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Industrialists hand in hand with environmentalists: how eco-labeling schemes can help firms to raise rivals’ costs

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  • Gilles Grolleau
  • Lisette Ibanez
  • Naoufel Mzoughi

Abstract

Industrialists may promote eco-labeling schemes in order to gain the support of environmentalists and ultimately gain market protection. Beyond the environmental effects of such coalitions, these schemes can provide industrialists a legitimate way to disadvantage rivals, frequently foreign rivals, by raising their costs. We consider a Stackelberg model that determines the conditions under which a domestic firm has incentive to impose an eco-label in order to raise the costs of its foreign rivals. The effects of eco-labeling on domestic social welfare are ambiguous. Policy recommendations are drawn. Notably, factors that may help policy makers to identify situations more vulnerable to undesirable outcomes from a welfare viewpoint are developed.
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  • Gilles Grolleau & Lisette Ibanez & Naoufel Mzoughi, 2007. "Industrialists hand in hand with environmentalists: how eco-labeling schemes can help firms to raise rivals’ costs," European Journal of Law and Economics, Springer, vol. 24(3), pages 215-236, December.
    • Handle: RePEc:kap:ejlwec:v:24:y:2007:i:3:p:215-236
    DOI: 10.1007/s10657-007-9034-6
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    Cited by:

    1. van't Veld, Klaas & Kotchen, Matthew J., 2011. "Green clubs," Journal of Environmental Economics and Management, Elsevier, vol. 62(3), pages 309-322.
    2. Jason Walter & Yang-Ming Chang, 2017. "Green certification, heterogeneous producers, and green consumers: a welfare analysis of environmental regulations," Journal of Regulatory Economics, Springer, vol. 52(3), pages 333-361, December.
    3. Khan Md Raziuddin Taufique & Chamhuri Siwar & Basri Talib & Farah Hasan Sarah & Norshamliza Chamhuri, 2014. "Synthesis of Constructs for Modeling Consumers’ Understanding and Perception of Eco-Labels," Sustainability, MDPI, vol. 6(4), pages 1-25, April.
    4. Gilles Grolleau & Lisette Ibanez & Naoufel Mzoughi & Mario Teisl, 2016. "Helping eco-labels to fulfil their promises," Climate Policy, Taylor & Francis Journals, vol. 16(6), pages 792-802, August.
    5. Walter, Jason M. & Chang, Yang-Ming, 2020. "Environmental policies and political feasibility: Eco-labels versus emission taxes," Economic Analysis and Policy, Elsevier, vol. 66(C), pages 194-206.
    6. Roheim, Cathy A. & Zhang, Dengjun, 2018. "Sustainability certification and product substitutability: Evidence from the seafood market," Food Policy, Elsevier, vol. 79(C), pages 92-100.

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    More about this item

    Keywords

    Eco-labels; Environmental protectionism; Raising rivals’ costs; L15; Q18; Q29;
    All these keywords.

    JEL classification:

    • L15 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Information and Product Quality
    • Q18 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agricultural Policy; Food Policy; Animal Welfare Policy
    • Q29 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Other

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