Environmental Engineering Reference
In-Depth Information
problems. R&D/innovation markets address the
future development of technology with a view to
particular new or improved goods or services. SDA
that adversely impacts such innovation incentives
in innovation markets would likely be scrutinized
for its anti-competitive impact.
Thus, it is reasonable to interpret many new
sustainable business models dependant on en-
vironmental standardization will reside in both
technology markets and innovation markets. As
an innovation market, the SDA develops new
technologies through design, sense-making and
negotiation. The standardization activity itself
constitutes a clearing mechanism or market that
attracts innovation investment (e.g., participation,
design or data contributions) then negotiates an
anticipatory standard ex ante. The anticipatory
standard directly impacts the final design of com-
pliant products through the licensing, pricing and
field of use constraints embodied in the standard,
as focused by the SDO's own process rules. As a
technology market, the SDA evaluates component
technologies from among various substitutes,
sometimes competing technologies. These are
complex matters made more accessible by the
prominent environmental standardization example
of Unocal Oil Co.'s participation in SDA concern-
ing the reformulated oxygenated, “summer time”
gasoline (RFG).
Starting in the late 1980s, Unocal participated
with other petroleum industry groups in the Cali-
fornia's Air Resources Board (CARB) develop-
ment of the Phase II standard for reformulated
gasoline (RFG). This CARB proceeding was
convened to determine “cost-effective” regula-
tions and standards governing the composition of
low emissions RFG. During the RFG rulemaking
in 1990-1994, Unocal contributed equations and
data based on its own proprietary research, and
these data were incorporated into CARB's RFG
standard. The FTC's complaint alleged that Unocal
misrepresented that these data were not propri-
etary when Unocal was actually actively seeking
the refinery industry serving California invested
heavily to comply with the RFG standard and
refiners became locked-in to compliance with the
RFG standard, Unocal aggressively pursued patent
infringement claims. In some cases, Unocal won
royalty payment judgments of $.0575 per infring-
ing gallon. Unocal settled the FTC's complaint that
had alleged Unocal made misrepresentations to
CARB, constituting materially false and mislead-
ing statements and unfair methods of competition.
The FTC alleged that the deceptive conduct per-
mitted Unocal to obtain unlawful market power
when CARB enacted regulations that overlapped
almost entirely with Unocal's IP in violation of the
Federal Trade Commission Act. The settlement
reduced Unocal's contingent liabilities thus paving
the way for Chevron's takeover of Unocal. The
merged company was prohibited from enforcing
the RFG patents, Chevron was barred from col-
lecting royalties, Chevron was forced to cease
patent infringement suits on the RFG patents,
and the RFG patents were dedicated to the public
domain (In re Unocal 2005).
Two other types of environmental markets are
substantially driven by standards. First, the factor
markets for entities that must limit emissions are
impacted by standards. For example, disclosures
of emissions required by environmental regula-
tors signal suppliers, consultants, prospective
employees, the financial markets and customers
of entities with substantial current emissions
problems or with environmentally clean profiles
(Bagby, Andrews & Murray 1995). Standards for
such disclosures are typically de jure produced
by government regulators so SDA participation
in the U.S. is limited to notice and comment rule-
making procedures for “affected parties” (APA
1946). Such procedures can vary widely among
the world's nations. Another such mechanism
works primarily through the capital markets, which
can exert financial discipline on publicly-traded
firms when contingent environmental liabilities
are disclosed and discussed. These revelations
