The weakness of strong governance and the strength of soft regulation: Environmental governance in post‐modern form

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Abstract
Much of the debate on economic regulation has revolved around the relative role of markets and hierarchies and the juxtaposition of those two modes of governance vis‐à‐vis each other. However, both the two seemingly polar positions share a basic common assumption, namely the possibility of a recursion to a sovereign public authority capable of making collective decisions that are binding for actors within its territorial domain. The paper argues that several factors in modern society serve to weaken the sovereign regulatory public authority and that the strong governance assumption, therefore, is highly questionable. Given, for instance, that the relevant market now often extends beyond the boundary of any single regulator and that national differences in resource endowments, and industrial structure and institutional traditions vary extensively, nation slates frequently find it difficult to agree on common regulatory principles. Against this background, the paper supplements the traditional market‐hierarchy dimension with distinction between governance under sovereign state autonomy and governance in situations where such state authority is lacking. The paper argues that if no alternative to the state‐based authority model is developed, society may develop a regulatory deficit—whether through poorly governed hierarchy or imperfectly regulated markets—which may lead to considerable welfare loss. Such regulatory deficit is likely to particularly affect the environment as many environmental problems have international effects and affect multiple sectors of society. With a special focus on environmental issues, the paper therefore seeks to expand our understanding of regulation beyond the centrally authorised market‐hierarchy modes. To help frame the analytical discussion, it briefly refers to examples of environmental regulation from the energy field.

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