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Collective voluntary agreements to eliminate polluting products

Author

Listed:
  • Ahmed, Rasha
  • Segerson, Kathleen
Abstract
Recently some industries have collectively agreed not to produce models of a product that do not meet an environmental standard. We present a model to examine a voluntary agreement of this type. The conditions under which an agreement is profitable include the stringency of the agreement, the relative performance of the greener product, industry size and the number of participants. While an agreement can be profitable for all firms (both participants and non-participants), i.e., all firms can be better off with the agreement than without it, nonetheless, a free-rider incentive exists. Thus, despite the potential for a profitable agreement, absent an effective enforcement mechanism, the agreement is not part of a Nash equilibrium. We suggest that this provides a possible explanation for the initial success of the European washing machines agreement, as well as a recent move by the industry to abandon the voluntary approaches and call for mandatory standards.

Suggested Citation

  • Ahmed, Rasha & Segerson, Kathleen, 2011. "Collective voluntary agreements to eliminate polluting products," Resource and Energy Economics, Elsevier, vol. 33(3), pages 572-588, September.
    • Handle: RePEc:eee:resene:v:33:y:2011:i:3:p:572-588
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    References listed on IDEAS

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    Cited by:

    1. Maarten Pieter Schinkel & Leonard Treuren, 2021. "Corporate Social Responsibility by Joint Agreement," Tinbergen Institute Discussion Papers 21-063/VII, Tinbergen Institute.
    2. Mingshun Zhang & Ying Cui & Erik ter Avest & Meine Pieter van Dijk, 2018. "Adoption of voluntary approach: Can voluntary approach generate collective impacts for China achieving ambitious energy efficiency targets?," Energy & Environment, , vol. 29(2), pages 281-299, March.
    3. Rasha Ahmed, 2012. "Promoting energy-efficient products: voluntary or regulatory approaches?," Environmental Economics and Policy Studies, Springer;Society for Environmental Economics and Policy Studies - SEEPS, vol. 14(3), pages 303-321, July.
    4. Tsvetanov, Tsvetan & Segerson, Kathleen, 2013. "Re-evaluating the role of energy efficiency standards: A behavioral economics approach," Journal of Environmental Economics and Management, Elsevier, vol. 66(2), pages 347-363.
    5. Van Moer, Geert, 2022. "Horizontal agreements about the use of a natural resource," MPRA Paper 113878, University Library of Munich, Germany.
    6. Pang, Yu, 2018. "Profitable pollution abatement? A worker productivity perspective," Resource and Energy Economics, Elsevier, vol. 52(C), pages 33-49.
    7. Schinkel, Maarten Pieter & Treuren, Leonard, 2024. "Corporate social responsibility by joint agreement," Journal of Environmental Economics and Management, Elsevier, vol. 123(C).
    8. Kathleen Segerson, 2013. "Voluntary Approaches to Environmental Protection and Resource Management," Annual Review of Resource Economics, Annual Reviews, vol. 5(1), pages 161-180, June.
    9. Matthew Kotchen & Kathleen Segerson, 2020. "The Use of Group-Level Approaches to Environmental and Natural Resource Policy," NBER Working Papers 27142, National Bureau of Economic Research, Inc.

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