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Is Ecolabelling a Reliable Environmental Policy Measure?

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  • Cesare Dosi

    ()

  • Michele Moretto

    ()

Abstract

The rationale of ecolabelling is to enable firms to reap the willingness-to-payfor the environmental attributes of goods by helping consumers toidentify ``green'' products. By so doing, ecolabelling is expected tostimulate spontaneous environmental innovation and to reduce aggregatedpollution. Our analysis however outlines situations under whichecolabelling could induce perverse effects, namely increased investment inconventional technologies before the labels are awarded, and examineswhether restricting the issue of labels could constitute an antidote. Copyright Kluwer Academic Publishers 2001

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File URL: http://hdl.handle.net/10.1023/A:1011101604084
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Bibliographic Info

Article provided by European Association of Environmental and Resource Economists in its journal Environmental and Resource Economics.

Volume (Year): 18 (2001)
Issue (Month): 1 (January)
Pages: 113-127

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Handle: RePEc:kap:enreec:v:18:y:2001:i:1:p:113-127

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Web page: http://www.springerlink.com/link.asp?id=100263

Related research

Keywords: ecolabelling; environmental policy; investment decisions; irreversibility; real option theory;

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  1. Abel, Andrew B., 1952-, 1995. "Options, the value of capital, and investment," Working papers 3843-95., Massachusetts Institute of Technology (MIT), Sloan School of Management.
  2. Mattoo, Aaditya & Singh, Harsha V, 1994. "Eco-labelling: Policy Considerations," Kyklos, Wiley Blackwell, vol. 47(1), pages 53-65.
  3. Kuhn, Michael, 1999. "Green Lemons - Environmental Labels and Entry into an Environmentally Differentiated Market under Asymmetric Information," Thuenen-Series of Applied Economic Theory 20, University of Rostock, Institute of Economics.
  4. Bertola, Giuseppe, 1998. "Irreversible investment," Research in Economics, Elsevier, vol. 52(1), pages 3-37, March.
  5. He, Hua & Pindyck, Robert S., 1992. "Investments in flexible production capacity," Journal of Economic Dynamics and Control, Elsevier, vol. 16(3-4), pages 575-599.
  6. Cesare Dosi & Michele Moretto, 1997. "Pollution Accumulation and Firm Incentives to Accelerate Technological Change Under Uncertain Private Benefits," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 10(3), pages 285-300, October.
  7. Dixit, Avinash K, 1989. "Entry and Exit Decisions under Uncertainty," Journal of Political Economy, University of Chicago Press, vol. 97(3), pages 620-38, June.
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