Voluntary Agreement Examples: Sector-Specific

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Since the chief appeal of voluntary agreements is often their ability to overcome the adversarial nature of mandatory regulation, many such agreements are sector-specific, because sectors are natural negotiating units. 

Numerous sector-specific agreements have been entered into around the world.  The U.S. Department of Energy reached an agreement—the Climate Challenge Program—to lower carbon emissions in the electric utility sector.  The EPA also formed an agreement with the metal finishing industry to control emissions.  Previous agreements were reached with the automobile industry to lower emissions of gases that damaged the ozone layer.  In France, the main aluminum producer and the packaging glass industry association both signed voluntary agreements to curb carbon emissions.  The European Union entered into a voluntary agreement with European carmakers to lower passenger vehicle emissions.  Canada made an agreement with its carmakers, too.  Germany and the Netherlands have both reached voluntary agreements with electric utilities, and the Netherlands has an emission reduction agreement with its petroleum sector.  Japan has a voluntary agreement to reduce emissions with its airline industry.  China is experimenting with voluntary agreements to improve energy efficiency in its steel industry.

Voluntary sector-specific agreements encounter numerous issues.  These include (1) determining the boundaries of a "sector," and at what level (individual firms, industry groups, etc.) negotiations will or should take place; (2) how to deal with non-participating firms; (3) how to encourage (and then measure) carbon emission reductions beyond those that would happen without the agreement; (4) how technological innovation and potential cost savings affect the incentives of entire sectors—and individual firms within those sectors—to enter a voluntary agreement; and (5) the extent to which voluntary agreements by entire sectors will encourage environmentally-conscious consumers to spend more money on that sector's products (and how those potential increased sales will be distributed among firms within that sector, whether all or only some sign the agreement).