Voluntary Approaches for Environmental Policy

Book excerpt: Voluntary approaches include environmental agreements negotiated with industry and public programs which firms can volunteer to participate in. They are increasingly supplementing or replacing other environmental policy instruments, such as regulations, taxes and tradable permits. However, their environmental effectiveness and economic efficiency are often challenged. Questions often asked include: Do voluntary approaches deliver the expected environmental benefits? Do they help reach environmental targets in a cost-effective way? This report assesses the use of voluntary approaches by building on a number of new case studies and an extensive search of the available literature. The focus of the analysis is on the environmental effectiveness, economic efficiency, and administrative costs of voluntary approaches, either used in isolation or as part of "policy mixes". This report concludes that the environmental effectiveness of voluntary approaches is often questionable, and their economic efficiency is generally low. While administrative and transaction costs vary greatly among voluntary approaches, it is clear that if too few resources are spent in their preparation, negotiation and enforcement, their environmental impacts are likely to be modest. Combining a voluntary approach with a tax or a tradable permit system can trigger quite significant additional administrative costs, and the environmental integrity of the other instrument can be weakened.