Olson's Theory of Collective Action in The Context of Co2 Emission Reduction

Policymakers have long faced issues in creating effective policies that reduce CO2 emissions while ensuring that all parties involved agree to the proposed approach. The United Nations Framework Convention on Climate Change was established in 1992, but has yet to establish an effective global agreement on carbon emission depletion. With rising temperatures and sea levels, increased droughts and flooding, the threat of global warming is ever growing. Mancur Olson’s theory of collective action offers a framework for why provision of public goods is problematic in many cases, including methods to improve the chances of cooperation. In the case of reducing CO2 emissions, the most valuable mechanism to encourage collective action is to establish a common belief in the cause by the people, further enhanced by participation from the private sector.

Olson’s theory of collective action asserts that though it may be in a group’s best interest to provide public goods, large groups often fail to achieve this. Pure public goods are non-excludable and non-rivalrous, meaning no one has the ability to control who uses the good and the consumption of the good by one person does not prohibit the use of it by another. This presents the free rider problem, where people benefit from a good without paying a share of the cost, which is why the market does not provide public goods but society relies on institutions to supply these. Olson argues that because of this problem, it is tough to collectively coordinate group decisions, also since groups may not agree on which interest to achieve.

Olson explains that collective action becomes more difficult in large groups due to the lack of significance of an individual’s contribution, anonymity of a group, and the issue of enforcement. In the context of reducing CO2 emissions, if most people in a society choose to decrease their emission by changing their incandescent light bulbs to LED bulbs, an individual may choose not to partake, as their contribution will be minimal. However, if no one changes their light bulbs, CO2 emissions will not decrease. The anonymity of a large group means that this individual can refrain from cooperating without the group knowing who it is. Furthermore, in large anonymous groups it is more difficult to achieve agreement on a common goal. In terms of enforcement, since it is a complex problem to identify who has participated or not, it is also tough to punish the abstainer. Thus, the individual shares none of the costs but will reap the benefits of lower CO2 emissions.

Despite the abovementioned, Olson does not insist that collective action never occurs- clearly seen through provision of public goods such as public transportation or universal healthcare in many countries. In order for public goods to be supplied, various mechanisms can be used to improve contribution and collective action. Olson argues that if persons are given selective incentives, or that they receive benefits only if they contribute, this will increase participation in the group objective. This is the “by-product” argument, in which the accomplishment of the group objective is a by-product of the engagement of individuals as a result of a particular incentive. Collective action may also expand if external enforcement is implemented. For example, if the State routinely checks homes to see if all light bulbs have been changed to environmentally friendly ones and fines the residents that do not, the abstainer in the previous paragraph is more likely to change their bulbs in fear of financial repercussions. Political entrepreneurship is another way in which participation may rise. If a party leader coordinates and motivates their party to attain the goal of CO2 emission reduction, thus encouraging party supporters to do the same, contribution may improve. Lastly, if a group has common values or beliefs, this may also encourage participation, as all individuals will see the group objective as beneficial.

Additionally, Samuel Bowles and Herbert Gintis theorize that cooperation is a product of evolution. In primitive societies, cooperation was beneficial as it meant greater capability in food acquisition, ability to share food, and better defensive powers. As such, individuals that contributed to the collective were awarded and had an increased chance of survival, eventually leading to humans being more group-minded. Moreover, societies that favored collective action may have had an increased chance of survival; hence societies today should also subscribe to cooperation. Joint action may also occur as a result of the incentive of reciprocity. If a person knows that they will receive cleaner air if their neighbor changes their light bulbs to environmentally friendly ones and vice versa, both parties will be encouraged to participate.

A policymaker willing to reduce CO2 emissions must tackle all of the issues presented by Olson’s theory. Since global warming and thus increasing CO2 emissions is a global issue, for the purpose of this essay, it is assumed that the policymaker must work with hundreds of other policymakers in order to achieve his goal. Moreover, this means that the policymaker is trying to encourage collective action for the largest group possible, the human population of the entire planet. One of the biggest issues with enforcement in the global context is that there is no legal body to leverage compliance of other nations with an international agreement. Previous agreements proposed by the U.N. have been voluntary, often resulting in countries pulling out of an accord to avoid failing to meet requirements. For example, Canada withdrew from the Kyoto Protocol in 2011 after realizing it could not meet their targets of reducing greenhouse gas emission to avoid financial penalties. Furthermore, most have been considered unsuccessful in effectively diminishing the effects of global warming.

Encouraging collective action becomes particularly difficult as nations have varying degrees of concern over global warming, where some countries fail to even consider global warming a threat to the planet and survival of the human species. It is also the case that some countries with the highest CO2 emissions are the ones that see it as a minimal threat. This was most recently seen when the United States, accounting for approximately 16% of carbon emissions globally, decided to pull out of the Paris Agreement put forth by the United Nations (U.N.). This was previously considered one of the most successful international environmental agreements, with ratification from 179 countries. Thus, it is found that there is no common belief in the severity of the effects of CO2 emissions.

Although there is no common view of the harm of CO2 emissions, this is the most powerful tool the policymaker can utilize when it comes to public goods. Elinor Ostrom proves that sustainable use of resources can be achieved given the right conditions in her book Governing the Commons: the evolution of institutions for collective action. She claims, “…A core goal of public policy should be to facilitate the development of institutions that bring out the best in humans.” Her research found that in smaller communities, groups created solutions that ensured sustainable use of public resources. These groups were successful if they had effective means of communication; clarity around group membership; an approach that suited the local conditions; equal opportunity of affected group members to participate in decision-making; ability to self-govern the solution; a system for monitoring compliance and scheme for enforcement by group members; affordable and attainable method to resolve issues; and encouraged responsibility for all members. Arguably, the most important condition is that of clear communication, illustrated by the Prisoner’s dilemma. Without communication, it is in both parties’ best interest to confess. However, if they had the opportunity to strategically plan, it becomes clear that they are better off if they both stay silent rather than confess. This is also on the basis that they can trust the other to follow through on their word. Fortunately, there are no restrictions on whether or not one is allowed communicate the importance of reducing carbon emissions to the masses.

Despite this, the issue of global communication arises. A Bangladeshi citizen may be able to explain to his neighbor the value in reducing carbon emissions by biking rather than driving to work, in fear of rising sea levels, but relaying this message to a Wisconsin native may prove more difficult. As such, it becomes the policymaker’s task to encourage effective communication regarding the importance of diminishing CO2 emissions. This appears to be a cumbersome assignment, and must therefore be relayed to the policymakers of all nations to push this message to their respective citizens. As mentioned previously, U.N. agreements focused on environmental sustainability have not been very effective. Rather, policymakers should focus on ameliorating education around the effects of carbon emissions; the power individuals have in diminishing this effect; and ways to participate. Since high CO2 emissions is a global issue, one most contribute to and therefore one most can combat, the most effective method of achieving this objective is to develop a common belief in the value of this. Examples of the effectiveness of a common value have been shown- in many Western European countries global warming is considered a large threat and their carbon emissions are lower than other similar nations. Clearly, this is also a result of policies implemented by the European Union and each specific nation’s government. However, some countries have established a culture around environmentally friendly practices. For example, in Amsterdam, the capital of the Netherlands, 60% of trips are by bike. If such a “biking culture” or culture of more environmentally friendly modes of transportation could be established globally, carbon emissions would decrease significantly.

Instituting a common belief is also valuable as it can lead to social shaming of those that do not obey environmentally friendly practices. Ernst Fehr and Simon Gachter, in their paper Cooperation and Punishment in Public Goods Experiments, prove that the “… willingness to punish constitutes a credible threat for potential free riders and causes a large increase in cooperation levels… ” If the threat of punishment can encourage collective action, this proves to be a powerful enforcement mechanism that all individuals can engage in. Additionally, it diminishes the need to trust fellow citizens, as fear of punishment will motivate them to follow through on their promise to contribute. As discussed earlier, with a global problem comes the issue of lack of global enforcement. The U.N. can encourage member states to participate in international agreements and impose penalties on those that fail to reach the desired result, but it cannot force contribution. One can clearly argue that nations have better enforcement mechanisms, through implemented policies or laws, which would definitely assist in improving collective action. Nevertheless, if the goal is a complete switch to environmentally friendly practices, many of the practices are difficult to monitor even for a state. For example, while a nation can create a law stating all homes must have LED light bulbs, routinely checking and verifying citizens are complying with this would be extremely tedious and costly with minimal benefit. However, if individuals know what environmentally friendly light bulbs look like and believe in the value of them, if they notice their friend has not switched theirs, they may discourage others from socializing with them. As creatures that desire social interaction, the friend is encouraged to comply with the implementation of LED light bulbs. With social shaming, two of Ostrom’s conditions can be met- a monitoring and enforcement scheme and encouraged equal responsibility for all group members.

Another issue with reliance on the ability of the U.N. to attain lower carbon emissions is that previous agreements have required adherence to similar targets for very different nations. Though the U.N. does not specify or demand certain methods for how countries should achieve these targets, it is unrealistic for such varied states to attain comparable targets. Ostrom illustrates this matter in her condition of groups using means that fit the local conditions. Particularly, a point of contention for many developing countries when attempting to reach a consensus for an agreement is that diminishing carbon emissions through use of renewable energies will stunt economic growth. Furthermore, these countries have less capital to adapt to climate change technologies and policies. Consequently, nations must have the freedom to choose the most appropriate course of action for them. One may argue that this will simply lead to developing nations to decide to disengage in any depletion of carbon emissions. As such, it is seen that leaving nations to determine their ideal method will only be successful if the citizens have a common belief in implementing and improving sustainable practices.

A policymaker can also harness the impact of firms engaging in corporate sustainability practices by rewarding companies committed to the application of these. In recent years, corporations have realized the importance of corporate social responsibility. When reviewed by third parties, companies are now rated on financial achievement as well as environmental, social, and governance accomplishments. Reputational risk, not just regulatory or financial risk, is now a factor they consider as a threat to losing customers. Companies understand that consumers are concerned not only about what products available for purchase and the price of them, but where they come from and the ways the firms operate. State Street Corporation, one of the oldest and largest banks in the world controlling approximately 10% of the world’s assets, recently released a product, ESG (environmental, social, governance) solutions, which factors in environmental, governance, and social factors into portfolio management. This demonstrates that portfolio managers are starting to focus not only on their potential return of investment and risk associated with this, but also how different firms rate on non-financial factors. From this, one can see that if investors are more willing to invest in corporations that have sustainable practices, the power of these companies is also increased. Furthermore, if companies successfully institute a common value of these various factors, collective action will improve.

The concept of corporate social responsibility is especially important because corporations are often the ones that stand to lose the most when environmentally friendly policies are implemented by the government. De facto, 71% of greenhouse gas emissions are caused by only 100 corporations. Additionally, this means that corporations have great incentives to bribe politicians or partake in lobbyist groups to prevent climate change policies from being implemented. Consequently, it is difficult to see how one policymaker willing to enact policies that reduce carbon emissions will have substantial leverage over their fellow politicians to counter incentives from large corporations. As Amita Joseph explains in Successful Examples of Corporate Social Responsibility, “Consumers’ and citizens’ campaigns can make all the difference.” Again, the significance of a common belief for the people is highlighted. If consumers can establish an expectation that corporations must participate in sustainable means of production, they will have no choice but to comply in fear of losing revenue from lost customers. Thus, companies have less incentive to undertake lobbying groups or bribes for politicians, as this would only be an additional cost to already lost clients.

Furthermore, participation by the government and individual citizens is not substantial to have imperative effects on global warming. If corporations produce the majority of carbon emissions, the most effective method of reducing carbon emissions will be to discourage firms from engaging in practices that produce carbon emissions. It has also been shown that corporate values can influence employee behavior and values. Jesus Cambra- Fierro found that corporations could especially influence consumer behavior with respect to environmental factors and producer loyalty. From this, it appears that corporations and consumers can work in symbiosis, positively influencing the other to engage in environmentally sustainable practices. Consumers can hold companies accountable, while firms can encourage workers, particularly those that do not see CO2 emissions as an issue, to participate in diminishing emissions. As examined earlier, global warming is a global issue that requires the participation of the entire human population. Ostrom’s condition of groups having the potential to self-govern and allowing all affected members to partake in governance is possible with corporate social responsibility. Firms are required to participate by consumers, but if they can choose the approach best suited for their particular business, collective engagement will increase.