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Green, greener, greenest: Eco-label gradation and competition

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  • Li, Yuanhao
  • van 't Veld, Klaas

Abstract

This paper analyzes two common features of markets in which eco-label programs certify that products are “green”: gradation—single programs offering multiple certification standards (e.g., platinum, gold, silver)—and competition—multiple programs vying to certify to their respective standards. We find that, depending on whether programs are sponsored by industry, environmental groups, or a government, they have strikingly different incentives to grade or compete. Industry sponsors are indifferent about both; environmentalist sponsors optimally grade or compete with other environmentalist sponsors only if consumer preferences for green consumption are skewed in a specific way; and government sponsors׳ decisions depend on the relative importance of private vs. public benefits generated by the green market. We find also that it is no accident that green markets frequently have an environmentalist program competing with an industry one. For each of the cases examined, our analysis is consistent with casual empirical evidence.

Suggested Citation

  • Li, Yuanhao & van 't Veld, Klaas, 2015. "Green, greener, greenest: Eco-label gradation and competition," Journal of Environmental Economics and Management, Elsevier, vol. 72(C), pages 164-176.
  • Handle: RePEc:eee:jeeman:v:72:y:2015:i:c:p:164-176
    DOI: 10.1016/j.jeem.2015.05.003
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    Cited by:

    1. repec:oup:erevae:v:44:y:2017:i:4:p:658-682. is not listed on IDEAS
    2. Anthony Heyes & Sandeep Kapur & Peter W. Kennedy & Steve Martin & John W. Maxwell, 2018. "But What Does it Mean? Competition between Products Carrying Alternative Green Labels when Consumers are Active Acquirers of Information," Birkbeck Working Papers in Economics and Finance 1812, Birkbeck, Department of Economics, Mathematics & Statistics.
    3. repec:eee:eneeco:v:76:y:2018:i:c:p:34-47 is not listed on IDEAS
    4. Daniel C. Matisoff & Douglas S. Noonan & Mallory E. Flowers, 2016. "Policy Monitor—Green Buildings: Economics and Policies," Review of Environmental Economics and Policy, Association of Environmental and Resource Economists, vol. 10(2), pages 329-346.
    5. Hend Ghazzai & R Lahmandi-Ayed, 2018. "Ecolabels: Is More Information Better?," Working Papers hal-01877934, HAL.
    6. Li, Yi, 2016. "Competing eco-labels and product market competition," 2016 Annual Meeting, July 31-August 2, Boston, Massachusetts 235389, Agricultural and Applied Economics Association.
    7. repec:eee:jeborg:v:160:y:2019:i:c:p:1-18 is not listed on IDEAS
    8. Frank Wijen & Mireille Chiroleu-Assouline, 2019. "Controversy Over Voluntary Environmental Standards: A Socioeconomic Analysis of the Marine Stewardship Council," Post-Print halshs-02071504, HAL.
    9. Aditi Sengupta, 2016. "Green Premium, Ecolabel, and Environmental Damage," Auburn Economics Working Paper Series auwp2016-16, Department of Economics, Auburn University.

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    Keywords

    Eco-labels; Green markets;

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