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The Green Premium Puzzle: Empirical Evidence from Climate-Friendly Food Products

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  • Voraprapa Nakavachara
  • Chanon Thongtai
  • Thanarat Chalidabhongse
  • Chanathip Pharino

Abstract

This paper investigates whether climate-friendly food products command a price premium in consumer markets. Using product-level data from a supermarket in Sweden, we examine the relationship between front-of-package climate impact scores and retail prices, controlling for product size, nutritional content, and fixed effects. Contrary to the intuitive expectation of a positive green premium, we find no evidence that climate-friendly products are priced higher. In some product categories, products with better climate scores are in fact associated with lower prices, suggesting a negative premium, an outcome that gives rise to what we refer to as the green premium puzzle. We argue that market frictions such as competing consumer priorities, psychological distance from climate issues, and skepticism toward environmental labeling may suppress the price signals intended to reward sustainable consumption. These findings offer important insights for producers, retailers, and policymakers seeking to align climate goals with effective market incentives in the transition toward a more sustainable society.

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  • Voraprapa Nakavachara & Chanon Thongtai & Thanarat Chalidabhongse & Chanathip Pharino, 2025. "The Green Premium Puzzle: Empirical Evidence from Climate-Friendly Food Products," Papers 2507.10333, arXiv.org.
    • Handle: RePEc:arx:papers:2507.10333
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    References listed on IDEAS

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    1. Julius J. Andersson, 2019. "Carbon Taxes and CO2 Emissions: Sweden as a Case Study," American Economic Journal: Economic Policy, American Economic Association, vol. 11(4), pages 1-30, November.
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