Topic Area: Air Pollution
Geographic Area: Netherlands
Focal Question: Have Voluntary Agreements worked in the Netherlands National Environmental Policy?
Sources:
(1)Bennett, Graham, 1991. "History of the Dutch National Environmental Policy." Environment, 33(7): 7-9, 31-33.
(2)Segerson, Kathleen, and Thomas Miceli, 1998. "Voluntary Environmental Agreements: Good or Bad News for Environmental Protection?" Journal of Environmental Economics and Management. 36(2): 109-130.
(3)Steffen, Alex, and Alan AtKisson, 1995. "The Netherlands' radical, practical green plan." Whole Earth Review. 86: 94-99.
Reviewer: Beth Dunphe, Colby College '99
Review:

The Netherlands has been at the forefront of the "sustainable development" movement across the globe. The Dutch government announced its National Environmental Policy Plan (NEPP) in 1989 after years of debate and even government upheaval. The NEPP includes management plans for various air pollutants, energy conservation, recycling, mass transit, pesticides, and wastes. It was the first attempt of any national government to develop such a comprehensive policy (Bennett 7,8).

The Netherlands was motivated by a number of serious environmental issues. The crowded country has suffered from extremely poor environmental health, particularly associated with air pollution problems. As a result of significant public pressure, the government took action setting ambitious goals in several areas, including a 70-90% reduction in pollutant emissions from 1985 levels. The main goal of the NEPP was to accomplish environmental progress without suffering economically. In fact the NEPP stipulated an increase in GDP and the allocation of less than 3% of the national budget to the plan (Steffen and AtKisson).

Perhaps most unique about the NEPP is that it attempts to achieve its lofty goals through a combination of voluntary and command and control strategies. The government set specific reduction targets for various pollutants, which were non-negotiable. These targets were to be met mainly through the voluntary action of businesses and industry. Industrial sub-sectors and even individual businesses were encouraged to work with the government to develop specific timetables and deadlines for the reductions. How these targets are actually met is up to the individual firms. Through the NEPP, the government has negotiated over 100 voluntary agreements with industries (Segerson and Miceli, 109). The goal of the voluntary agreements is to shift the cost of the NEPP implementation from the government to the private sector, providing a micro solution to a macro problem.

Voluntary agreements have become increasingly popular as policy tools, but are relatively new in environmental policy. Potential benefits of voluntary agreements include:

1. "the encouragement of a pro-active cooperative approach from industry, which can reduce conflicts between regulators and industry

2. greater flexibility and freedom to find cost-effective solutions that are tailored to specific conditions

3. the ability to meet environmental targets more quickly due to decreased regulation and implementation lags" (Segerson and Miceli, 110)

These benefits imply that voluntary agreements have the potential to reduce the costs of the NEPP as the Netherlands had hoped. As suggested, the targets for abatement were reached by significant cooperation between the industries and the government in the Netherlands. It was the flexibility of 'customized implementation' that promoted cooperation (Steffen and AtKisson, 96).

So far, two major types of environmental agreements have emerged. The carrot approach induces participation through positive incentives, like subsidies and cost sharing. The stick approach induces participation by threatening a harsher approach if the voluntary agreement is unsuccessful (i.e. future legislation) (Segerson and Miceli 110). The NEPP's voluntary agreements are of the stick approach, with the government threatening strict legislation and taxation if the agreements are not reached. Some have called the NEPP a bunch of "coercive voluntary agreements" (Steffen and AtKisson, 95).

Segerson and Miceli (1998) have found that "because of the potential cost savings, a voluntary agreement is the equilibrium outcome of the interaction between a polluter and a regulatory agency" (111). However, they found that the level of pollution reduction depends on: the allocation of bargaining power, the magnitude of the background threat, and the social cost of funds. They found that when the regulator has all (or most of) the bargaining power, the background threat is serious, and the social cost of funds is low (making subsidies a policy option), the level of abatement reached by the voluntary agreement will be significantly higher than would have been reached by regulations (129).

The incentive to participate in the voluntary agreements for NEPP was to prevent the government from instituting further regulations. The Netherlands' tough environmental regulations are enforced by an environmental police force with special courts to prosecute firms undertaking illegal activities. With such effective enforcement of environmental regulations, industries had the incentive to try and limit the number of regulations that they could face penalties for. Specifically, the government threatened to enact regulations mandating pollution controls and excise taxes if the voluntary agreements were unsuccessful (Steffen and AtKisson, 97).

The NEPP has been successful on many fronts. Some targets have been met or exceeded, while others are on target for 2010. Some pollution targets that involved a few large producers, like various chemicals, have been met successfully.

However, a number of targets were not met and in some cases have been relaxed. CO2 levels have actually continued to rise since the NEPP implementation. The main cause of this is the large number of automobiles in the Netherlands. The stipulated CO2 stabilization at 1990 levels will require changing the behavior of individuals rather than industries (Bennett, 8). In fact, the government is planning to implement an energy tax to reduce CO2 emissions (Steffen and AtKisson, 98).

The voluntary agreement portion of the Netherlands' National Environmental Policy Plan has had mixed results. It has been successful when there are a small number of polluters and stiff threats of future regulations. In areas like CO2 with numerous individuals responsible for pollution, voluntary agreements with some firms haven't worked. Many have become disappointed with the results of the NEPP; the "Green Plan" has been dubbed the "Gray Plan" by the media. In this case, non-traditional voluntary agreements have been generally unsuccessful in controlling air pollution levels.

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