New Modes of Governance in the Shadow of Hierarchy: Self-regulation by Industry in Europe

ABSTRACT In technically complex areas, political actors increasingly rely on private actors to shape public policy, due to the greater expertise of private actors. This article theorises and empirically investigates the conditions under which self-regulation by industry (governance) emerges in environmental policy at the European level and asks how effective it is. Is a shadow of hierarchy (governmental intervention) needed to ensure the emergence and effectiveness of voluntary agreements? We show that the willingness to engage in self-regulation is prompted by the threat of governmental legislation. Once legislation has been pre-empted, environmental self-regulation is implemented under a weak shadow of hierarchy. We identify the causes of this weak control and explain the differential performance in the two sectors on the basis of different market incentives.