ince they can access the improved environment without paying.
For example, if one government engages in a public initiative for the public good such as improving the air quality by reducing CO2 emissions, the benefit will likely flow to neighboring countries. There may be no incentive for the neighboring country to engage in a similar initiative, especially if it's able to free-ride off of the public good created by the other country. The Kyoto Protocol strives to limit this free-riding problem for CO2 gas reduction by getting the agreement from major polluting countries to publicly commit to a reduction. However, as we've seen in the last 10 years, certain countries have refused to sign the protocol, and other countries will not meet their targets.
We can use the prisoner's dilemma problem to understand the choice that a government must make between lax and stringent environmental policies. By forming a hypothetical 2x2 matrix comparing the benefits and costs of two countries, both countries would be better off by moving to stringent environmental policies. However, if one country moves to stringent policies, the other is better off by staying with lax policies because it will incur less cost and accrue more benefit. There are some generic strategies to change the equilibrium from lax to stringent policies:
- Increase the cost of current policies. In the example, if the cost of current policies increases, the dominant strategy switches to stringent policies.
- Increase the benefit of astringent policy. Firms can perhaps get customers to pay for the stringent policies. There is evidence of this with Fairtrade and premium electricity programs based on renewable energy. If the benefit increases by a certain amount, the dominant strategy becomes a stringent policy.
- Encourage governments and companies to move away from maximizing their own benefit and make them look to the greater good. In the game, this corresponds to playing stringent policies, no matter what.
The under-provision of public goods is an important problem societies face. Greenpeace and other similar NGOs have been formed to make sure that the public good is supplied by changing the payoffs of those who can supply it. Although it may seem obvious, it is important to point out that no one firm, organization, or government can "produce and distribute" the public good, since the natural environment cannot be owned outright.
When we look specifically at the models of both organizations, each faces particular challenges. Greenpeace's success lies on continually creating new media mindbombs to reinforce its message and lobby for change. Naturally, the question is whether Greenpeace can continue to develop media-worthy mindbombs. Furthermore, by refusing to accept donations from governments and businesses, Greenpeace has only two sources of income: individual donors and foundation trusts. Its membership has been relatively flat at 2.8 million people over the past five years. Unlike WWF, which has 5 million supporters, Greenpeace does not have any trusts, and therefore, the organization's existence relies on the willingness of its individual members to continue donating every year.
For WWF, a particular challenge might be publicly challenging the practices of governments and businesses if it is receiving donations from those parties. In the past, WWF has returned donations from businesses when it has disagreed with the donor's environmental practices. Fortunately, WWF has several avenues for income given its 1001 Trust Fund, licensing revenues from the Panda trademark, and its broader fundraising policy.
Q: Do you see the strategies of these organizations changing? Are they taking advantage of the current global focus on climate change?
A: It is hard to tell how the organizations will adapt to the future. Let's suppose that in the next few years, the G8 governments commit to major quantifiable reductions in greenhouse gases. If this were to occur, we may see the organizations focus on watchdog activities to ensure that the governments' commitments are indeed being u