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The economics of eco-labeling: Standards, costs and prices

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  • Yenipazarli, Arda

Abstract

The existing eco-label landscape is fragmented because of the presence of numerous labels with different standards and is a pre-competitive environment for firms to play in with many unanswered questions. Different standards – eco-labels are built around – have different effects on credibility and legitimacy, costs and benefits, and ability to achieve sustainability goals of eco-labeling. Focusing on eco-label standards and using a Hotelling-type horizontal differentiation model, we identify standards-specific issues for and characterize primary barriers to eco-labeling. Some of the major findings are as follows: (1) More rigorous environmental standards enforced by higher-integrity labels do not necessarily translate into higher selling prices; (2) Higher prices commanded by labeled products do not guarantee that a firm will derive higher profits from eco-labeling; (3) Auditing fees paid per product unit being inspected for ensuring compliance with an eco-label standard (rather than participation fees paid up front) is the primary de facto barrier to business involvement in eco-labeling; and (4) Customers׳ willingness to pay price premiums for eco-labeled products is not a sufficient condition to generate a premium in the market.

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  • Yenipazarli, Arda, 2015. "The economics of eco-labeling: Standards, costs and prices," International Journal of Production Economics, Elsevier, vol. 170(PA), pages 275-286.
    • Handle: RePEc:eee:proeco:v:170:y:2015:i:pa:p:275-286
    DOI: 10.1016/j.ijpe.2015.09.032
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    2. Nagy-Kercsó Katalin, 2023. "Towards Sustainability on a Sea of Eco-Labels. Leading or Misleading?," Acta Universitatis Sapientiae, Economics and Business, Sciendo, vol. 11(1), pages 186-207, October.
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    6. Yeboah, Samuel, 2023. "Navigating Sustainability: Unveiling Responsible Consumption and Production in Developing Economies for SDG 12 Achievement," MPRA Paper 118214, University Library of Munich, Germany, revised 25 Jul 2023.
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    8. Ren, Shenggang & He, Duojun & Yan, Ji & Zeng, Huixiang & Tan, Justin, 2022. "Environmental labeling certification and corporate environmental innovation: The moderating role of corporate ownership and local government intervention," Journal of Business Research, Elsevier, vol. 140(C), pages 556-571.

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