but rather options for reducing toxic-substance use in the first place, with science as a driver of innovation.

Literature that discusses and analyzes incentive prize competitions continues to emerge (Kalil 2006; Stine 2009). The federal government is relatively new to this arena and most agencies are still figuring out how to use prizes to fulfill their missions. As EPA is already discovering, using incentives can be a successful way to drive innovation for mission-related topics.

Leveraging Environmental Protection Agency Actions to Promote Private-Sector Innovation

Both intentional and unintentional actions by EPA can affect the willingness of the private sector to invest in research and development. There have not been formal analyses of the extent of such private investment, but it probably dwarfs the investment made by EPA itself. EPA has the potential to expand the investment in new and innovative science and engineering dramatically if it provides signals that are clear, selects instruments and polices that achieve a specific set of outcomes or performances, and allows the regulated community to benefit from innovations (Jaffe et al. 2002, 2005; Popp et al. 2010).

Throughout EPA’s history, its actions have resulted in substantial investment in new science and engineering by the private sector, at times with beneficial results. Those actions have taken at least three forms:

•   Regulations. EPA regulations specify results that need to be achieved and dates by which they need to be achieved. Regulations have, at times, resulted in substantial innovation that might not have been achieved without such clear signals. An example is vehicle carbon monoxide emission standards, which have resulted in substantial investment in developing and continually enhancing the three-way catalyst and dramatically decreasing ambient carbon monoxide despite large increases in travel (NRC 2003).

•   Testing Protocols and Risk Assessment. In its pursuit of risk estimates for a wide array of substances, EPA can strongly influence research and development investment by the private sector. For example, recent efforts by EPA to enhance its investment in computational toxicology and high-throughput screening have resulted in substantial private investment as well.

•   Public Information. In requiring the public release of information on emissions and discharges, EPA can set strong incentives for private investment in both major process redesign and product substitution to shift to more sustainable production inputs. One cogent example is the Toxics Release Inventory, which collects data on the disposal and release of over 650 toxic chemicals that are submitted by over 20,000 regulated facilities each year; EPA makes the information available through a publicly accessible Web site. It is an example of consumer-driven change that has led to important reductions in some chemical emissions after its initial public release.

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