Voluntary Agreement Examples: North America

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The United States has been experimenting with voluntary agreements since the 1990s.  Local initiatives to curb ozone pollution by discouraging passenger vehicle use on certain days represent one early type of voluntary initiative aimed at shaping behavior via raising awareness.  On a bigger scale, the EPA’s 33/50 program to control the release of 17 toxic chemicals produced mixed results, with firm size being an important factor in whether the agreement lowered pollution—larger firms were more likely to meet their commitments than smaller firms were.  The EPA has also developed an environmental leadership program, a voluntary program designed to recognize firms with exemplary environmental records.  The publicity and awareness generated is used as an incentive to improve environmental performance.  The Department of Energy (DOE) created the Climate Challenge program to encourage electric utilities to reduce carbon emissions.  The DOE also developed the Energy Star program to bring attention to energy-efficient home appliances.  And in the absence of federal regulation, ten Northeast states have developed the Regional Greenhouse Gas Initiative to control carbon emissions by electric utilities.  Other regional agreements are also under consideration.

Issues include (1) the effect of these voluntary agreements on relationships between firms and the government; (2) the rigor with which outcomes are monitored and publicized; (3) the role of industry trade associations (and more generally, how negotiations between firms and the government occur and the significance of interest groups); (4) whether and to what extent the threat (either explicit or implicit) of future regulation affects firm incentives to embrace voluntary agreements; and (5) the timing of firms that join voluntary agreements—with early joiners potentially being more likely to take their commitments seriously by making significant investments to improve environmental performance.

An emerging issue is how a national cap-and-trade program or other mandatory emission-reduction scheme will interact with existing voluntary initiatives by firms and individuals.  For instance, how will regulation affect the market for carbon offsets, which are already purchased on a voluntary basis by concerned individuals and firms?

Canada has also embraced voluntary agreements.  In 2005 a voluntary agreement to reduce carbon emissions produced by passenger vehicles was signed by the Canadian government and the automobile industry.  Canada also has experience with (1) other government-led initiatives to curb various forms of pollution, (2) negotiated agreements between firms and the government, and (3) unilateral agreements and goals set by firms themselves to improve environmental performance.

Mexico also has experience with voluntary agreements to control toxic chemicals (Mexico has yet to adopt any significant carbon emission policies), with mixed results.  Voluntary agreements were once thought of as a possible replacement for failed command-and-control regulations, but have yet to produce the desired environmental benefits.