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Eco-labels, Production Related Externalities and Trade

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Abstract

We analyze the trade and welfare effects of eco-labels in a domestic market with one domestic firm and one foreign firm. Pollution is production related, and the government can choose between including the product category in an eco-label scheme and setting an environmental standard. The environmental standard will only apply to the domestic firm, while both firms can adopt the eco-label. Given that the environmental damage is not too large, we find that it is optimal for the government to introduce an eco-label scheme. An eco-label scheme is optimal even though the domestic firm may loose profit and the foreign firm may gain. Hence, the eco-label scheme is not introduced for protectionist purposes. Further, if the government for some reason were prevented from using eco-labels, global, domestic and foreign welfare would be hampered.

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  • Mads Greaker, 2002. "Eco-labels, Production Related Externalities and Trade," Discussion Papers 332, Statistics Norway, Research Department.
    • Handle: RePEc:ssb:dispap:332
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    Cited by:

    1. Parry, Ian & Fischer, Carolyn & Jawahar, Puja & Aguilar , Francisco, 2005. "Corporate Codes of Conduct: Is Common Environmental Content Feasible?," RFF Working Paper Series dp-05-09, Resources for the Future.

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    More about this item

    Keywords

    Eco-labels; strategie environmental; policy; trade;
    All these keywords.

    JEL classification:

    • H7 - Public Economics - - State and Local Government; Intergovernmental Relations
    • Q2 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation
    • R3 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location

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