The Effectiveness of Voluntary Environmental Programs—A Policy at a Crossroads?

Abstract

Voluntary environmental programs (VEPs) have been used as a policy tool in the United States since the early 1990s and come in many forms. Early assessments of VEPs targeting changes in production processes showed that industrial participants improved their environmental performance and VEPs were celebrated as a viable alternative to more traditional regulation. Recent analyses using more sophisticated techniques, however, paint a less favorable picture. On the one hand, firms appear willing to sign up to VEPs, and in some cases, participants may be able to create a shield against future losses in shareholder value. On the other hand, these VEPs targeting production processes appear not to generate significant pollution abatement. The latter finding is particularly disturbing and this article discusses various explanations, including institutional failure and participant motivations. Future research needs to focus on understanding the firm motivation to invest in production‐related pollution abatement under a VEP. For policymakers, the research offers a warning on the limited impact to date of VEPs targeting production processes. However, the multitude of other VEPs, such as those which target new product development and changing market demands, merit a closer look to determine the overall potential of VEPs to engender positive environmental change.