*This is the fourth post on a symposium on Cynthia Giles’ “Next Generation Compliance: Environmental Regulation for the Modern Era.” For other posts in the series, click here.
“Let’s decide to learn faster” (p. 277). Cynthia Giles closes the last chapter of Next Generation Compliance with this simple, powerful admonition for improving regulatory performance. Drawing from her extensive experience enforcing regulations in practice and the considerable evidence of regulatory compliance – and lack thereof – across a variety of environmental contexts, Giles makes a rigorous case for reimagining the role of compliance in regulatory development and implementation. After presenting a how-to playbook for integrating compliance considerations in the drafting of new rules, Giles looks forward to how such a strategy could inform and improve an array of climate-oriented regulations.
Next Generation compliance focuses on the accounting for compliance at the rule development stage. This stands in contrast to the long-common approach of assuming 100 percent compliance without consideration of incentives or institutional capacity for firms to comply with or for the regulators to enforce compliance. A regulator may have discretion in how to set a regulatory goal and the means by which regulated entities could demonstrate compliance with that goal. By selecting “strategies to make compliance the default” (p. 6) in the design of a regulation, the regulator can reduce the burden on regulated entities and facilitate environmental improvement. Identifying and requiring the reporting of relevant data on a firm’s regulatory performance can assist both the regulator – in ascertaining regulatory compliance – and the regulated entity – by empowering it to manage what it measures.
Serious consideration of compliance in the rule-writing strategy can deliver more effective environmental regulations. Understanding the efficacy of a rule requires an understanding of: (a) did firms comply with the rule; and (b) did the rule significantly change their behavior. As noted by Giles, it is possible for a rule to realize 100 percent compliance because it lacks meaningful requirements on regulated entities. On the other hand, some rules may realize low compliance, but covered firms undertook substantial effort towards compliance, which could deliver more important change in environmental and public health outcomes. This approach demands an understanding of the results and impacts of a regulation and doing so credibly requires a careful assessment of what would have happened in the absence of the regulation.
A “Next Gen” compliance analysis of a proposed regulation – addressing how rule design can enhance compliance and improve environmental outcomes – naturally prompts the question of regulatory performance evaluation. Thus, Next Generation compliance complements well an emerging focus on evidence-based policymaking. For decades, Republican and Democratic Presidents alike have called for regulatory look-backs and retrospective review of regulations, with mixed results. Employing best practices for the planning for the retrospective review of regulations can enhance the value of the information from such reviews.
Planning for and conducting a regulatory performance evaluation fit well within the broader efforts to implement the Foundations for Evidence-Based Policymaking Act at the Environmental Protection Agency and throughout the federal government. In implementing this law, the Office of Management and Budget tasked agencies to develop Learning Agendas to “identify, prioritize, and establish strategies to develop evidence to answer important short- and long-term strategic questions (i.e., questions about how the agency meets its mission(s), including about how programs, policies, and regulations function both individually and in combination).” For example, the EPA’s 2022 Learning Agenda prioritizes the need to promote compliance with drinking water system rules and policies, an issue addressed in detail in Next Generation Compliance. The critical issue lies in producing evidence through program evaluation – the collection and rigorous analysis of the appropriate data – to inform regulatory and policy improvements over time.
Just as more effective regulatory compliance can be realized by planning for it in the rule-writing stage, so can more effective regulatory performance evaluations. Indeed, many of the data collection requirements that would facilitate better regulatory compliance could likewise play a key role in performance evaluations. In contexts where there are uncertainties about the most effective regulatory designs to ensure compliance and enhance environmental quality, experimentation designed for evaluation could promote substantial policy reforms. As Giles notes: “sometimes a randomized control trial or other robust field evaluation is the blast that is needed to shake regulators out of their comfort zone. A well-designed study also provides actual proof about what works, and what doesn’t, so the discussion can proceed on evidence rather than ideology” (p. 272).
Designing a rule to enable rigorous performance evaluation and produce data for public review and analysis can enable third-party experts to amplify the learning from agency actions and assessments. Giles calls for such transparency – as does President Biden in a presidential memorandum on restoring trust in government – because the work of non-governmental researchers can serve data-driven advocacy for better public policy. As Giles notes: “Creative outside researchers, advocates, and reporters, can use the data in unexpected ways and uncover information that significantly informs the policy debate” (p. 146).
Integrating Next Generation compliance analysis and planning for regulatory performance evaluation at the rule-writing stage both serve the goal of improving the foundation of evidence underlying environmental policy. Indeed, such insights extend well beyond conventional EPA regulatory authorities. As the EPA, Department of Energy, Department of Agriculture, and, perhaps most importantly, the Department of the Treasury implement various clean energy spending and tax expenditure programs under the Inflation Reduction Act, there are great opportunities to learn how to “build back better.” As policymakers employ a growing mix of subsidy and regulatory strategies for cutting greenhouse gas emissions, there is considerable potential for an agency to rapidly moving up the learning curve and for knowledge spillovers among agencies and policy approaches. The challenge lies in promoting new agency cultures that embrace learning, providing the resources to prepare for and undertake evaluations to produce evidence, and to attract the attention of and support by political leaders across government. Integrating new ideas on compliance and evaluation in the way we design and implement regulations and programs will facilitate the faster learning that we need in combatting climate change, as well as other environmental risks.
Joseph E. Aldy is Professor of the Practice of Public Policy at the Harvard Kennedy School.