Eco-labels, Production Related Externalities and Trade

Mads Greaker

Discussion Papers from Statistics Norway, Research Department

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.

Keywords: Eco-labels; strategie environmental; policy; trade (search for similar items in EconPapers)
JEL-codes: H7 Q2 R3 (search for similar items in EconPapers)
Date: 2002-10
New Economics Papers: this item is included in nep-agr, nep-geo and nep-pbe
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:ssb:dispap:332

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