Non-binding voluntary agreements

Abstract

In reality, most voluntary agreements with polluters (VAs) are not enforceable in the sense that no legal tools are available to enforce …rms'commitments. We examine whether such VAs are able to achieve an e¢ cient level of environmental protection when they are obtained under the legislative threat of a pollution quota.We show that they can improve social welfare relative to legislative intervention when lobbying Congress is very e¤ective and when the polluter and the regulator do not discount future costs and bene…ts heavily. These …ndings suggest that VAs should be used selectively, taking into account sector characteristics and the degree of in ‡uence of lobbying on Congress.

Negotiating a voluntary agreement when firms self-regulate

“…Our work is normative in that we aim to identify the best instrument choice for a welfare-maximizing regulator. In this respect, our approach is not original: Segerson and Miceli (1998), Lyon and Maxwell (2003), and Glachant (2007) all make this assumption.…”

“…Consequently, self-regulation or a VA emerges only when they are less costly than the public policies that the firms would face in the absence of voluntary commitments. In this research stream, some papers deal with VAs (Manzini and Mariotti, 2003;Segerson and Miceli, 1998;Glachant, 2007), while others look at selfregulatory actions but do not consider voluntary agreements Heyes, 2005;Denicolo, 2008). In the real world, however, regulatory agencies clearly have the VA arrow in their quiver, but it is equally clear that firms are free to undertake self-regulation.…”

The Role of Standards in Eco-Innovation: Lessons for Policymakers

“…Although voluntary agreements are mostly non-enforceable, ex post legislation can be used to punish non-compliants. Voluntary agreements may even be preferred over emission quota (a behavioral standard) from a static point of view, depending on the industry's lobbying power (Glachant, 2007).…”

Costly Enforcement of Voluntary Environmental Agreements

“…This could be because implementing an emissions control policy (whether a conventional regulation or a voluntary agreement) is so time consuming and costly that it is hard for the government to reverse itself. (Glachant (2007) discusses the difficulties of enacting new legislation). The combination of hard-to-reverse regulatory decisions and hard-toobserve aggregate emissions implies that in many cases it will not be possible to enforce a voluntary agreement by threatening to impose a tax in case of aggregate noncompliance.…”

“…Most theoretical analyses of negotiated agreements model simple agreements between a government and a single firm, or a series of independent agreements with an arbitrary number of firms (Segerson andMiceli 1998Schmelzer 1999;Nyborg 2000;Lyon and Maxwell 2003;Glachant 2007).3 As a result these studies preclude the possibility of free riding, which is a thought to be an important characteristic of existing voluntary agreements (Storey et al 1999;Alberini and Segerson 2002). Dawson and Segerson (2008) study the free-riding issue by modeling voluntary participation with an environmental agreement in which a regulator offers an industry the opportunity to meet an aggregate emissions target in exchange for not imposing an emissions tax.…”