Abstract
In this paper, the environmental effectiveness of voluntary instrument (VI) is examined . Here VI is defined as a policy instrument which makes polluters to reduce their environmental load emissions "voluntarily" by the threat made by the government that if they fail to achieve a certain environmental target before a certain point of time, an alternative policy instrument will be applied. The conditions to make profit-maximising firms achieve the target are investigated. With regard to VI applied to individual firms, it is shown that the condition is that additional costs to achieve the target is smaller than the subjectively expected value of additional costs of the alternative instrument applied when they fail to meet the target. Information instruments and subsidy-like instruments enhance the effectiveness of VI when used jointly. With regard to VI applied to a group of firms, it is shown that if there is a subset of the fines, whose environmental load abatements meet the condition of successful individual VI above individually and jointly achieve the collective target, then it is possible that the firms will talk and agree to an abatement assignment to achieve the target and implement it, although neither the agreement nor the implementation is automatic.
