilized by others in the scientific community. The data must be made available to the project officer upon request in a standard exchange format without restriction and be accompanied by comprehensive metadata documentation adequate for specialists and non-specialists alike to be able to understand how and where the data were obtained and to evaluate the quality of the data.  Applicants who develop databases containing proprietary or restricted information should provide a strategy, not to exceed two pages, to make the data widely available, while protecting privacy or property rights.  These pages are in addition to the 15 pages permitted for the project description.


Academic and not-for-profit institutions located in the U.S., and state or local governments, are eligible under all existing authorizations.  Profit-making firms are not eligible to receive grants from EPA under this program.  Federal agencies and national laboratories funded by federal agencies (Federally-funded Research and Development Centers, FFRDCs) may not apply.

Federal employees are not eligible to serve in a principal leadership role on a grant. FFRDC employees may cooperate or collaborate with eligible applicants within the limits imposed by applicable legislation and regulations.  They may participate in planning, conducting, and analyzing the research directed by the principal investigator, but may not direct projects on behalf of the applicant organization or principal investigator.  The principal investigator's institution may provide funds through its grant from EPA to a FFRDC for research personnel, supplies, equipment, and other expenses directly related to the research.  However, salaries for permanent FFRDC employees may not be provided through this mechanism.

Federal employees may not receive salaries or in other ways augment their agency's appropriations through grants made by this program.  However, federal employees may interact with grantees so long as their involvement is not essential to achieving the basic goals of the grant. The principal investigator's institution may also enter into an agreement with a federal agency to purchase or utilize unique supplies or services unavailable in the private sector.  Examples are purchase of satellite data, census data tapes, chemical reference standards, analyses, or use of instrumentation or other facilities not available elsewhere, etc.  A written justification for federal involvement must be included in the application, along with an assurance from the federal agency involved which commits it to supply the specified service.

EPA encourages interaction between its own researchers and grant principal investigators for the sole purpose of exchanging information in research areas of common interest that may add value to their respective research activities.  However, this interaction must be incidental to achieving the goals of the research under a grant.  Interaction that is "incidental" is not reflected in a research proposal and involves no resource commitments.

Potential applicants who are uncertain of their eligibility should contact Jack Puzak in NCER, telephone 202-564-6825, Email: puzak.jack@epa.gov.

Standard Instructions for Submitting an Application

A set of special instructions on how applicants should apply for a NCER grant is found on the NCER Web site, http://www.epa.gov/ncer/rfa/forms/.  Standard Instructions for Submitting a STAR Application and the necessary forms for an application will be found on this Web site.

Sorting Codes

The need for a sorting code to be used in the application and for mailing is described in the Standard Instructions for Submitting a STAR Application.  The sorting code for applications submitted in response to this solicitation is 2001-STAR-P1.  The deadline for receipt of the application by NCER is no later than 4:00 p.m. ET, May 14, 2001.


The projected funding amount per award is from $50,000 to $200,000 per award per year, with durations from 1 to 3 years. Field experiments, survey research, and multi-investigator projects may justify the higher funding level.  Proposals requesting total funds over $400,000 are discouraged.  Awards made through this competition will depend on the availability of funds.


Further information, if needed, may be obtained from the EPA official indicated below. Email inquiries are preferred.

Dr. Matthew Clark
EPA National Center for Environmental Research
Fax (202) 565-2447, Voice (202) 564-6842

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Last Updated: February 23, 2001

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