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  • Green Goods? Consumers, Product Labels

    and the Environment

    Julian Morris

    Published by the IEA Environment Unit

    1997

  • First published in January 1997 by

    THE ENVIRONMENT UNIT THE INSTITUTE OF ECONOMIC AFFAIRS

    2 Lord North Street, Westminster, London SW1P 3LB

    INSTITUTE OF ECONOMIC AFFAIRS 1997

    Studies on the Environment No.8

    All Rights Reserved

    ISBN 0-255 ??????

    Many IEA publications are translated into languages other than English or are reprinted. Permission to translate or to reprint should be sought from the Editorial Director at the address above.

  • 3

    Table of Contents

    Foreword ..........................................................Lynn Scarlett 7

    The Author .............................................................................9

    Acknowledgements .................................................................9

    Introduction..........................................................................10

    Consumer Attitudes....................................................10

    The Ecolabel: An Economic Instrument for Environmental Protection? 14

    Summary and Conclusions.........................................14

    1. Product Differentiation through Labelling .......................16

    Selecting a Product ....................................................16

    Choice by Rules of Thumb....................................16

    Selecting the Product Category..............................17

    Selecting a Particular Product ...............................18

    Labels: The Consumers Best Friend ..........................18

    Category Labelling ...............................................19

    Specific Product Information Labelling .................19

    Brand Labelling....................................................19

    Certification Labelling ..........................................20

    Why Product Certification Schemes Exist ..................20

    Information Asymmetries and Market Signalling ........21

    Product Certification Symbols....................................24

    General Concept Certification ...............................24

    Manufacturers Claims Certification......................25

    The Impact of Product Certification on Consumer Behaviour 26

    Summary and Conclusion ..........................................27

    2. The Promise of Ecolabelling .............................................29

    Ecolabels: Environmental Seals of Approval...............29

    The Benefits of Ecolabels...........................................30

  • 4

    Ecolabelling in an Ideal World....................................30

    Summary and Conclusions.........................................31

    3. The Pitfalls of Ecolabelling ...............................................33

    Defining a Product Category......................................33

    Defining the Boundary of a Product Category.............33

    Developing Product Selection Criteria: Product Life-Cycle Analysis 35

    Defining the Boundary of the Life-Cycle ....................38

    Inventory and Assessment ..........................................39

    Production............................................................41

    Distribution ..........................................................41

    Use.......................................................................41

    Disposal ...............................................................43

    A Case Study.............................................................43

    Trade-offs and Environmental Quality........................45

    A Cheap and Accurate Testing Procedure ...................46

    Updating Product Selection Criteria ...........................46

    Ecolabelling and Trade...............................................47

    Summary and Conclusions.........................................49

    4. The Political Economy of Ecolabelling .............................51

    Stakeholders, Politics and Property Rights..................51

    Stakeholders and Ecolabels ........................................52

    Ecolabelling by Private Sector Companies..................53

    Category Selection................................................53

    Setting Product Selection Criteria..........................53

    Ecolabelling by the State............................................54

    Political Self-Interest.............................................56

    Lobbying in Action: the EU Eco-Label .......................57

    Demand for the Eco-Label ....................................57

    Who Should Operate the Eco-Label?.....................58

    Who Should Develop the Criteria? ........................61

    How Should the Criteria be Set?............................62

    The Eco-Label for Paints ......................................63

    The Eco-Label for Detergents ...............................64

  • 5

    The Eco-Label for Washing Machines...................65

    The Eco-Label for Tissue Paper ............................65

    Green Seals Criteria for Towels and Tissue Paper ....................................................66

    The Future of the Eco-Label .................................67

    Summary and Conclusions.........................................69

    5. The Impact of Ecolabels ...................................................71

    The Impact of the Blue Angel for Paints .....................72

    The Impact of the Blue Angel for Recycled Paper.......74

    The Case of the Blue Angel for Birdhouses.................75

    Summary and Conclusions.........................................75

    6. The Unintended Consequences of Ecolabels ....................77

    Efficient Markets, Lock-in and Ecolabelling ...............77

    The Video War ......................................................78

    Lock-in by Ecolabelling ........................................79

    Ecolabelling Mandates and Other Coercive Behaviour 80

    The Demand for Ecolabelling in Sweden ....................80

    Lock-in Detergents and the Perils of an International Ecolabel 82

    Ecolabels, Innovation, and Trade................................84

    Conservation of Resources through Self-Interest.........84

    Summary and Conclusions.........................................85

    7. Alternatives to Ecolabelling ..............................................87

    Providing Environmental Information.........................89

    Third Party Verification of Claims..............................90

    Voluntary Guidelines..................................................91

    Statutory Definitions of Words ...................................92

    Mandatory Provision of Information...........................94

    Voluntary Information-Sharing...................................95

    Ecolabels, Experts and Individuals .............................96

    Summary and Conclusions ...................................................97

    Figures:

  • 6

    1. An Idealised Ecolabelling Programme .............................32

    2. Product Life-cycle Analysis for Paper Products ...............37

    Tables:

    1. Proportion of US Consumers Looking for Environmental Information on Labels 12

    2. The Problem with Product Category Boundaries..............36

    3. Comparing Life-cycle Inventories for Reusable vs. Disposable Nappies 44

    Box:

    1. Ecolabels and Environmental Trade-offs: The Case of Garbage Bags 81

    Appendix: Current Ecolabelling Programmes Worldwide ..99

    References .......................................................................... 103

    Summary .................................................................Back cover

  • 7

    Foreword The first post-World War II wave of environmental regulations in industrialised nations largely neglected the consumer, focusing instead on prescribing pollution clean-up by industries. Now supplementing these regulations are efforts to steer consumers towards products with the lowest environmental impacts. Ecolabels, referring to symbols intended to designate that a product is environmentally best in a given category, have become an increasingly popular tool in this steering exercise. In Green Goods? Consumers, Product Labels and the Environment, Julian Morris evaluates the complex nature of environment information and then examines the merits and drawbacks of ecolabels as a means of providing consumers with information about the environmental impacts of products. Morris acknowledges that environmental information may enhance the ability of consumers to purchase environmentally best products. However, ecolabels, concludes Morris, provide consumers

    with only the barest minimum of information concerning the environmental impact of a product and that even this information may be of dubious validity (p. 15).

    At least 25 nations world-wide now have some form of ecolabel, and some non-governmental ecolabel programmes also exist. In theory, these programmes are intended to improve consumer awareness of the environmental impacts of products and bring about environmental protection. Morris proposes that achievement of these goals depends upon designing a programme that awards labels based on a comprehensive (life-cycle) evaluation of all the resource use and environmental impacts of each product. Moreover, product selection criteria must be constantly re-evaluated to take into account changes in

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