How can health concerns improve environmental public good provision through labels?

This paper deals with the environmental performance of labeling strategies promoting an agricultural commodity characterised by the joint and complementary provision of an environmental public good and a private characteristic such as health benefits. In a theoretical analysis, we explore different market settings with an eco-label, health label, or a label promoting both health and the environment to see how the degree of information given to homogeneous consumers on the public and private characteristics affects public good provision. We show that when consumers only have access to partial information on one of the two complementary characteristics (eco-label or health label), public good provision is higher through a health label in most situations. An eco-label leads to higher provision in a small market if consumers' preferences for the environment are higher than for health. We prove that in most situations, public good provision increases when the label promotes both characteristics rather than one (full information). The extent of this increase depends on consumers' preferences and the market size. The public good remains underprovided in all market settings from the perspective of a social planner. However, under certain conditions, a health label and a health and environment label lead to the optimal provision of public good from the perspective of an environmental agency.