Incentives for Voluntary Early Action in GHG Mitigation and Role of Information Disclosure Mechanisms Donna Ramirez Harrington Department of Economics University of Vermont
Economics and the Environment Strengthen and harness market Quality of information matters Complement to regulation
Recent Climate Change News
Information Disclosure and Voluntary Agreements (VAs) Widespread use started in 1990s for chemical releases Adopted in US and Canada and many developing countries Regulatory pre-emption Regulatory relief Market reputation – consumers, stockholders Public recognition - lobby groups, local community Technical assistance and learning Flexibility Cost-effectiveness
Participation in GHG Information Disclosure Programs or Voluntary Programs for GHG Mitigation US DOE Climate Wise Program (1994-2001) Canadian Voluntary Climate Registry (VCR) (1994-2003) What are motives for reporting? Do reporters have lower GHG levels and higher innovation activity?
Motives for Participation US Climate Wise Canadian VCR To signal environmental To signal environmental responsibility to responsibility to the regulators, investors and regulator and the public the public High technical capacity (R&D and technical High technical capacity (experience in unilateral assistance) actions) Profitable, less financially risky http://www.sciencedirect.com/science/article/pii/S09287655 http://link.springer.com/article/10.1007%2Fs10640-010-9391-4 12000747
Impacts of these Early Action and Initiatives US Climate Wise Canadian VCR Promote innovative Reporters did not have activity (environmental lower GHG than non- patents) but only among reporters relatively low R&D firms Issues: • Credibility of data • Self-reporting • Observing outcome with and without the policy
Mandatory GHG Reporting EPA GHG Reporting Program (2011- ) http://www.epa.gov/ghgreporting/ Canadian Mandatory Greenhouse Gas Reporting System (2004- ) http://www.ec.gc.ca/ges-ghg/default.asp?lang=En&n=040E378D-1
Canadian Mandatory GHG Reporting 2004-2010 : Preliminary findings Negative abnormal stock market returns among reporters Absolute performance does not matter Relative performance matters: Negative abnormal returns higher for worse-performing firms Ranking in terms of GHG levels got worse relative to other reporters Voluntary reporting prior to mandatory reporting offsets some of negative effect on stock market returns Negative abnormal returns do not persist Old vs new news Changes in regulatory framework
GHG Reporting: Looking ahead Research: Are biggest stock market losers reducing GHG levels (more)? Policy: How to design GHG reporting systems Quality of information and ease of use Credibility of information Policy: How to design national GHG reporting systems Cap and trade system requires credible and systematic reporting
Other Environmental Reporting: Current Practices Policy: Disclosure policies for green power Supply-side Public Service Board to prescribe standards for electricity suppliers to disclose information on fuel sources and environmental impacts of electricity generation to retail customers on an annual or less frequent basis.
Other Environmental Reporting: Current Practices Policy: Reporting systems as behavioral intervention for consumers’ energy use Demand-side Personalized energy use feedback and social comparison Mailed regularly Short-term reduction unless there is repeated notices Hunt Allcott and Todd Rogers "The Short-Run and Long-Run Effects of Behavioral Interventions: Experimental Evidence from Energy Conservation," October 2014 American Economic Review (104:10, pp. 3003 – 3037).
Environmental Reporting: Looking ahead Policy: Reporting systems for heating and transportation
Publications and Work in Progress: GHG Voluntary Programs and Information Disclosure Published EMS and the VCR: The role of environmental management systems in the Canadian Voluntary Climate and Challenge Registry, Journal of Environmental Planning and Management, 57(8), 2014. http://www.tandfonline.com/doi/abs/10.1080/09640568.2013.787055 Innovation under the Climate Wise Program, Forthcoming at Resource and Energy Economics May 2013, 35(2) : 91 – 112 (with K Brouhle and B. Graham) http://www.sciencedirect.com/science/article/pii/S0928765512000747 GHG Registries: Participation and Performance under the Canadian Voluntary Climate Challenge Program, Environmental and Resource Economics , December 2010 47(4): 521-548 (with K. Brouhle). http://link.springer.com/article/10.1007%2Fs10640-010-9391-4 Firm Strategy and the Canadian Voluntary Climate Challenge and Registry (VCR), Business Strategy and the Environment , 2009, 18, 360-379 (with K. Brouhle). http://onlinelibrary.wiley.com/doi/10.1002/bse.604/abstract In progress: The Canadian Mandatory Greenhouse Gas Reporting System: Information Disclosure, Capital Markets, and Climate Change Mitigation (with K. Brouhle) Patent Citations and Network Effects from Climate Wise Program (with B. Graham and K. Brouhle)
Research Work on GHG Voluntary Programs and Information Disclosure Innovation under the Climate Wise Program, Resource and Energy Economics May 2013, 35(2) : 1. 91 – 112 (with K Brouhle and B. Graham) Patent Citations and Network Effects from Climate Wise Program (with B. Graham and K. 2. Brouhle), In progress These papers deal with the Climate Wise Program and patenting behavior. The Climate Wise program was one of the largest voluntary programs in the US geared toward climate change mitigation. One of its key objectives was to assist firms in reducing the greenhouse footprint of their operations by fostering innovation in processes and procedures. Unlike existing literature on Climate Wise, these two papers are concerned with the impact of the program on knowledge acquisition and transmission, rather than on measure of pollution directly. This is an important contribution because knowledge acquisition and transmission may not yield immediate environmental benefits such as reduced greenhouse gas emissions and energy cost savings but they may be important in building knowledge stock to achieve long-term emission reduction goals especially for the case of greenhouse gases for which the future form of future regulatory intervention is still uncertain.
Research Work on GHG Voluntary Programs and Information Disclosure EMS and the VCR: The role of environmental management systems in the Canadian Voluntary Climate and 1. Challenge Registry, Journal of Environmental Planning and Management , 57(8), 2014. GHG Registries: Participation and Performance under the Canadian Voluntary Climate Challenge Program, 2. Environmental and Resource Economics , December 2010, 47(4) : 521-548 (with K. Brouhle). The Canadian Mandatory Greenhouse Gas Reporting System: Information Disclosure, Capital Markets, and Climate 3. Change Mitigation (with K. Brouhle), In progress These papers examine the Voluntary Climate and Challenge Registry (VCR) in Canada which specifically prescribes the adoption of environmental management practices that would determine the quality of its action plan. The first paper shows that adoption of EMS prescribed by the VCR is more likely among facilities which have experience with implementing other management systems, such as ISO 14001, and among facilities in provinces with higher levels of legal and institutional support for EMSs but less reliance on the primary sector. The second and third focus on the information disclosure component of the VCR. The second paper focuses on the quality of publicly-available information that is related to the degree of involvement in the VCR. The findings show that firms which voluntarily disclose information about their climate mitigating activities tend to be the ones who are very visible: they are large (visible to the public), publicly traded (sensitive to stockholders) and high polluters (responsive to regulators), highlighting the value of VCR as an information disclosure mechanism. However, participants do not have lower greenhouse gas emissions than those who do not participate in the program, which may suggest some form of strategic greenwashing behavior. After the VCR program ended in 2004, the government of Canada legislated mandatory reporting of greenhouse gases by individual polluting entities in specific sectors. Thus, the third paper is an ongoing work which examines whether and how much mandatory information disclosure related to climate mitigating activities influences stock market returns of publicly traded firms and whether these firms reduce greenhouse gases in response to negative stock market returns.
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