Voluntary agreements on energy efficiency are contracts between government (government agencies, federal, state, or local) and industry (firms or industry associations), which are initiated by the government. They include negotiated targets to meet specific energy efficiency goals with time schedules often ranging from five to ten years.


Voluntary agreements have served as a tool for developing a long term strategic plan for increasing industrial energy efficiency through engaging stakeholders such as engineers, management, industry associations, financial institutions, and governments in joint activities to deploy BAT (Best Available Technologies) and foster innovation for industrial energy efficiency. Setting targets under negotiated agreements involves assessing the energy-efficiency potential of each industry and identifying economically feasible measures for improvement. This assessment can be made by an independent third party and used as a basis for the negotiation. Rewards and sanctions, such as auditing, benchmarking, monitoring, disseminating information and offering financial incentives, can motivate participation.


These agreements can increase awareness of industrial energy efficiency and engage stakeholders. Successful implementation is typically rewarded with financial gains or exemption from mandatory measures. They tend to receive greater support from industry and are more flexible and faster to implement than mandatory measures. However, if compliance is low, agreements may be replaced by mandatory alternatives. Voluntary agreements may be replaced by mandatory alternatives if considered ineffective; or can be accompanied by restrictive policies, such as a carbon tax. In developing countries, voluntary agreements combined with restrictive policies and strict regulations are widespread.