Traditional legislation creates a legal sanction for desired activities by
the private sector and imposes penalties for non-compliance. Alternatively,
regulations may specify contractual obligations between parties, including targets,
time schedules, monitoring and evaluation efforts, etc. More recently, self-regulation,
or so-called voluntary agreements have gained prominence. Under voluntary agreements,
industry and government get together and come to some form of understanding
and commitments on certain targets and achievements, and agree to undertake
their own monitoring and reporting.
One example of a voluntary programme is the Top Management Commitment Programme (TMCP) in the UK. This programme, implemented by the Energy Efficiency Office (EEO), is targeted at the top management of companies in the UK. The programme attempts to elicit a formal commitment from the Chief Executive Officer (CEOs) of a company, requiring them to state their commitment to energy efficiency and display the same all over the company. The commitment was signed by the CEO and the Minister in charge, and it requires the company to formalise their commitment to energy efficiency. The company would undertake to report on energy consumption and efficiency, set up working groups and/or councils, suggestion schemes, etc. This programme has already been joined by over 1000 companies, including IBM, Shell, Ford, BA, etc. Follow-up surveys carried out by the EEO indicated that the success on energy conservation efforts was significantly higher in the companies that signed on than in the companies that were not part of the TMCP.
The U.S. EPA's Green Lights Programme is another example of a voluntary agreement (see Case Study 2). Companies participating in the programme agree to invest in energy-efficient lighting retrofits in exchange for technical expertise and public relations benefits from the programme. China has started its own Green Lights programme. Numerous successful corporate voluntary programmes for ozone-depleting-substance phaseouts have also occurred (see Case Study 17).
In developing countries, one example of an especially successful voluntary programme was part of the Thailand Promotion of Electricity Efficiency Project by the Thai national electric utility (EGAT), partially financed by the Global Environment Facility (Martinot and Borg, 1999). EGAT wanted to rely on voluntary agreements and market mechanisms, and elicited a voluntary agreement with all five Thai manufacturers and the sole importer of T-12 fluorescent tubes. Under the voluntary agreement, the manufacturers and importer of T-12 lamps agreed that they would switch to producing and importing more-efficient T-8 lamps instead of the less-efficient T-12 lamps. In return, EGAT engaged in an extensive public education and information campaign to educate consumers about the switch and make the switch acceptable to the market. By 1995, all lamp manufacturers and importers had complied with the agreement, and virtually all T-12 lamps were eliminated from the Thai market. Success was aided by a zero net cost to manufacturers (reduced T-8 production costs paid for the production conversion), T-8 retail prices similar to those for the T-12 lamps, and luminaire compatibility. Success was also attributed to cultural factors ; the utility stated that the public considered such voluntary agreements more desirable and fairer than price incentives like rebates or subsidies.
There is much scope for voluntary agreements and other types of voluntary pollution prevention programmes, particularly for reduction of GHG emissions (Aloisi de Larderel, 1997). Berry (1995) suggests that industry and government should together take steps to refine knowledge of technologies and to educate users and manufacturers. Bringing the cost of non-standard technologies such as photovoltaics (PV) systems down implies reaping economies of scale in manufacturing the PV systems. To bring the transaction barrier down, Berry further suggests more knowledgeable buyers, sellers, and suppliers, risk taking on the part of investors in large manufacturing plants, efforts at cooperation by major users of PV systems, and opportunities for risk sharing.
However, as identified in a recent report (OECD, 1999b), there can be problems with voluntary agreements, and the overall experience has been more mixed. In particular, an essential prerequisite for voluntary agreements is an underlying ability and willingness by policymakers to develop and enforce environmental regulations, so that the threat of alternative measures is credible. In countries where such conditions do not exist the use of voluntary agreements could be at best ineffective and potentially very damaging for environmental objectives.
New examples of unilateral corporate commitments are also emerging, involving senior executives of the company voluntarily making a clear commitment to addressing environmental issues. An example of leadership has been the recent clear announcement of BP Amoco to reduce CO2 emissions by 20%, combined with the establishment of an internal trading system to achieve that end.
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