Voluntary- and Information-Based Approaches to Environmental Management: A Public Economics Perspective

Abstract

Interest in decentralized approaches to environmental management has grown significantly in recent years. Along with the standard instruments of environmental policy—quantity, price, and technology regulations—is a growing number of voluntary—and information-based approaches (VIBAs) that includes more decentralized policies, programs, and market trends. This article offers a perspective on VIBAs through the lens of public economic theory. The unifying theme is that many VIBAs are based on the creation of impure public goods and/or clubs. The innovation of these arrangements is the way in which jointly produced private benefits effectively subsidize the voluntary provision of public goods. From this perspective, VIBAs can be viewed as a property rights approach because they privatize an aspect of public good provision in order to make such provision more incentive compatible with firm or individual preferences for decision making. Although VIBAs have the potential to promote environmental protection and economic efficiency, these outcomes are not assured. However, a more careful examination of the theoretical basis for VIBAs can help us identify the circumstances under which these approaches hold the greatest promise for efficient environmental policy.

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