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Bunching with the Stars: How Firms Respond to Environmental Certification

Author

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  • Sebastien Houde

    (ETH Zurich, Switzerland)

Abstract

This paper shows that firms respond strategically to ENERGY STAR, a voluntary certification program for energy-efficient products. Firms offer products that bunch at the certification requirement, differentiate certified products in energy and non-energy dimensions, and charge a price premium on certified products. In the US refrigerator market, the magnitude of the price premium corresponds exactly to the average willingness to pay consumers have for certified products. This suggests that firms have the ability to extract most of the consumer surplus associated with certified products. If firms had to pay a fee to use the certification, a policy recently suggested, most of the cost should then be borne by consumers. I illustrate how such policy would impact the adoption of energy-efficient appliances.

Suggested Citation

  • Sebastien Houde, 2018. "Bunching with the Stars: How Firms Respond to Environmental Certification," CER-ETH Economics working paper series 18/292, CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich.
    • Handle: RePEc:eth:wpswif:18-292
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    File URL: https://www.ethz.ch/content/dam/ethz/special-interest/mtec/cer-eth/cer-eth-dam/documents/working-papers/WP-18-292.pdf
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    Citations

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    Cited by:

    1. Yujie Lin & Joshua Linn, 2023. "Environmental Regulation and Product Attributes: The Case of European Passenger Vehicle Greenhouse Gas Emissions Standards," Journal of the Association of Environmental and Resource Economists, University of Chicago Press, vol. 10(1), pages 1-32.
    2. Mark A. Andor & David H. Bernstein & Stephan Sommer, 2021. "Determining the efficiency of residential electricity consumption," Empirical Economics, Springer, vol. 60(6), pages 2897-2923, June.
    3. Atasoy, Ayse Tugba, 2020. "Behavioral responses of green builders to discontinuous certification schemes," Resource and Energy Economics, Elsevier, vol. 60(C).
    4. Hoogerbrugge, Coen & van de Kaa, Geerten & Chappin, Emile, 2023. "Adoption of quality standards for corporate greenhouse gas inventories: The importance of other stakeholders," International Journal of Production Economics, Elsevier, vol. 260(C).
    5. Sébastien Houde & Erica Myers, 2019. "Heterogeneous (Mis-) Perceptions of Energy Costs: Implications for Measurement and Policy Design," NBER Working Papers 25722, National Bureau of Economic Research, Inc.
    6. Bovay, John, 2021. "Moral hazard under discrete information disclosure: Evidence from food-safety inspections," 2021 Allied Social Sciences Association (ASSA) Annual Meeting (Virtual), January 3-5, 2021, San Diego, California 307948, Agricultural and Applied Economics Association.
    7. Goeschl, Timo, 2019. "Cold Case: The forensic economics of energy efficiency labels for domestic refrigeration appliances," Energy Economics, Elsevier, vol. 84(S1).
    8. Bruno Lanz and Evert Reins, 2021. "Asymmetric Information on the Market for Energy Efficiency: Insights from the Credence Goods Literature," The Energy Journal, International Association for Energy Economics, vol. 0(Number 4).
    9. Alberini, Anna & Di Cosmo, Valeria & Bigano, Andrea, 2019. "How are fuel efficient cars priced? Evidence from eight EU countries," Energy Policy, Elsevier, vol. 134(C).
    10. Duc-Niem Le & Van-Hoa Nguyen, 2024. "Does Quality Certification or Product Diversification Improve the Performance of Small and Medium Enterprises?," Sustainability, MDPI, vol. 16(5), pages 1-11, February.
    11. Alberini, Anna & Horvath, Marco & Vance, Colin, 2021. "Drive less, drive better, or both? Behavioral adjustments to fuel price changes in Germany," Ruhr Economic Papers 892, RWI - Leibniz-Institut für Wirtschaftsforschung, Ruhr-University Bochum, TU Dortmund University, University of Duisburg-Essen.
    12. Schleich, Joachim & Durand, Antoine & Brugger, Heike, 2021. "How effective are EU minimum energy performance standards and energy labels for cold appliances?," Energy Policy, Elsevier, vol. 149(C).

    More about this item

    Keywords

    environmental certification; firm behavior; energy efficiency; imperfect competition;
    All these keywords.

    JEL classification:

    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L15 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Information and Product Quality
    • Q48 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Government Policy
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy

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