This paper is extracted from the report “Managing The Effects of Nanotechnology” and has two purposes. The first is to describe the menu of possibilities for government action to deal with the adverse effects of nanotechnology. If there are important alternatives that are not described here it is because of inadvertence or ignorance.
The second purpose is to provide evidence relevant for determining what needs to be done to manage nanotechnology. When I began this work, my initial assumption was that there was no need for new statutory authority. As I learned more about the unique aspects of nanotechnology and thought more about the weaknesses of existing statutes, I was increasingly led to the conclusion that a new law is needed. This paper, however, is not an advocacy piece for a new law. It would have been written quite differently if that were its purpose. Rather, it is a policy analysis, intended to give the reader the information relevant for thinking about a course of action.
In short, the paper is intended to inform, not persuade.
Incentives for Environmentally Beneficial Technology
An important aspect of managing nanotechnology is to encourage its application to environmentally beneficial uses. Most applications of nanotechnology are environmentally beneficial in that they reduce the amount of material necessary for a particular purpose. However, there are more specific environmental benefits that nanotechnology may make possible. For example, nanotechnology materials already have been used to remove toxic materials from soil at contaminated sites.
Government initiatives to encourage environmentally beneficial nanotechnology also should be used to encourage applications that benefit public health. In fact, failure to treat nanotechnology public health and environmental applications equally would be morally and politically untenable. This section discusses four mechanisms that can be used to encourage applying nanotechnology to environmental protection and public health: research, tax breaks, acquisition programs and regulatory advantages. While each of these is worth considering, each has significant problems.
The most direct way for government to encourage beneficial nanotechnology is for the government (usually federal, but possibly state or local) to conduct the research itself. Alternatively, the government can pay for research, but let others do the actual work under contract. A third possibility - one in which the government has less control over the research - is for the government to award research grants.
In 2000, President Clinton started the National Nanotechnology Initiative (NNI), which included $422 million of funds from various agencies. The 21st Century Nanotechnology Research and Development Act, enacted in 2003, provided a statutory base for the NNI. The NNI is an interagency effort under the general direction of the National Science and Technology Council.
The NNI included $989 million for research contained in the budgets of 11 agencies in FY 2004. In 2005, the amount is estimated to increase to $1.08 billion. The President’s budget requests $1.05 billion in FY 2006. Of the 2006 request, $230 million is in the Defense Department budget. EPA is requesting $5 million. Overall, 4 percent of the federal funds go to research on the health and environmental effects of nanotechnology and another 4 percent goes to “education-related activities and research on the broad implications of nanotechnology for society”.
Several U.S. states have appropriated money for nanotechnology research as part of the competition for economic growth. In 2000, California allocated $95 million toward a Nano-Systems Institute at the University of California Los Angeles and Santa Barbara. In 2003, Oregon appropriated $21 million to launch a Nano/Micro Institute, and New York contributed $50 million to a Nanotech Center at SUNY Albany.
Many other national governments are funding nanotechnology research. The European Union is spending significant amounts. In 2004, scientists in China published more articles on nanoscience and nanotechnology than scientists in the United States, and China now ranks third behind the United States and Japan in nanotechnology patents. A recent survey found the United States, Japan, Germany and South Korea to be the dominant nations in nanotechnology research and development.
The effectiveness of this research for encouraging environmentally beneficial nanotechnology is unknowable now and may never be known. Dramatic successes and failures of government R&D programs are widely publicized, but overall evaluations of such programs are rare. In the United States, it is hard to know what portion of government R&D funds go to nanotechnology technologies that are directly or indirectly beneficial to health and the environment. This should be a continuing concern of the NNI.
Tax benefits have been an important tool for protecting the environment. The Byzantine U.S. tax code contains a variety of incentives for environmentally beneficial behavior such as energy conservation. Tax penalties to discourage pollution or other socially undesirable behavior have been used in the United States, but are more common in European countries. For example, gas taxes are much higher in most OECD (Organization for Economic Cooperation and Development) countries than in the United States.
Although one can argue that any imaginable provision can find its way into the U.S. tax code, there are at least two significant obstacles to using taxes to encourage environmentally beneficial nanotechnology.
One obstacle is that there has never been strong support for such use of the tax system. In particular, environmental groups have been cool to economic incentives of any kind. The tax-writing committees in Congress, especially the powerful House Ways and Means Committee, most frequently have taken the position that taxes should be used only to raise general funds for running the government and have opposed using taxes for social purposes.
The Treasury Department usually has supported the committees in this opposition. The fact that some large corporations are engaged in nanotechnology research and development does provide a potential base of support for tax subsidies. The other obstacle lies in defining which expenditures would be eligible for tax subsidies or tax penalties. The definition of which products or processes are nanotechnology is not altogether clear, and defining which nanotechnology efforts are environmentally desirable is much more problematic. The need to make economically important decisions about poorly delineated categories leads to confusion at best, and to corruption at worst.
The federal and state governments are major consumers of a broad variety of goods and services. This characteristic has occasionally been used to promote social goals. For example, the Clean Air Act says that the General Services Administration (GSA) should underwrite the incremental cost of purchasing clean fuel vehicles for use in federal agency fleets. In theory, the government could be required to purchase environmentally beneficial nanotechnology products. Such a mandate would raise the same definitional problems as tax breaks. More fundamentally, it would raise a dilemma that has characterized most acquisition proposals, one of cost versus social goal.
Government agencies generally behave like rational consumers, searching for the lowest price for a given product. If the products mandated to be purchased are less expensive than comparable products, agencies will buy them in any case and the legislation is unnecessary. If the mandated products are more expensive, the agencies will be reluctant to spend their budget money to fulfill a purpose that is not part of their mission, and the acquisition program gets quietly undermined by the resistance of purchasing agents in individual agencies. To the extent that government purchasing is done centrally by the GSA, the chances of acquisition programs succeeding are slightly better, but the basic dynamic remains.
There have been a few instances of using regulatory incentives to encourage particular types of technologies. For example, FDA accelerates the review and approval of certain types of drugs that address unmet medical needs. It would be possible for FDA to give some advantage to nanotechnology drugs and medical devices if this were considered desirable. It also would be possible to do this under new legislation dealing with nanotechnology.
TSCA does not lend itself to such incentives because there is a set time limit (90 days, extendable to 180 days) for EPA to make a decision about a chemical. At the end of the time period, the chemical can be manufactured unless the agency has taken steps to ban or limit its manufacture.
How much of an incentive a regulatory provision is depends on how much capital has been invested in the product before the regulatory decision, and on how much time is saved by the regulatory advantage. In the case of something like a new drug, where the development expense typically is large and the regulatory delay could be lengthy, a regulatory leg up can be an important incentive.
This article has been broken into parts due to its original length. The parts can be found as follows:
• Part 1
• Part 2
• Part 3
• Part 4
• Part 5
The original document is Managing The Effects of Nanotechnology