Rising interest in credence qualities in agricultural products and the role for government

Consumers are increasingly interested in the impacts of agricultural production on the environment, animals, workers, health etc – all examples of credence attributes. While governments set and enforce minimum requirements regarding these attributes, roles for government in markets for products with additional levels of these attributes (‘ecolabelled’ products) are less clearly defined and understood. This presents a risk that government actions will create distortions in markets for ecolabelled and non-ecolabelled products. This is especially likely if policy is based on pursuing environmental and other outcomes through encouraging ecolabelling. There are some areas, it is argued, where government actions could increase the efficiency of markets for goods with additional credence qualities. This is because of the impacts of information asymmetries between producers and consumers. However, firms have developed many ways to signal the credibility of their claims, and any government intervention must be cognisant of this. The paper reports on a continuing body of work within the Victorian Department of Primary Industries aimed at identifying roles for government in ecolabelling, and progressing their implementation.