Governance and governance structures, and institutional inertia

Before both theories will be described and discussed, the concept of institutions will be defined. This concept is used both in the governance theory and the institutional inertia theory. The concept of institutions has several definitions. Veblen defines institutions as

“settled habits of thoughts common to the generality of man” (Vatn 2005:10). Vatn (2005:60) on the other hand defines institutions as “conventions, norms and formally sanctioned rules of a society. They provide expectations, stability and meaning essential to human existence and coordination. Intuitions regularize life, support values and produce and protect interests”.

3.1.1 Governance and governance structure

One can look at the theory of governance structure from different points of view. This thesis is looking at a governance system that will try to mitigate climate change. Thus, the literature will be drawn from environmental governance literature.

Environmental governance can be defined as “the set of regulatory processes, mechanisms and organizations through which political actors influence environmental actions and

outcomes” (Lemos and Agrawel 2006:298). In addition to the public actors, governance also includes actors like communities, NGOs and businesses. This means that governance is different from government (Lemos and Agrawel 2006).

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As there are several ways of looking at the theory of governance structure, there are also different ways of defining the concept. Najam et al. (2006:2) states that governance structure can be looked at “as the sum of organizations, policy instruments, financing mechanisms, rules, procedures and norms” that regulate the development of environmental issues dealt with in the specific governance system. The concept of organization can both be referred to as actors and institutions. Governance structure will be designed and maintained in a certain way depending on what types of actors are involved. According to Vatn and Vedeld (2010), the various actors can be distinguished in the terms of their capacities and competencies. At the same time, the actors involved and their input to the governance structure will affect the capacities of the whole governance structure. The type of coordination will also affect the capacities of the system. Governance structure will also be designed and maintained depending on how conflicts are handled within the system and how the coordination is between the actors involved (Vatn and Vedeld 2010). Governance structures will be

constructed based on different institutions. Institutions will be further described in section 3.3.

Vatn and Vedeld (2010) and Haas et al. (2011) agree that environmental governance structure consists of at least three types of actors; private actors, public actors and the civil society.

Haas et al. (2011) also add the scientific network to the list. As the scientific network will be looked at in the discussion of the Brazilian REDD+ governance structure, this thesis will also use the scientists as a type of actor. Civil society includes non-governmental organizations (NGOs) and locally formed community organizations (Vatn and Vedeld 2010).

The actors will coordinate on different levels, and this may include market interaction, command and reciprocal arrangements. Command is when the power lies with one of the actors. Reciprocal arrangement is when there is direct involvement between the actors, and norms of equality are central in the interaction. Market interaction is related to trade, where the distribution of power between the actors is thought of as formally equal (Vatn and Vedeld 2010). It has been argued that cooperation between two or more types of actors “that utilize institutionalized tensions amongst the parties” (Haas et al. 2011:5) are most effective.

Biermann et al. (2009) can support Haas et al. (2011) in the sense that they state that it is more common these days with public-private relationships.

16 Capacities and competencies

There are several capacities in the governance system that will vary depending on which type of actors that are involved and how they interact. Vatn and Vedeld (2010) describe four aspects in relation to this.

Rights and responsibilities

Right and responsibilities refer to who have the economic power and also the rules and laws regarding political decision-making within the governance system. The latter also include who has access to the processes around the decision-making. In general, these types of

capacities decide on the different interests that are relevant and important to protect (Vatn and Vedeld 2010).

Information

In a governance system it is also important to see how the information is produced and distributed. This includes transparency and access. The relationship between the actors involved in the production and distribution of the information is also essential (ibid).

Asymmetric information may occur in a system where the power and the decision-making lie mainly with one of the actors involved in an interaction. This means that one of the parties have more information than other parties that are linked to the governance system (Vatn 2005). This may particularly be in relation to the distribution of information. Lack of transparency may also be a result if the power lies with one party.

Transaction costs

Transaction cost is related to the costs of interactions. A broad definition of transactions costs may include “costs of information gathering, formulation of goals/agreements and contracts, and setting up and running systems for controlling the fulfillment of what is agreed” (Vatn and Vedeld 2010:4). The transaction costs in a governance system will vary depending on what type of governance system it is. The costs will depend on whether the system needs to

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be built from scratch or if existing institutions and organizations can be used in the creation of the system already exist.

Motivation

Motivation is determined by what type of logic that influences decisions. This will vary both with what type of actors that are involved and also what type of interactions that exist in the governance system. Private actors often have a different motivation than an actor from the civil society, which again may be different from the motivation of a public actor. Private actors often have profit maximization as their main motivation. Image making may also be part of the motivation. One may argue that most actors have some type of image making as part of their motivation. Regarding type of interactions, motivation will be dependent on whether there is a willingness to cooperate or more strategically interactions (Vatn and Vedeld 2010).

Evaluation criteria

When evaluating a governance system, several criteria may be used. This thesis will focus on the evaluation criteria stated by Vatn and Vedeld (2010). These are chosen as they are

relevant for the discussion of the thesis. The criteria are in both this thesis and the paper by Vatn and Vedeld (2010) looked at in relation to governance of reduction of emissions from deforestation and forest degradation.

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Table 1 Description of four criteria to evaluate governance systems

Criteria Description

Overall political legitimacy Looks at different types of actors, how the different types of actors and the society are accepting the solution. It is

important to distinguish between legal political legitimacy and a moral political legitimacy. Political legitimacy also

emphasizes which actors should be involved at the different stages of the process, and transparency, accountability and distribution of power.

Effectiveness Looks at to what degree reduction of deforestation is managed.

Leakage control, additionality and permanence are important factors. Motivation aspects, like risk of corruption, and the ability of coordination across sectors are included in the factors in this criterion. The ability to coordinate at different levels of government in order to see to what degree the results will affect the different sectors.

Efficiency Concerns whether and to what degree the system is managed to give results at low-costs. Both transaction costs and direct costs are included.

Source: based on Vatn and Vedeld (2010)

3.1.2 Institutional inertia

As both Veblen and Vatn state in their definition of institutions (stated earlier in this chapter), institutions are stable and important to humanity. According to Kingston and Caballero (2008), institutions should be stable and durable in order to create order, and this is important when institutions change is discussed. Veblen‟s theory, discussed in Kingston and Caballero (2008), emphasizes that individual habits are created by institutions. This means that when behavior changes, institutions will change the habits. This again will make institutions to indirectly affect preferences (Kingston and Caballero 2008). Hodgson (2007:331) seems to agree with this by arguing that new habits are created as institutions” channel and constrain behavior”.

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If one looks at an organization, habits exist there as well and can be called organizational routines (Kingston and Caballero 2008). Kingston and Caballero (2008) further argue that if the organization is going to change the routines, they may copy routines from others or find new routines in another way. However, this is a complex process as there are several people‟s interlocking habits that are going to be changed. Thus, this change will cause a slow process of change and may create inertia. North, as discussed in Kingston and Caballero (2008), argues that institutional inertia is created due to the informal constraints. This is because informal constraints happen evolutionary.

Kingston and Caballero (2008) argue that institutional inertia can also be linked to the history of the organization. The institutions that already exist have a historical aspect in it, and certain groups within the organization may be interested in keeping the institutions that already exists due to different reasons. These groups may try to prevent the institutional change from

happening.