This book examines how voluntary regulatory programs can mitigate collective-action problems. Drawing on club theory, we present a theoretical perspective to help scholars and policy-makers to think systematically about the challenges and opportunities of voluntary regulation. While the book focuses on voluntary environmental regulation, our approach is sufficiently general to be applicable to voluntary regulatory programs in other issue areas.

The assumption underlying most environmental regulation in the world today is that the pursuit of profit leads firms to pollute the environment. The standard prescription for mitigating pollution's harms has been for governments to enact regulations that command firms to meet specific pollution targets and control how firms do it, such as by prescribing specific pollution-control technologies for firms' production processes. While command and control regulations have had undeniable successes in reducing pollution, they have been criticized for being inefficient because they do not discriminate between costly and cheap pollution control. Budgetary pressures have curtailed governments' monitoring and enforcement programs and thereby undermined their efficacy. In light of such criticisms, several new policy instruments have been offered to complement command and control regulations. We firmly believe that the command and control system should continue to serve as the backbone of environmental governance. The challenge is to find new policy tools that can preserve its virtues and yet mitigate its negatives. One such tool, voluntary environmental programs, or “green clubs” as we term them, looks to improve firms' environmental performance by having firms voluntarily adopt an environmentally progressive code of conduct.