Voluntary Agreements for Energy Efficiency or GHG Emissions Reduction in Industry: An Assessment of Programs Around the World

Abstract

Voluntary agreements for energy efficiency improvement and reduction of energy-related greenhouse gas (GHG) emissions have been a popular policy instrument for the industrial sector in industrialized countries since the 1990s. A number of these national-level voluntary agreement programs are now being modified and strengthened, while additional countries -- including some recently industrialized and developing countries -- are adopting these type of agreements in an effort to increase the energy efficiency of their industrial sectors. Voluntary agreement programs can be roughly divided into three broad categories: 1) programs that are completely voluntary, 2) programs that use the threat of future regulations or energy/GHG emissions taxes as a motivation for participation, and 3) programs that are implemented in conjunction with an existing energy/GHG emissions tax policy or with strict regulations. A variety of government-provided incentives as well as penalties are associated with these programs. This paper reviews 23 energy efficiency or GHG emissions reduction voluntary agreement programs in 18 countries, including countries in Europe, the U.S., Canada, Australia, New Zealand, Japan, South Korea, and Chinese Taipei (Taiwan) and discusses preliminary lessons learned regarding program design and effectiveness. The paper notes that such agreement programs, in which companies inventory and manage their energy use and GHG emissions to meet specific reduction targets, are an essential first step towards GHG emissions trading programs.