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Eco-labels, Production Related Externalities and Trade

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Author Info
Mads Greaker () (Statistics Norway)
Abstract

We analyze the trade and welfare effects of eco-labels in a domestic market with one domestic firm and one foreign firm. Pollution is production related, and the government can choose between including the product category in an eco-label scheme and setting an environmental standard. The environmental standard will only apply to the domestic firm, while both firms can adopt the eco-label. Given that the environmental damage is not too large, we find that it is optimal for the government to introduce an eco-label scheme. An eco-label scheme is optimal even though the domestic firm may loose profit and the foreign firm may gain. Hence, the eco-label scheme is not introduced for protectionist purposes. Further, if the government for some reason were prevented from using eco-labels, global, domestic and foreign welfare would be hampered.

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Paper provided by Research Department of Statistics Norway in its series Discussion Papers with number 332.

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Date of creation: Oct 2002
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Handle: RePEc:ssb:dispap:332

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Related research
Keywords: Eco-labels strategie environmental policy trade

Find related papers by JEL classification:
H7 - Public Economics - - State and Local Government; Intergovernmental Relations
Q2 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation
R3 - Urban, Rural, and Regional Economics - - Production Analysis and Firm Location

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References listed on IDEAS
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  1. Neven, D. & Thisse, J-F., 1989. "On Quality And Variety Competition," Papers 8920, Catholique de Louvain - Center for Operations Research and Economics.
  2. Teisl, Mario F. & Roe, Brian & Hicks, Robert L., 2002. "Can Eco-Labels Tune a Market? Evidence from Dolphin-Safe Labeling," Journal of Environmental Economics and Management, Elsevier, vol. 43(3), pages 339-359, May. [Downloadable!] (restricted)
  3. Tom Tietenberg, 1998. "Disclosure Strategies for Pollution Control," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 11(3), pages 587-602, April. [Downloadable!] (restricted)
  4. Adam B. Jaffe et al., 1995. "Environmental Regulation and the Competitiveness of U.S. Manufacturing: What Does the Evidence Tell Us?," Journal of Economic Literature, American Economic Association, vol. 33(1), pages 132-163, March. [Downloadable!] (restricted)
  5. Cremer, Helmuth & Thisse, Jacques-Francois, 1999. "On the taxation of polluting products in a differentiated industry," European Economic Review, Elsevier, vol. 43(3), pages 575-594, March. [Downloadable!] (restricted)
  6. B. Howarth, Richard & Haddad, Brent M. & Paton, Bruce, 2000. "The economics of energy efficiency: insights from voluntary participation programs," Energy Policy, Elsevier, vol. 28(6-7), pages 477-486, June. [Downloadable!] (restricted)
  7. Shaked, Avner & Sutton, John, 1982. "Relaxing Price Competition through Product Differentiation," Review of Economic Studies, Blackwell Publishing, vol. 49(1), pages 3-13, January. [Downloadable!] (restricted)
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