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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

CLOSED - FOR REFERENCES PURPOSES ONLY

Market Mechanisms and Incentives for Environmental Management

Opening Date:  April 26, 2002
Closing Date:  August 15, 2002

Summary of Program Requirements
Introduction
Background
Description
Related Information Sources
Funding
Eligibility
Standard Instructions for Submitting an Application
Additional Requirements
Contact

Get Standard STAR Forms and Instructions (http://www.epa.gov/ncer/rfa/forms/index.html)
View NCER Research Capsules (http://www.epa.gov/ncer/publications/topical/)
View research awarded under previous solicitations (http://cfpub.epa.gov/ncer_abstracts/index.cfm/fuseaction/research.search/rpt/abs/type/3)



SUMMARY OF PROGRAM REQUIREMENTS
GENERAL INFORMATION

Program Title: Market Mechanisms and Incentives for Environmental Management

Synopsis of Program:

The U.S. Environmental Protection Agency (EPA), as part of its Science to Achieve Results (STAR) program, is seeking applications for research leading to improved theoretical and/or empirical analyses of the feasibility and effectiveness of market mechanisms and economic incentives (MM&I) as substitutes for, or complements to, traditional environmental management programs.  The terms "market mechanisms" and “incentives" refer to approaches that rely on economic incentives, market forces, or financial mechanisms to encourage regulated entities to reduce emissions, discharges and waste generation, or generally improve environmental performance. EPA is interested in supporting research on practical applications of MM&I approaches related to its mission, i.e., addressing environmental quality and human health.

Contact Person:  Matthew Clark, PhD., 202-564-6842; email: clark.matthew@epa.gov

Applicable Catalog of Federal Domestic Assistance (CFDA) Number(s): 66.500

Eligibility Information:
Academic and not-for-profit institutions located in the U.S., and state or local governments are eligible to apply for assistance under this program.

Award Information:
Anticipated Type of Award: Grant
Estimated Number of Awards: Approximately four to eight
Anticipated Funding Amount: Approximately $1 million - $2 million
Potential Funding per Grant per Year: $50,000 to $200,000 per year for 1 to 3 years, dependent upon topic addressed by application.
Limitations: Requests over $400,000 total, including both direct and indirect cost, will not be considered.
Sorting Code(s):

The sorting code for applications submitted in response to this solicitation is 2002-STAR-P1.

Deadline/Target Dates:
Letter of Intent Due Date(s): None
Application Proposal Due Date(s): August 15, 2002


INTRODUCTION

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 (MM&I) for environmental quality management.

EPA has supported similar economic research in 2000 and 2001 through earlier versions of the MM&I solicitation, and for several additional years through the EPA/NSF joint program on Decision-making and Valuation for Environmental Policy (DMVEP).  This year, subject to available funding, EPA also plans economic and decision science solicitations addressing valuation of environmental impacts on human health and the environment, and corporate environmental behavior and the influence of government interventions.  EPA plans a new solicitation for January of 2003 to address the role and value of environmental information on decisions at the firm, market, community, and government levels.  Announcements and awards related to these competitions may be found on the Internet at: http://www.epa.gov/ncer/.

BACKGROUND: MARKET MECHANISMS AND INCENTIVES

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 present value of 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 cost-effective environmental programs that will meet the Nation's environmental goals.  The terms "market mechanisms" and “incentives" refer to approaches that are alternatives or complements to traditional environmental regulation and that rely on economic incentives, market forces, or financial mechanisms 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.

DESCRIPTION

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 theoretically sound empirical research that will accomplish one or more of the following objectives:

1. Identify and evaluate the most effective applications of MM&I for media-specific or cross-media environmental quality issues that federal, state, and local agencies must address;

2. Identify the institutional, technical, legal and regulatory obstacles to successful implementation of MM&I approaches;

3. Provide empirical estimates of MM&I cost-savings relative to existing or proposed regulatory programs;

4. Demonstrate the relative effectiveness of MM&I programs in achieving environmental results, in a variety of situations, compared to traditional regulatory or other;

5. Show how selected MM&I approaches can be transferred or generalized to other environmental problems or geographic/political scales;

6. Investigate the enforcement and performance verification aspects of MM&I programs; and,

7. Evaluate the effects of MM&I program design for a specific medium, including property rights distribution and transaction costs, on efficiency and equity outcomes.

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 application 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 application of trading systems for achieving air quality standards across all types of emission sources: mobile, stationary and area, and between supply and demand alternatives (e.g., demand side management in the electric power industry);

  •  
  • 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 for specific air, land or water pollutants;

  •  
  • The transferability of actual experiences with existing MM&I to novel situations, for example, generalizability of approaches across media types or scales of operation; or,

  •  
  • Improved designs of trading systems for specific air or water pollutants, including the relative efficiency and equity of different property rights distribution systems among polluters and victims, upstream and downstream product users, demand and supply management, etc.
RELATED EPA INFORMATION SOURCES

Applicants are encouraged to avail themselves of information from the following sources during preparation of proposals.  The MM&I research effort relates to several EPA programs, including:

Other federal, state and local environmental agencies also employ variations of MM&I approaches.  EPA welcomes research that identifies the barriers that need to be overcome as well as the changes that need to occur in order for these agencies to apply MM&I approaches.


FUNDING

EPA anticipates making approximately four to eight awards totaling about $1 million to $2 million.  The projected range is from $50,000 to $200,000 per award per year, with durations from one to three years.  Field experiments, survey research, and multi-investigator projects may justify the higher funding level.  Awards made through this competition will depend on the availability of funds. Requests for amounts in excess of a total of $400,000, including both direct and indirect costs, will not be considered.



ELIGIBILITY

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.

Potential applicants who are uncertain of their eligibility should contact Jack Puzak in NCER, phone (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 an NCER grant is found on the NCER web site, http://www.epa.gov/ncer/rfa/forms/index.html. Standard Instructions for Submitting a STAR Application and the necessary forms for an application also will be found on this web site.

SORTING CODES

The need for sorting codes 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:  2002-STAR-P1
The deadline for receipt of the application at NCER is no later than 4:00 p.m. ET, August 15, 2002.

ADDITIONAL REQUIREMENTS: Data and Model Availability

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 others in the scientific community may readily use them.  The data must be made available to the project officer in a standard exchange format without restriction and be accompanied by comprehensive meta-data 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.

CONTACT

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
clark.matthew@epa.gov
voice (202) 564-6842
Fax (202) 565-2447

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