Voluntary approaches in environmental policy, including agreements on environmental performance negotiated with industry and public programmes in which firms can volunteer to participate, are increasingly popular in a number of countries. However, OECD work questions their environmental effectiveness and economic efficiency.
The work examines the use of voluntary approaches in situations where alternative instruments could have been applied. It finds that, while the environmental targets of most voluntary approaches have been met, there are only few cases where such approaches have contributed to environmental improvements beyond what would have happened anyway. The work also indicates that the economy-wide efficiency of voluntary approaches is generally low, as they seldom incorporate mechanisms to equalise marginal abatement costs between all polluters. However, it recognises that traditional “command and control” policies also rarely equalise abatement costs, and voluntary approaches can offer a higher economic efficiency than such policies by providing firms increased flexibility in how they achieve environmental improvements.
There are cases where voluntary approaches represent the only policy option available. This is for instance the case when there is no authority in place that could adopt and enforce a “compulsory policy” – i.e. a “command and control” regulation or a tax related to environmental performance. OECD’s Guidelines for Multinational Enterprises provides a good example. These Guidelines are recommendations addressed by governments to multinational enterprises operating in or from adhering countries. They provide voluntary principles and standards for responsible business conduct in a variety of areas including employment and industrial relations, human rights, environment, information disclosure, competition, taxation, and science and technology.
Voluntary Approaches for Environmental Policy: Effectiveness, Efficiency and Usage in Policy Mixes provides an in-depth assessment of the use of voluntary approaches, building on a number of new case studies and an extensive search of the available literature. The focus of the analysis is both on voluntary approaches used in isolation and as part of policy mixes.
Relevant OECD reports and publications:
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