The Economics of environmental voluntary agreement

This paper provides elements in order to contribute in including environmental voluntary agreements (VAs) into the standard framework of the economics of the environment. Environmental voluntary agreements are based on the exchange between the P.A. and firms and on the design of a framework of incentives to parties in a context of negotiation. A cost and benefit evaluation of VAs for the firm under typical alternative conditions and a simple model to describe the firm’s behaviour in signing and complying with VAs are developed. Free riding, regulator capture and transaction costs issues are considered in assessing the possibility to pursue efficiency goals through VAs. Key words: environmental policy, environmental voluntary agreements, free riding, negotiation, voluntary approaches