Eco-labels, Production Related Externalities and Trade
AbstractWe 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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Bibliographic InfoPaper provided by Research Department of Statistics Norway in its series Discussion Papers with number 332.
Date of creation: Oct 2002
Date of revision:
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, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location
This paper has been announced in the following NEP Reports:
- NEP-AGR-2003-07-29 (Agricultural Economics)
- NEP-ALL-2003-06-04 (All new papers)
- NEP-GEO-2003-06-04 (Economic Geography)
- NEP-PBE-2003-06-04 (Public Economics)
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