Voluntary Environmental Agreements in Developing Countries: The Colombian Experience

According to proponents, voluntary agreements (VAs) negotiated with polluters sidestep weak institutions and other barriers to conventional environmental regulation in developing countries. Yet little is known about their effectiveness. We examine VAs in Colombia, a global leader in the use of these policies. We find that the main motive for using VAs has been to build capacity needed for broader environmental regulatory reform. Their additional effect on environmental performance has been questionable. These findings suggest that in developing

Conventional approaches to pollution control rely on legislative mandates for cuts in emissions. Voluntary regulation, on the other hand, offers incentives to reduce emissions. Industrialized countries mainly rely on such regulation to spur overcompliance with mandatory regulation. In developing nations, however, policymakers use it to discourage all-too-common noncompliance with pollution-control laws.

In a new RFF Report, Senior Fellow Allen Blackman and his coauthors, Eduardo Uribe, Bart van Hoof, and Tom Lyon, examine the use of voluntary agreements (VAs) negotiated between polluters and regulators in Colombia, presenting new case studies of VAs signed with six parties: the cut-flower, palm oil, electricity and oil sectors, and trade associations in the greater metropolitan regions of Medellín and Cartagena. They find that although these and other VAs mostly failed to improve environmental outcomes, they did have positive impacts on regulatory capacity building—a primary goal of those participating in the agreements.

“For both regulators and industry,” according to the authors, “probably the most important motive for participating in VAs was to . . . facilitate exchanges of information between regulators and industry representatives—building environmental management expertise in regulatory agencies and in the private sector, filling gaps and resolving inconsistencies in new regulations, and limiting rent seeking.” Blackman and his coauthors write that the Colombian experience suggests that the most appropriate role for VAs in developing countries may be to build capacity for environmental management, not to improve environmental performance.
But most Colombians expected the agreements to lead to improved environmental performance, and that disconnect between the expected and actual benefits proved costly. Write Blackman and his coauthors: “It likely contributed to the rapid proliferation of superfluous VAs in Colombia in the late 1990s, growing disillusionment with VAs several years later, and the current confusion about whether and how to continue policy. In short, unrealistic expectations about VA benefits may have contributed to a misallocation of scarce regulatory and political resources to VAs. The broad lesson for environmental management in developing countries is that, although VAs may have significant benefits—namely capacity building—it is important that these benefits not be oversold or misrepresented.”