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

In technically complex areas, political actors increasingly rely on private actors to shape public policy. This is due to the greater expertise of the private actors, mostly industry. This article theorizes 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 a regulatory threat with governmental action. 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.