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Voluntary Approaches in Climate Policy

Voluntary Approaches in Climate Policy. Magali Delmas & Janice Mazurek. OUTLINE. The possible role of voluntary approaches (VAs) in climate policy Definitions Why do firms and the regulator participate? Effectiveness and efficiency of VAs Applications, case studies

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Voluntary Approaches in Climate Policy

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  1. Voluntary Approaches in Climate Policy Magali Delmas & Janice Mazurek

  2. OUTLINE • The possible role of voluntary approaches (VAs) in climate policy • Definitions • Why do firms and the regulator participate? • Effectiveness and efficiency of VAs • Applications, case studies • Conclusions on the actual role of VAs

  3. 1. The possible role of VAs • VAs are not new (John Muir’s Sierra Club 1892) • We all make voluntary efforts to reduce our environmental impacts, with little effect • Better results if firms participate in efforts • Better results if authorities promote and encourage voluntary efforts • VAs are the fastest growing type of environmental instrument in recent years (OECD 2003) • In some cases, they are the only instrument for climate protection (USA)

  4. 2.1 Definition • VA = any effort to reduce environmental impacts that go beyond what is imposed by regulation or what is cost-minimizing in the face of economic instruments • Types: • Self regulation • Negotiated agreements (NAs) • Public voluntary programs (PVPs)

  5. 2.2 Types of VAs

  6. 2.3 Further distinctions • Do firms undertake voluntary abatement alone or jointly? • What type of compensation or incentive is offered by the regulator? • Is abatement costly in the net or not (‘no regret actions’)? • What are the motives for participation?

  7. 2.4 Distinctive features of VAs • Co-operation with the regulator • There must be an interest, material or ideal,for polluters to make an effort • VAs are flexible • Co-ordination among polluters

  8. 3.1 Why do firms participate ? • Direct financial gain, win-win, no regrets action (chaps 3 & 10) • Subsidies or tax rebates (chaps 3, 6, 13, 14 & 15) • Exemption from regulation, regulatory relief (chap. 11) • To prevent restrictive regulation or tax (chaps. 3-8 &14) • Collective learning (chaps 5, 10 &12) • To improve environmental reputation (chaps 4, 5 & 10) • Strategic move (chaps 4 & 5) • Stewardship (chap. 2)

  9. 3.2 Why does the regulator participate ? • VAs are less efficient than other instruments, but those other instruments are not available: Lyon & Maxwell (chap. 6) • Regulator is not sure Parliament would accept constraining regulation: Langpap & Wu (chap. 7) • Parliament or citizens may prefer VAs, which they consider more participative and less costly: Grepperud & Pedersen (chap. 8)

  10. 4.1 Effectiveness and efficiency of VAs • Effectiveness = impact on emissions. Survey of literature and experiences by Khanna & Ramirez (chap. 2). Difficulty: what is the baseline? • Efficiency = (1) total cost minimizing amount of abatement, (2) least cost abatement. Survey by Segerson & Roti Jones (chap. 3)

  11. 4.2 Specific problems • Trade-off between effectiveness of VAs and market competition: Brau & Carraro (chap. 4) • Same problem with imperfect information and incomplete contracts; e.g. VAs are signals of abatement costs to regulator or of environmental quality to customers: Cavaliere (chap. 5)

  12. 5.1 Applications, case studies • Long term agreements in the Netherlands: Glasbergen (chap. 9) • Green Lights and Energy Star Office in the USA: Howarth, Haddad & Paton (chap. 10) • Programme XL in the USA: Delmas & Mazurek (chap. 11)

  13. 5.2 Applications, case studies • Production and product regulation in the EU: Albrecht (chap. 12) • Climate Change Levy Agreements in the UK: de Muizon & Glachant (chap. 13) • CO2 law in Switzerland: Baranzini, Thalmann & Gonseth (chap. 14) • Energy agreements in Denmark: Bjørner (chap. 15)

  14. 6. Conclusions on the role of VAs • What is special about climate change ? • Do not expect too much of VAs • VAs are useful in early stage • They should be part of policy mix

  15. 6.1 What is special about climate change? • The uncertainty about abatement costs and consequences of warming is so great, that constraining measures are hardly acceptable • Global and long term effects; no direct victims who could sue polluters • Many polluters, many non-point sources

  16. 6.2 Do not expect too much of VAs • Participation is greater when targets are energy or emissions intensities • They work fine as long as they are costless (no regret) • In general VAs reach their targets, but those targets are not very demanding • They are costly to negotiate and implement (NAs with large polluters, PVP with small ones)

  17. 6.3 VAs are useful in early stage • In early stage of environmental policy, VAs are often the only possible choice because they are the most politically acceptable instrument • VAs can facilitate the preparation and implementation of more constraining instruments • They can create support for those instruments • VAs can also delay the implementation of more constraining instruments

  18. 6.4 VAs should be part of policy mix • Modern environmental policy combines diverse instruments in order to address the conflicting goals of efficiency and equity • VAs do not particularly increase the effectiveness or efficiency of policy mixes, but they can increase their acceptance and influence burden sharing • VAs are rather transitory measures that prepare the ground for more constraining instruments

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