[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.]

Global Warming and Voluntary Initiatives:

the role of the Voluntary Challenge and Registry in Canada

Course: Corporate Perspectives on the Environment

Submitted to: Professor Sonia Labatt

Submitted by: Rory O'Brien

Date: December 18, 1997


Table of Contents

Introduction        2
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
Conclusion        26
Bibliography        28


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.

The Issue of Global Warming

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:

The Canadian situation

Canada will not escape the consequences of climate change. In fact, it may actually fare worse than other places due to its geographic position.

"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 1995.

"Canada is the second highest per capita producer of greenhouse gas emissions among major industrialized nations…The structure 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.

Overview of Policy Instruments

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

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

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 bonds).

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.

Industry voluntary initiatives

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 Standards Organization.

While self-regulation is realized without any government involvement, voluntary agreements and voluntary challenges are initiatives that are formal arrangements between industry and government, which are

"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.

degree of partnership

Industry Government

self-regulation voluntary agreements voluntary challenges

Figure 1

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 policy process…, [a] desire to minimize financial and legal liability related to environmental performance…, [t]rade 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 regulatory intervention."

As the next section illustrates, the voluntary initiative was the preferred option to use in Canada on the global warming issue.

Government Actions to Combat Global Warming

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.

The Framework Convention on Climate Change (FCCC)

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 them.

National Action Program on Climate Change (NAPCC)

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 Action Plan.

The Voluntary Challenge and Registry (VCR)

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.

Evaluation of success

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.

VCR's December 1996 Progress Report

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."

An Independent Review

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 performance:

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"

Analysis of performance failure

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 on reductions.

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 'file clerk'.

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 itself.

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.

Congruence with general theory

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

…While many…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 related to:


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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