Voluntary Approaches

Voluntary approaches can be defined as any mechanism or program that aims to protect the environment where relevant economic agents are able to decide whether or not to participate; that is, involvement in the program is voluntary and no direct penalties are imposed on non-participants, although incentives may be used to encourage participation.

There are three broad types of voluntary approach.

• Unilateral initiatives where polluters act without direct government involvement to protect the environment. The defining features of unilateral initiatives are that they are initiated, designed, and operated by polluters. Hence, government involvement is generally limited, which raises questions about whether unilateral initiatives are a policy mechanism or a type of market behavior. Yet governments can encourage unilateral initiatives by suggesting them to polluters or threatening mandatory measures. There are three main types of unilateral approaches: voluntary adjustment of internal processes (e.g., under an environmental management plan); industry self-regulation (e.g., codes of conduct); and environmental certification schemes (e.g., organic producer associations).

• Bilateral agreements between the regulator and a polluter or group of polluters. These initiatives involve negotiation between the parties about how environmental protection will be achieved. Both parties have obligations under the agreement with polluters generally expected to meet certain targets and abide by conditions to protect the environment and the regulator generally expected to provide some sort of incentive. The incentives provided by regulators can include subsidies (e.g., monetary payments and technical assistance), public recognition, and undertakings not to enforce regulations or to introduce new regulations. The agreements need not be legally binding, but there must be negotiation and some sort of understanding about the obligations of the parties.

• Voluntary public (or government) programs where the regulator determines who is eligible to participate, the obligations of participants, and the incentives used to encourage compliance. The key to these types of programs is that they are initiated and designed by the regulator, and relevant producers are invited and encouraged to participate. Again, the types of inducements include grants, technical assistance, and public praise.

The main advantages of voluntary approaches are that they are flexible (which provides polluters with the freedom to find cost-effective solutions) and noninterventionist. In addition, where disputes arise about the fairness of polluter-pays instruments like regulations and pollution fees, voluntary instruments can help overcome political resistance by enabling governments to pay polluters for the loss of property rights (i.e., they can resort to a beneficiary-pays approach). Due to these characteristics, voluntary approaches are often supported by polluters, which can assist in reducing the political costs for regulators. Further, it is sometimes claimed that voluntary approaches have lower administrative costs than other instruments and that in certain circumstances they can be more effective than mandatory approaches.

Although voluntary approaches can offer some benefits, because of the public good characteristics of many environmental goods and services (i.e., they are nonrival and nonexcludable) they are unlikely to result in an optimal level of environmental protection. In particular, there is a risk that some producers will seek to free-ride on the environmental protection measures undertaken by others. Like some economic instruments, voluntary mechanisms also lack certainty and are ill-suited to dealing with uncertainty and irreversibility.

Voluntary approaches can also be expensive to operate and administer. The incentives necessary to encourage participation can impose a significant burden on taxpayers. These problems can be exacerbated by gaming on behalf of polluters where they seek to take advantage of information asymmetries to extract excessive economic rent. In addition, the transaction costs associated with voluntary approaches can be high if there is a need to negotiate agreements with a significant number of producers.

Given the weaknesses associated with voluntary mechanisms, they are often seen as being used when political resistance blocks the introduction of more effective instruments or as a mechanism that supports or complements other programs.

Research has shown that if voluntary approaches are to be effective, the existence of a strong and credible threat of regulation is essential. The existence of an appropriate threat of regulation increases the incentive for polluters to participate and bolsters the bargaining position of regulators. It can also reduce the financial incentives needed to ensure participation, which can improve the cost-effectiveness of the program.

Was this article helpful?

0 0
Project Earth Conservation

Project Earth Conservation

Get All The Support And Guidance You Need To Be A Success At Helping Save The Earth. This Book Is One Of The Most Valuable Resources In The World When It Comes To How To Recycle to Create a Better Future for Our Children.

Get My Free Ebook

Post a comment