Innovations in Ground Water and Soil Cleanup From Concept to Commercialization (1997) / Chapter Skim
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2 MARKET-BASED APPROACHES FOR STIMULATING REMEDIATION TECHNOLOGY DEVELOPMENT
2 MARKET-BASED APPROACHES FOR STIMULATING REMEDIATION TECHNOLOGY DEVELOPMENT
Pages 42-79
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requiring cleanup of the nation's waste sites. Investors assumed that the very large number of contaminated sites, combined with strict federal enforcement of the new regulations, would create a large market for innovative cleanup technologies and saw the potential for high returns from environmental investments.
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remediation would be explicit and consistent, allowing owners of contaminated sites to compare these costs with those of installing a remediation technology and cleaning up the site. FATE OF INNOVATIVE TECHNOLOGY VENDORS While successful examples of the introduction of innovative technologies for waste site remediation exist, such examples are relatively rare.
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. The one company in TABLE 2-1 Stock Value of Selected Remediation Technology Companies Initial Public Offering Company Technology Area Date Share ($)
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For example, most of the contaminated sites shown in Table 1-2 in Chapter 1 are leaking underground storage tanks, many of them owned by small gasoline stations, while the larger, more complex sites are usually owned by large industries or groups of industries. Similarly, the characteristics of the public sector remediation market vary because of the wide variation in the agencies (ranging from the U.S.
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REGULATORY BARRIERS TO INNOVATION The regulatory structure for implementing hazardous waste cleanups, especially at Superfund and Resource Conservation and Recovery Act (RCRA) sites, has added to the inherent difficulties that remediation technology vendors face in bringing new products to the market.
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has estimated that Fortune 500 companies spend fully a third of their costs at Superfund sites on legal expenses such as disputing cost shares with other potentially responsible parties and negotiating remedy selection with the Environmental Protection Agency (EPA)
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If companies and responsible government agencies knew for certain that existing cleanup standards would be strictly enforced, there would be an incentive to clean up sites sooner. However, shifting political forces and changing legislative agendas, combined with a lack of sufficient penalties for failing to comply with existing regulations, reward those who wait for political relief.
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In part because of the incentives to delay remediation and in part because of the long series of regulatory steps involved in selecting a cleanup remedy for a site, the time line for selecting and installing a remediation technology can be very long and can vary unpredictably from site to site. According to the Congressional Budget Office, for example, the average time between when a site is proposed for listing on the Superfund National Priorities List (NPL)
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While remediation of all but the simplest sites requires a significant investment of time because of the technical difficulty of site characterization and remediation technology design, the financial disincentives to initiate remediation and time-consuming bureaucratic procedures can greatly increase the uncertainties associated with predicting the timing of remediation projects, as shown in Figure 2-2. Unpredictable time delays make it very difficult for technology developers and funders to forecast cash flow.
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(1980) · FMC installs additional ground water monitoring wells on adjacent school yard.
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Thus, there is insufficient reward for the additional risk of having provided capital at the early stage of development. Like the remedy selection time line, the end point that a technology must
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Without clear, consistent regulatory requirements on how to receive approval for a remediation technology, it is difficult for technology developers to prove to potential customers that their technology is acceptable to regulators, even if the developer has cost and performance data. Thus, technology developers and customers may find themselves in a Catch 22: the customer wants to be assured that the technology will be accepted by regulators, but the regulator wants to see the technology in operation before providing the permit, meaning that the developer first needs to sell the technology to a customer.
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OTHER BARRIERS TO INNOVATION Not just regulatory programs but also the actions of remediation clients have frustrated attempts to commercialize innovative remediation technologies. In the private-sector remediation market, companies can be hesitant to share information about their contaminated sites.
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In summary, lack of information sharing in the private-sector remediation market and inadequate control over costs in the public-sector remediation market create barriers to innovation that add to those that are inherent to the market itself and those created by the regulatory process. CHARACTERISTICS OF FLOURISHING TECHNOLOGY MARKETS The amount of venture capital invested in a given market is an indication of the perceived health of the market and the drive for innovation.
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Greater risk generally carries with it the opportunity to create greater rewards. The typical remediation start-up company is not competing for investment capital against a number of similar remediation companies but against all other start-up companies; the risk profile of remediation firms needs to be less than or equal to the risk profile of other types of companies in which investors might choose to place their capital.
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However, this sector is very well financed, despite the regulations, in part because the steps needed to obtain regulatory approval are clear (see Box 2-2~. In rare cases, innovative remediation technology ventures have succeeded in commercializing their technologies by obtaining initial sales in markets unrelated to remediation in which the regulatory expectations are clear; Box 2-3 describes an example of one such venture, Thermatrix.
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58 INNOVATIONS IN GROUND WATER AND SOIL CLEANUP sectors of the economy that are the most competitive are the ones in which change and technical innovation and development occur most rapidly. For example, the U.S.
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was in part due to a carefully developed business plan that the company prepared prior to offering the product to the market. Such models are rare in the remediation technology industry.
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Once investors can see that they have a chance to recoup their investments, capital will return to the remediation marketplace. The question is how to adapt current regulatory policies and client perceptions to remove some of the barriers that have driven investment capital away from the remediation market.
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That is, both the vendor and the customer must perceive financial benefit from improved remediation of contaminated properties, while still protecting the interest of the affected public in ensuring that sites are cleaned up. Capital will flow to the remediation technology market when it becomes evident that new technologies can create real value for customers.
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Anecdotal evidence suggests that the market incentives driving the redevelopment of brownfields can lead to careful consideration of innovative remediation technologies, because property developers have a strong incentive to complete the remediation as quickly and effectively as possible so they can sell or lease the rehabilitated land. For example, at a brownfield site in downtown Wichita, Kansas, the city chose an innovative in situ treatment approach over a conventional pump-and-treat system in part because the innovative method could be more easily modified to improve performance (see Box 2-6~.
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. To shift the remediation technology market from one that is driven almost solely by regulations to one that captures the power of economic self interest, federal and state regulatory agencies need to pursue five types of initiatives.
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Third, the regulatory process for selecting cleanup goals and remediation technologies needs to be more predictable. Fourth, complete information about the size and nature of all sectors of the remediation market, public and private, must be made available.
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INNOVATIONS IN GROUND WATER AND SOIL CLEANUP nities need to be created to test innovative remediation technologies and verify their performance. Economic Drivers As described in this chapter, the remediation market is unique in its lack of economic drivers to accelerate the use of innovative technologies.
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Recently, support has been growing for development of accounting practices that represent the full environmental costs of doing business, and consistent reporting of remediation liabilities would complement such full-cost accounting initiatives (see Box 2-81. To provide for uniformity and credibility in corporate reporting of remediation liabilities, consistent standards for tabulating remediation liabilities would
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Third-party auditors (certified public accountants, ground water professionals, engineers, or all of these) could audit the records of the reporting company to ascertain whether the reports were accurate.
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Nevertheless, financial incentives for considering innovative remediation technologies could be created by careful oversight of remediation contractors. Rather than hiring contractors on a cost-reimbursable basis, federal agency managers should hire remediation contractors on a fixed-price basis, in which the cost of achieving a specified goal is agreed upon in advance and clear milestones are established.
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Rather, consistency in remedy selection processes means that the detailed steps in selecting remedies for two different sites having similar geophysical and contaminant characteristics should be similar, regardless of the regulatory program under which the sites are being cleaned up or the EPA office responsible for overseeing the sites. To increase the consistency of the remediation technology selection process, the EPA should conduct a detailed review of remedy selection procedures at Superfund and RCRA sites in its 10 regions.
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They would need to include some mechanism to account for site-specific variations in the potential for human or ecosystem exposure to the contamination and in synergistic effects caused by the presence of multiple contaminants. While national ground water and soil cleanup standards might benefit remediation technology developers by clarifying the level of performance that remediation technologies must achieve, the issue of whether such standards should be established is highly controversial and needs careful analysis.
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, factors that can help decrease the amount of litigation over who should pay for cleanup include careful work by the EPA to identify all potentially responsible parties up front, consistent enforcement against responsible parties who fail to meet regulatory requirements, and involvement of skilled mediators with the full group of responsible parties to negotiate their individual responsibilities. Freedom to Choose To provide incentives for innovation, customers must have the freedom to choose any remediation technology or group of technologies they desire in order to meet the required cleanup standards.
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Full Disclosure of Contaminated Sites Companies, as well as government agencies, should be required to fully disclose information about all contaminated sites above a given size or risk level. Included in this disclosure should be descriptions of contaminants present at the site, geologic conditions, and releases into the soil, ground water, and air.
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Technology Demonstration and Verification Given the hesitancy of corporations to serve as the first client for an innovative remediation technology, more opportunities need to be created to test innovative technologies and verify their performance prior to marketing. The EPA has recognized this problem and has in place initiatives to encourage the testing of innovative remediation technologies at federal facilities, including DOD and DOE sites, as described in detail in Chapter 5.
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CONCLUSIONS Increasing the use of innovative remediation technologies at public- and private-sector sites will require a shift in the paradigm that currently governs the remediation market. Rather than being driven by environmental regulations alone, organizations responsible for contaminated sites need to be motivated to pursue remediation for financial reasons.
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A consistent regulatory process that responds rapidly to approval requests is essential so that remediation technology developers can predict with reasonable certainty the steps that will be required for regulatory approval of their technology and how long they may have to wait before receiving their first job contract. While the process for remedy selection .
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Although there is political pressure to avoid including contaminated sites on registries because of the perceived stigma associated with owning a site on such a list, public disclosure of contaminated site information is essential for ensuring that accurate and complete information about the remediation market is widely available.
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1995b. Federal Hazardous Waste Sites: Opportunities for More Cost-Effective Cleanups.
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1995. Presentation to the National Research Council's Committee on Innovative Remediation Technologies, National Academy of Sciences, Arnold and Mabel Beckman Center, Irvine, California, March 9.
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