Optimal NGO Financing of a Resource Management Certification Scheme

Murray Fulton () and James Vercammen ()

Environmental & Resource Economics, 2014, vol. 58, issue 4, 605-626

Abstract: The development of voluntary certification schemes in areas as diverse as fish, coffee and forestry offer the promise of environmental improvements without the requirement of governmental regulation and intervention. In many cases, however, the costs to landholders of making the transition are too large for them to do so. At the same time, the large intermediaries appear to have little economic incentive to introduce certification because the market does not adequately value the environmental benefits. Instead, NGOs and other aid and development agencies who would like to see small producers benefit from the change in production practices have typically stepped in to provide financial support for certification. This paper shows how voluntary price discrimination (in the form of donations) by the consumers that most highly value certification can be used to finance a switch to environmentally sustainable practices and thus address a market failure. This analysis shows that an NGO’s optimal intervention depends on the size of its budget, the elasticity of supply of the product, and the elasticity of participation by producers. NGOs with smaller budgets rely more heavily on lump sum transfers to the intermediary and less heavily on volume and participation-dependent subsidies. Volume and participation dependent subsidies are inversely related to the elasticity of supply and the elasticity of participation in a standard Lerner relationship. Copyright Springer Science+Business Media Dordrecht 2014

Keywords: Certification; NGO; Smallholder; Sustainable production; H2; O2; Q2 (search for similar items in EconPapers)
Date: 2014
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://hdl.handle.net/10.1007/s10640-013-9712-5 (text/html)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:kap:enreec:v:58:y:2014:i:4:p:605-626

Ordering information: This journal article can be ordered from
http://www.springer. ... al/journal/10640/PS2

DOI: 10.1007/s10640-013-9712-5

Access Statistics for this article

Environmental & Resource Economics is currently edited by Ian J. Bateman

More articles in Environmental & Resource Economics from Springer, European Association of Environmental and Resource Economists Contact information at EDIRC.
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().