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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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