Private  actors

instruments to overcome veto points in the socio-technical regime and landscape. This neglects the political dimension that is necessarily involved in setting societal preferences (Meadowcroft, 2009b) and points again to the lack of normative guidance of the MLP and transition management. Third, since the innovation niches are populated by very few people, democratic concerns arise as it is taken for granted that “the visions and policies emerging from transition arenas will be accepted and deemed legitimate by the broader public”

(Hendriks, 2009: 343). Hence, transition management is an approach that introduces management into the MLP but shows the same weaknesses that have been discussed above.

Governing the Transition to a Green Economy 69 environmental policymaking is subject to more intensive economic scrutiny, while economic

policies are subject to less and less environmental assessment” (Schnaiberg et al., 2002: 21).

In this context of economic primacy it would be almost impossible to achieve ecological preservation in particular because the companies have no inherent interest to reduce environmental degradation. Schnaiberg et al. (2002: 29) argue that firms that improve their ecological performance do so for one of three reasons: “(1) firms were forced by regulation or social movement action to make improvements; (2) they made improvements only when their economic bottom line would be secure; or (3) they achieved the appearance of improvements through ‘creative accounting’ or misreporting.” In general, the treadmill of production approach does not allow any change towards the better under the existing political and economic framework. It argues for a revolution to solve environmental problems. This approach has lost influence with the growing green economy because it can hardly explain this development. Hence, newer approaches develop various economic incentives to behave environmentally friendly and include market-based tools.

2.3.3.2. ‘Economic  rationalism’  

Another extreme is to understand people as economic humans. In this understanding they become consumers guided by “selfish materialism of consumer values” in contrast to citizens which “are more concerned with collective, community-oriented values” (Dryzek, 2005: 113).

Hence, in theory, consumers act purely out of their economic self-interest rather than to achieve a larger normative goal for society. However, Spaargaren and Mol (2008) note that this clear distinction between citizen and consumers is blurring as citizens become active in the marketplace and consumers exert their influence on public goods. The environment is regarded as an economic resource base without any inherent value. The entire social life is regulated by market activities, which are triggered by price signals. Dryzek (2005: 121) labels this problem-solving discourse ‘economic rationalism’ which “may be defined by its commitment to the intelligent deployment of market mechanisms to achieve public ends”.

From this perspective, state regulation is always a reason for market failure that disturbs the most efficient resource allocation. Public actors only assign and enforce private property rights. Hence, proponents of a radical understanding of economic rationalism often forget that it is government that establishes and frames markets. The ambiguous treatment of government as the advocates of this radical understanding cannot solve this paradox. This has resulted in

“economic rationalists who advocate not wholesale privatization and private property rights, but rather market-type mechanisms and economic incentives to induce environmentally

appropriate behaviour” (Dryzek, 2005: 128) gaining influence. In this moderate approach consumers regain their citizenship. So-called “citizen-consumers” break down “the separation of nationally articulated political preferences of sustainable development and globally organised economic practices” (Spaargaren and Mol, 2008: 355).

This perspective materialises in market-based or economic environmental policy instruments, such as, “eco-taxes and subsidies based on a mix of regulation and market incentives, voluntary agreements, certification and eco-labelling, and informational systems” (Lemos and Agrawal, 2009: 76) which have gained prominence as they are more efficient than command and control regulation.²³ Their success depends “on the internalization of positive environment preferences among relevant stakeholders, most importantly citizens and consumers” (Lemos and Agrawal, 2009: 77). Markets achieving environmental ends require the state to implement the price incentives in the macroeconomic framework, businesses that respond to these signals by reducing pollution in order to lower prices and citizens that base their buying decision on prices and ecological impact. Depending on the innovations that are taking place, this requires adjustments to existing market designs (Matthes, 2009). Public planning must set the framework and ensure long-term stability underlining the importance of collaboration between the actors.

2.3.3.3. Greening  the  marketplace  

Economic rationalism has demonstrated that business and consumers are two sides of one coin: Demand for green goods creates supply and this results in new and improved goods stimulating demand. However, the green market does not necessarily lower the amount of consumed goods but it ensures that the environmental quality of the purchased products is better. For example, less or recycled resources are used in the production chain, new and more environmentally friendly production techniques have been implied. While the evolving green market is an important factor of the transition process, it can easily result in rebound effects, which can potentially increase overall GHG emissions.

The question “who has the power and motivation to act to change consumer behaviour – the consumers themselves, the producers, the government” (Witt, 2011: 113) or someone else, remains unanswered. Various preconditions need to be met for green consumption to become a major market force: consumers must believe that climate change is happening, comparable alternatives must be available and consumers must be motivated to buy low-carbon

23 See chapter ‘3.3.1.1. Pricing carbon to level the playing field’ for a discussion of carbon pricing mechanisms.

Governing the Transition to a Green Economy 71 alternatives which they trust to make an environmental impact (Szusz, 2011). While these

preconditions are difficult to meet, the number of market participants including ecological concerns in their buying decision is growing steadily. Citizens become change agents by making conscious and informed decisions. Demand for green goods should also stem from the public sphere. States are a huge source of demand in a national economy: If they turn themselves into green consumers, they can significantly influence the marketplace.²⁴

Besides increasing demand for green goods and services, two other reasons explain the emergence of environmentally sensitive businesses: “the external pressures on businesses that stem from governments, markets and civil society, and the internal conditions within businesses that relate to their governance structures, corporate cultures and capacities for innovation“ (Gouldson, 2008: 4618). The Porter induced innovation hypothesis supports the view that business can profit from environmental regulation “that are more stringent (or are imposed earlier) than those faced by their competitors in other countries” (Porter and van der Linde, 1995: 98). This would result in an increase of competitiveness of private actors because of state actions. While empirical evidence supporting the Porter hypothesis is inconclusive, “it reminds us that a particularly ingrained piece of conventional wisdom (‘environmental regulation reduces firm competitiveness’) is frequently wrong” (Tietenberg and Lewis, 2009: 586).

While environmental front runners can make large profits in this growing green market, remaining within the fossil fuel status quo promises even bigger profits in most cases (Dryzek et al., 2011). Nonetheless, many companies have identified this green market potential and adopt their business model voluntarily. The motivation to do so varies: It can be “in response to price mechanisms or to other incentives, to comply with specific emission reduction regulations (or in their anticipation), in order to enhance their reputation, to differentiate products and to attract investors” (Organisation for Economic Co-operation and Development, 2010: 52). Many companies even adopt their business models voluntarily at the price of increasing production costs. This is surprising from a theoretical point of view:

Neoclassical economics assumes that business only acts on environmental issues that are associated with additional costs if they are forced to do so by public regulation. Hence, other reasons must explain this behaviour. One reason is “the opportunity to influence public or private politics that makes corporate environmentalism profitable” (Lyon, 2009: 58).

Furthermore, businesses adopt voluntary measures because they fear more stringent

24 See chapter ‘3.3.2.2. Innovation stage’ for a more elaborated discussion of public procurement.

regulation in the future (Baron and Lyon, 2011). Hence, the state is key since the threat of regulation causes action. As a result, many ecological front runners request reliable and realistic long-term plans from governments as the basis for their planning (Organisation for Economic Co-operation and Development, 2010). Finally, Giddens (2009: 122) argues that businesses become more environmentally aware “because the message of need for change has struck home”. This would be an important step for the green transition since it is difficult to reverse and would signal a low-carbon lock-in.

Companies can face a trust issue when promoting themselves as green. While many companies work closely together with environmental non-governmental organisations to reduce their environmental footprint, companies are criticised for not living up to their promises (Baron and Lyon, 2011). So-called ‘green-washing’ describing that companies create “a green ceremonial façade” (Forbes and Jermier, 2011: 561) is a major problem that undermines trust. It is not limited to the private sector but can also describe government action (Fitzpatrick, 2011b). Focussing on a few environmental achievements while neglecting a variety of other issues is an often-applied strategy in this context. However, meeting certain standards, such as achieving GHG emissions reductions throughout the supply chain as well as measuring and verifying the results by third-party auditors and publishing the results, can overcome these concerns.