Self-Regulation

Voluntary Policies are an alternative to the traditional regulatory policies in decreasing emmisions.  This gives firms the option to reduce pollution on their own. Self regulation usually does not work unless there is the threat of future regulation by an agency. With a credible threat, firms can find the most cost-effective ways to reduce emissions on their own. If regulatory policies are later implemented, the polluting firms are already hitting the mark of lowered pollution. The other advantage of voluntary policies to individual firms is the gain they have over new entrants into the market who don’t have access to low-cost, pollution-reduction systems. By adjusting early, firms can create barriers to market entry and reduce competition.  Barriers like these usually are not good for the economy as a whole, but often benefit individual firms. Also, as the country becomes more aware of pollution problems, environmentally-friendly firms look attractive to consumers, and can give the firm an edge over their competition as well. A downside to these policies is that they give some firms an incentive to artificially raise their pollution. Firms that feel they will be regulated in the future might raise their pollution above their current level so that when decreased pollution is mandated, they can return to their previous pollution level without incurring the additional cost of abatement.

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