Voluntary agreements with Industries - participation incentives with industry-wide targets: a comment

This comment reexamines the problem of free-riding in pre-emptive collective environmental voluntary agreements (VA) analysed by Dawson and Segerson in the context of VAs with a global emission target and a pigouvian tax used as a threat. Completely remaining in the authors' framework, we here reconsider their results about efficiency. While they claim it provides the optimal amount of environmental quality but inefficiently, we show that there exists an optimal threat under which the equilibrium of the game is a cost-effective VA. This result gives an additional indication on the way VAs should be used to be efficient.