[N.B. - the original MS-Word file had footnote citations throughout, but I can't seem to get them to convert to HTML. If anyone reading this can tell me how to do this, I'd appreciate it.
In the meantime, for those who'd like the Word file for the document, click here.]
the role of the Voluntary Challenge and Registry
Course: Corporate Perspectives on the Environment
Submitted to: Professor Sonia Labatt
Submitted by: Rory O'Brien
Date: December 18, 1997
The Issue of Global Warming 3
The Canadian situation 5
Overview of Policy Instruments 7
Command and control regulations 7
Market based Instruments 8
Industry voluntary initiatives 9
Government Actions to Combat Global Warming 12
The Framework Convention on Climate Change (FCCC) 12
National Action Program on Climate Change (NAPCC) 13
The Voluntary Challenge and Registry (VCR) 14
Evaluation of success 15
VCR's December 1996 Progress Report 16
An Independent Review 18
Analysis of performance failure 22
Congruence with general theory 25
Most research scientists and policy-makers around the world are
in agreement that global warming is a real phenomenon, and that
anthropogenic greenhouse gases are a significant contributing
factor. Citizens, environmentalists, and politicians, have become
increasingly concerned about the anticipated deleterious effects
of such warming on the biosphere and on society, and have begun
calling for more effort to cut back on greenhouse gas emissions.
Industry and union leaders, on the other hand, are concerned about
the potential harm to the economy as a result of emission reductions,
and have been more resistant to taking strong action. As a result,
there has been an almost exclusive reliance on voluntary initiatives
as the social policy instrument to deal with the issue since 1992.
However, lack of success in achieving national reduction targets
is prompting a turn to a regime of legislated economic instruments
in the form of global tradable emission permits.
This paper will provide some background to the issue, and discuss
the general nature of policy instruments available to deal with
environmental problems. The Canadian situation will be highlighted
with an overview of the Voluntary Challenge and Registry, a government-industry
voluntary initiative designed to reduce emissions to below 1990
levels by the year 2000. This will be followed by an analysis
of why it has not been successful in achieving targeted reductions.
Global warming is produced by a build-up of atmospheric greenhouse
gases, which include carbon dioxide (CO2), methane (CH4), nitrous
oxide (N2O), and chloroflorocarbons (CFCs), among others. Together,
they absorb some of the sun's direct infrared radiation, and some
that is reflected back off the earth. This causes heat retention
and a warming of the atmosphere. Most greenhouse gases occur naturally,
but they are also produced by human activity such as the burning
of fossil fuels and deforestation. The warming has impacts on
climate and weather patterns, and therefore the issue is often
referred to as "climate change".
Climate includes all the elements of weather, such as temperature,
precipitation, and wind patterns. Climate change refers to changes
in the climate as a whole, not just one single element of the
weather. Global climate change, therefore, refers to changes in
all the interconnected weather elements of the Earth.
The Intergovernmental Panel on Climate Change (IPCC) is a U.N.
advisory group of 2,500 scientists, and is the authoritative scientific
body on climate change. In their 1995 definitive study, which
provided more evidence for similar conclusions drawn in their
1990 report, their main findings were:
Canada will not escape the consequences of climate change. In
fact, it may actually fare worse than other places due to its
"For Canada, most models project greater warming in interior
regions than on the coasts and greater winter warming in the Arctic
than in the south, with increased average winter precipitation
across the country and decreased net soil moisture and water resources
in the Canadian interior in the summer. The frequency and intensity
of storms are also projected to increase. The confidence of model
projections for regions is low, but to date they suggest net average
warming for central and northern Canada of 4-6°C by 2050
and 3-4°C along the east and west coasts. Canada's agricultural,
fishery, and forestry sectors could be adversely affected, as
could human health and the nation's infrastructure. Canadians
would face important socioeconomic repercussions should these
changes materialize as predicted."
Canada also is one of the world's leading per capita emitters
of greenhouse gases, with emissions associated with energy use
accounting for 89% of the country's greenhouse gas emissions in
"Canada is the second highest per capita producer of greenhouse
gas emissions among major industrialized nations
of the Canadian economy plays a major role in determining the
extent of our greenhouse gas emissions. Energy-intensive natural
resource industries are particularly important. When compared
with other industrialized nations, Canada's goods-producing sector,
for example, is more dependent on the extraction and processing
of natural resources than on manufacturing. As one of the world's
leading producers of natural resources, this country enjoys an
abundance of energy resources, including coal, hydro-electricity,
natural gas, uranium, and oil. The availability of reliable domestic
sources of energy at reasonable prices has been critical in establishing
Canada's energy-intensive, natural resource based industries.
While the share of products manufactured for export has increased,
Canada continues to rely heavily on the export of energy-intensive
natural resources, including minerals, agricultural goods, and
a variety of energy products such as coal, oil, and gas. This
means that greenhouse gas emissions associated with these exports
are attributed to Canadian sources."
While the scientific community is almost completely unified in
its acknowledgment of the reality of global warming, industry,
particularly in the energy sector, is less convinced that disaster
is immanent, and sees suggested reductions in emissions as being
devastating to the economy. As a result, one of their major fears
is that governments will impose strict legislation, such as a
carbon tax, and they have therefore been strong advocates of an
industry-wide voluntary reduction program.
We will turn now to a general overview of the types of policy
instruments available to deal with environmental problems.
There are three main policy instruments used to create planned,
operational changes in an industry in order to alleviate environmental
problems: (i) command and control regulations (legislated), (ii)
market based instruments, and (iii) voluntary initiatives.
Command and control regulations are measures instituted through
government legislation aimed at directly influencing the environmental
performance of polluters by
"regulating processes used, by abandoning or limiting the
discharge of certain pollutants, and/or restricting activities,
for example, by licensing, the setting of standards, and zoning.
Regulations by 'command and control' leave no choice to the polluter,
who must comply or face penalties."
Command and control has been the predominant public policy instrument
to deal with the problem of corporate environmental pollution.
In many cases, legislation entails setting limits on the amount
of pollution a company is allowed to create, e.g., the US Clean
Air Act, and the US Clean Water Act. It also can ensure compliance
through a system of mandatory reporting, such as the National
Pollution Release Inventory established under the Canadian Environmental
Protection Act (CEPA), and the US Environmental Protection Agency's
Toxic Release Inventory under the Emergency Planning and Community
Right to Know Act.
Besides emission controls, other examples include: bans, production
input controls, consumption controls, price controls, rate-of-return
regulation, technology standards, licensing and certification,
and impact regulations.
Market-based instruments (also called 'economic instruments')
place financial burdens on polluters, to the extent that these
costs provide an incentive to reduce pollution.
"Although economic instruments are often discussed as an
alternative to 'regulation', they require some legislation and
regulations for their creation. They are, in fact, a less direct
form of regulation, with the potential to allow more scope for
initiative on the part of the persons regulated, and to provide
financial rewards for those who exceed the minimum standards"
Examples of market-based instruments include: charges (to industry
and consumers to cover costs of pollution), market creation (tradable
permits, market/price intervention, liability insurance), subsidies
(grants, soft loans, tax allowances), deposit-refund systems,
and financial enforcement incentives (non-compliance fees, performance
The experience of using tradable permits to phase out lead in
gasoline in the United States is a good illustration of how market-based
incentives can not only result in successful elimination of pollution,
but do so in a cost-effective manner.
Voluntary initiatives by industry have been defined as
"a regulatory process whereby an industry-level, as opposed
to a governmental- or firm-level, organization (such as a trade
association or a professional society) sets and enforces rules
and standards relating to the conduct of firms in the industry".
Examples of self-regulation in the area of environmental management
include: codes of conduct, such as the Coalition for Environmentally
Responsible Economies' (CERES) principles and the Chemical Manufacturers
Association's (CMA) Responsible Care Program, and development
of standards, such as those of the ISO 14000 series from the International
While self-regulation is realized without any government involvement,
voluntary agreements and voluntary challenges are initiatives
that are formal arrangements between industry and government,
"agreement[s] between the government (or one of its agencies)
and a section of the community (or its representatives) whose
main purpose is to establish a degree of regulation over the specific
activities of the latter, and which involves a non-statutory regulatory
procedure or code of practice, or both, which the latter is committed
to follow under the terms of the agreement".
The diagram below illustrates the amount of government involvement
in the various types of industry voluntary initiatives.
The Voluntary Challenge and Registry (VCR) is an example of how
the Canadian government is working with industry to lower greenhouse
gas emissions and counter the effects of climate change. Moffet
and Bregha list others:
"Various government initiatives have challenged polluters
to improve their performance beyond regulatory requirements and
to report their efforts publicly. These programs have met with
mixed results. Some, like the VCR, have had only limited effect.
By contrast, programs such as the 33/50 program in the US, the
Ontario Pollution Prevention Pledge Program (P4), and the federal
Accelerated Reduction and Elimination of Toxics Program (ARET)
have been quite effective."
They go on to explain why voluntary initiatives are being increasingly
preferred as policy options:
"Both government and industry are expressing increasing interest
in voluntary environmental initiatives. In addition to the general
increase in sensitivity to environmental issues and an emerging
awareness of a moral imperative to act, industry's interest stems
from three main considerations: [a] desire to influence the public
, [a] desire to minimize financial and legal
liability related to environmental performance
and competitiveness concerns
In addition to sharing many
of these assumptions, the current government interest in voluntary
action is also driven by: an ideological interest in reducing
government intervention in the market place; the possibility that
the promotion of voluntary approaches will place fewer demands
on government's reduced resources; and the belief that the promotion
of voluntary approaches will be more effective in some cases than
As the next section illustrates, the voluntary initiative was
the preferred option to use in Canada on the global warming issue.
This section will outline the main steps taken by political leaders
to in addressing global warming and climate change. It discusses
the The Framework Convention on Climate Change for action at the
global level, and the National Action Program for Climate Change
at the national level in Canada.
After over a decade of sounding the alarm, scientists around the
world finally succeeded in convincing policy makers to do something
about the problem of global warming. The Framework Convention
on Climate Change (FCCC), a treaty agreement, was signed by 154
countries, including Canada, at the Earth Summit in Rio in 1992,
and came into effect in 1994.
"Countries ratifying the Convention
agree to take climate
change into account in such matters as agriculture, energy, natural
resources, and activities involving sea-coasts. They agree to
develop national programmes to slow climate change. The Convention
encourages them to share technology and to cooperate in other
ways to reduce greenhouse gas emissions, especially from energy,
transport, industry, agriculture, forestry, and waste management,
which together produce nearly all greenhouse gas emissions attributable
to human activity."
"Specific commitments concerning efforts to limit greenhouse
gas emissions and enhance natural sinks apply to the OECD countries
as well as to 12 "economies in transition" (Central
and Eastern Europe and the former Soviet Union). Although negotiations
left the treaty language less than clear, it is generally accepted
that the OECD and transition countries should at a minimum seek
to return by the year 2000 to the greenhouse gas emission levels
they had in 1990."
It is important to note that reduction targets were non-binding,
meaning that countries would not be penalized for not meeting
In conjunction with the UN FCCC commitment, the Federal Government
of Canada took steps to initiate the National Action Program on
Climate Change (NAPCC), officially launched in February 1995,
whose aim is to facilitate the reduction of emissions to 1990
levels. Flexibility and inclusivity are important characteristics
of the program.
"The Action Program should be read as a "living"
plan - one that pursues sectoral and broad-based opportunities
through the development of appropriate actions and measures by
private and public jurisdictions, reviews progress, and makes
adjustments as required."
Most of the NAPCC's efforts are directed toward raising public
awareness and increasing research and development on the issue.
For concrete action, however, the program puts a strong emphasis
on voluntary initiatives. Regulation is largely limited to energy
efficiency standards (e.g., household appliances), and aside from
"a few small taxes on new vehicles, in some provinces",
there is little use made of economic instruments. The type of
voluntary initiative chosen was that of a voluntary challenge.
A program was begun in 1995 called the Voluntary Challenge and
Registry, and it has been regarded as the centrepiece of the National
The Voluntary Challenge and Registry (VCR) is a government-funded
program that encourages industry, business and government to make
public commitments and to develop and implement voluntary action
plans for reducing their greenhouse gas emissions.
"The role of the VCR is to recruit participants and to record
and report on their actions, commitments and achievements. The
VCR is not designed to play an audit role or report statistics
on greenhouse gas emissions. Instead, the voluntary nature of
the VCR encourages participants to take ownership and responsibility
for their emissions and to develop and implement their own solutions.
The Registry component of the VCR is a permanent, open and public
record of the commitments made and the actions taken by industry,
business and government to limit emissions of greenhouse gases
from their operations. Participants can use the Registry as a
benchmarking tool to compare their progress to other organizations
and as a source of innovative solutions through the sharing of
information and technology."
Participants in the challenge submit a letter of intent confirming
a commitment to limit or reduce greenhouse gases from their operations.
This is followed by submission of an action plan, and subsequent
progress reports. The Internet registry publicly documents the
progress and achievements of all participants.
It must be mentioned that although the VCR was only created as
a formal government-led program in 1995, many of the leading industries
in Canada had been putting measures in place to reduce emissions
since the early 1990s. The VCR, however, was established to provide
a greater coherency and impetus to these efforts, as well as to
persuade and educate others to start reductions.
Though the operations of the VCR were included in the 1996 NAPCC evaluation, there are two other operational evaluations that focused specifically on the VCR, and the degree to which it has been successful. One is the annual progress report produced by the VCR staff, and the other is the annual independent review performed by the Pembina Institute, a citizen-based organization involved in environmental education, research, policy development and consulting. A description of each will be followed by an analysis of why the program has not been as successful as originally hoped.
The internal progress report gives a recap of staff activities
for the year, along with some statistics on participants' submissions,
a categorical listing of types of participant activities (energy
efficiency, demand-side management, fuel substitution, process
redesign, management or corporate practices, and offsets), and
a breakdown of participation by industry sector. In style, it
is more anecdotal reporting than quantifiably analytical, but
there is evidence presented that the VCR has made progress relative
to the previous year's operations, particularly with respect to
eliciting participation from the major greenhouse gas emitters
in the energy, forestry and electrical utility sectors.
The year's results are listed under their three criteria by which
to gauge success:
Participation - 619 registrants, representing a majority of emissions in Canada, had
submitted letters of intent or action plans;
Commitment - 331 participants had submitted action plans;
Achievement - 284 participants had described the
actions they had completed, and 108 had quantified their achievements
to date in their action plans.
There is considerable emphasis on presentation of vignettes of
the successes of individual companies in some aspect of emission
reduction or another, as is understandable in the VCR staff's
role as program booster. What is not shown, though, is any indication
of a concrete relationship between the VCR's operations and the
change in the overall amount of emissions in Canada, or of a methodological
framework for ongoing evaluation.
One of the main functions of the VCR was to act as an information clearinghouse for the participants, to keep them apprised of the latest developments and improvements in the program's processes. To this end, they developed an Internet-based website, on which they posted program updates and information on how to participate, as well as the full text of submitted action plans. While this seems to have been fairly active after startup in May 1996, online activity appears to have slowed to the point where the latest update, the VCR newsletter, was posted in January 1997, almost a year ago. This seems to indicate that the site is no longer being maintained, which may indicate operational difficulties. A year previously, the Acting Director General, Energy Policy Branch, Natural Resources Canada, "raised questions about the level of support required for the Office's activities and its ability to provide support to VCR participants."
The Pembina Institute has performed two reviews of the VCR, one
in December 1995, the other a year later in 1996. The first was
a review of the program as a whole, while the second concentrated
on the individual action plans of the participants.
Pembina staff developed a framework to assess the credibility
and effectiveness of individual greenhouse gas emission reduction
action plans submitted to the VCR. This framework tested each
submission against a list of 45 evaluation criteria covering 13
different subject areas, and scored the results out of 100.
Plans were assessed on the basis of a) the quality of the information
provided, b) the content of the action plans, and c) overall climate
protection performance. In their words:
"First, the review examines the extent to which submissions
provide the reader with the basic information necessary to understand
an organization's current and future greenhouse gas emissions
profile. In addition, the review assesses the extent to which
an organization has provided information on its past and future
actions to address climate change.
Second, the review focuses on the actions organizations are taking
to reduce greenhouse gas emissions in their climate change action
plans. The review also assesses whether or not a framework of
incentives and initiatives has been established to ensure that
these actions go beyond 'investment as usual'.
Third, the review evaluates the past performance of organizations
in producing results (i.e., greenhouse gas emission reductions).
As well, it evaluates the potential benefits for climate protection
of future actions that are planned or to which an organization
is committed to."
The reviewers did not assess all action plans submitted by participants.
They rejected all but 73 plans on the basis of not meeting the
minimum standard of containing (i) a greenhouse gas emissions
inventory, and (ii) a commitment to either consider or implement
specific actions to reduce emissions after submission of the plan
to the VCR. Failure to meet these standards indicates that reduction
is not a serious priority with those participants.
Some general findings include:
Regarding the three areas of assessment, here is a breakdown of
a) the quality of the information provided
Although leading participants had made progress in itemizing their
inventories of greenhouse gases, they were still weak in projecting
future emission levels, and in describing actions they are taking,
or intend to take, to reduce emissions.
b) the content of the action plans
In general, participants scored poorly in this area, mainly because
actions beyond 'business as usual' were not emphasized, particularly
those framework actions such as reduction-specific R&D, employee
education, internal financial incentives, encouragement of suppliers
or customers to reduce, among others. It is these kinds of activities
that are necessary to make a meaningful contribution to Canada's
climate change commitments.
c) overall climate protection performance
Fewer than half of the participants showed declines in emissions
between 1990 and 1996, and of the 28 reporting 1,000,000 tonnes
or more in 1995, 17 showed emissions increased from 1990 levels.
Only 38 provided a projection of emissions to the year 2000, and
of the 20 reporting 1,000,000 tonnes with a projection, 14 expect
emissions to remain above 1990 levels in the year 2000.
The primary conclusion drawn by the reviewers was that although
there was an increase in the quality of the reporting,
"the great majority of submissions still fail to provide
solid evidence that participants are making any significant progress
in managing or reducing greenhouse gases"
Greenhouse gas emissions in Canada increased 9% between 1990 and
1995, and are predicted to be 8% higher than 1990 levels in the
year 2000. It is quite clear that Canada will not come close to
meeting its original target of a reduction to 1990 levels.
In its explanation of why greenhouse gas reductions were not realized,
the Pembina review places the blame in large part on the VCR.
This understanding is shared. The Sierra Club of Canada, which
has developed its own "Rational Energy Policy" that
promotes energy efficiency and green technologies, is highly critical
of what it sees as government inaction, and is not happy with
the VCR either - "The Voluntary Challenge and Registry clearly
is not working and will not contribute to significant reductions
of greenhouse gas emissions in Canada."
Even Rick Findlay, Manager of the Climate Change Air Issues Branch
at Environment Canada, admitted in 1996 that "efforts are
not working as well as expected". He reiterated this again
at a November 1997 Climate Change Briefing
Of the reasons that the VCR did not perform as well as originally
hoped , there are four that may be singled out as major factors:
i) little incentive to reduce emissions, ii) increase in production
due to rising consumer demand, iii) poor operational design of
the VCR, and iv) a lack of government and industry support.
Little incentive to reduce emissions
There has been very little incentive for major greenhouse gas
emitters to go beyond 'business as usual'. The Framework Convention
on Climate Change did not penalize non-compliance with reduction
targets, which allowed the federal government to comply with industry
demand for a completely voluntary participation in the challenge.
There were no regulatory 'sticks' put in place, to enforce compliance
Increase in production and demand
Industrial production, and energy consumption, increased as a
result of the boom in the economy over the past few years. Senior
managers at Suncor and Ontario Hydro have publicly stated that,
notwithstanding implementation of measures that reduce emissions
on a per unit of production basis, they have been unable to reduce
overall emissions in light of increased consumer demand. This
is most likely indicative of other corporate situations. And again,
governments, with their own financial concerns, and political
emphasis on creating jobs, have not been inclined to mount major
campaigns to get consumers to cut back on their purchases.
Poor design of VCR
The VCR suffered from a poor initial design. Whereas it should
have been established with a well-developed and tested set of
stringent procedures, detailed standardized reporting mechanisms,
and rigid and comprehensive evaluative criteria, it has taken
two years to begin instituting a certain degree of rigourousness
in its requirements from participants. Coupled with the lack of
government regulatory power, it seems the more effective 'taskmaster'
role has been subordinated to one akin to that of a cheerleading
The result of this state of affairs is an array of incomplete
participant reports, with a wide variety of activity measures,
that make it practically impossible to correlate actions directly
with any reduction in emissions brought about by the VCR program
Lack of support for program
It also appears likely that there was a lack of government support
given to the program. The scope of its responsibilities seems
far out of proportion to its size of operations. And there did
not appear to be much in the way of a extensive public education
campaign by the NAPCC, which would have enhanced the VCR's image.
Industry, too, appears not to have given a high profile to the VCR. The VCR's anticipated move from government program to independent entity was predicated on two thirds of its funding coming from the business sector. This was to have taken place in early 1997, but is still not yet accomplished.
These conclusions are generally in line with the directives for
an effective voluntary initiative given by Moffet and Bregha,
who are quoted at length due to the relevancy of their advice
to the situation of the VCR.
"Measuring and monitoring the effectiveness of voluntary
initiatives raise a number of challenges. The objectives of the
program must be clear in order to know what to measure. A good
baseline must be established in order to measure changes. Adequate
resources must be allocated to ensure accurate and timely information.
And considerable effort may be required to overcome the conceptual
challenges associated with extracting relevant information that
is embedded in other process measurements and in establishing
cause and effect relationships.
Measuring results is important both for internal and external
accountability. This information is required internally to monitor
and evaluate the effectiveness of the program. Externally, the
growing interest in voluntary approaches has been accompanied
by a demand for improved corporate environmental reporting to
ensure that these initiatives meet public policy goals
initiatives to date have succeeded in enhancing
environmental protection, some have not. The objectives and the
design of these initiatives therefore matter. More specifically,
any voluntary approach to the environment must confront issues
This paper has sought to provide some light on why greenhouse
gas emissions have risen in Canada since 1990 in spite of a political
commitment to other nations to reduce them to well below 1990
levels. Background information on the nature of the global warming
issue, and a history of actions taken by national governments
was given, along with an overview of the types of social policy
available to deal with environmental concerns.
An inclination to voluntary initiatives led the government of
Canada to establish the Voluntary Challenge and Registry as the
key element in its National Action Program on Climate Change.
The VCR operations were described, and the findings of both an
internal and external review of the program to December 1996 were
presented. These findings indicate that while the program has
had some success in soliciting participation from major greenhouse
gas emitters, it has so far failed to achieve real reductions
in levels of emissions.
Finally, reasons were postulated as to why the program has underperformed,
namely: lack of incentives, increased industrial production,
poor program design, and lack of support for the VCR.
At the recent UN World Conference on Climate Change in Kyoto, an agreement was reached for most OECD countries to reduce emissions 6-8% of the 1990 base levels by around the year 2010. The fact that these targets will be legally binding, with penalties, is commensurate with the move away from reliance on purely voluntary initiatives to an economic instrument in the form of marketable emissions permits, backed with regulatory oversight, to ensure that caps on emissions are indeed adhered to. It would seem the time for the voluntary challenge is past and it is time to get down to serious business.
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