Time for negative eco-labels?

Environmentally responsible purchasing behavior has been greatly facilitated by the development of eco-labelling schemes, which provide information about the products’ otherwise unassessable environmental quality.
Most eco-labels identify the least polluting alternative within a product group (positive labelling), while virtually no labels exists to help identify the most environmentally adverse products (negative labelling). [One exception is the EU electricity multilevel labelling scheme that ranks on a scale from A to G electric appliances in terms of their energy efficiency]

Is this focus on positive eco-labels desirable or should we rather ask policy makers to develop negative and multilevel labelling schemes?

Grankvist, Dahlstrand and Biel (2004) suggest that negative labelling may be more effective in reducing the adverse environmental impact of consumption than positive labelling. In a computer based experiment they found that while positive and negative labelling had an equal impact on individuals with a strong interest for the environment and had no impact on those not caring about the environment, they had a very different impact on the choices of individuals with an intermediate interest for the environment. These individuals were more affected in their products’ choice by the negative label than by the positive label, that is, they more often changed their purchase decisions in a more environmentally friendly direction when faced with the negative labels then when faced with the positive one. On the basis of this result Grankvist, Dahlstrand and Biel (2004) conclude that if we want to encourage less polluting consumption then we should develop negative eco-labels and multi-level labels.

The developments of multi-levelled and negative eco-labels should also be encouraged on the ground of their potential impact on social norms. Negative labelling reinforces a social norm that frowns upon the purchase of the most polluting product, while positive labelling one that rewards the purchase of the least polluting one. These norms in turn, are likely to lead to significantly different effects in terms of environmental impacts: Norms that socially reward the purchase of the least polluting products may lead to increases in aggregate polluting emissions when consumers consider only the environmental impact per product unit. However, norms of social disapproval for brown consumption will not have this effect .(Lombardini-Riipinen 2002.)

Positive eco-labels are environmentally effective when consumers care about the environmental impact of their overall consumption. If they only care about the environmental impact per product unit, argue Bougherara, Grolleau and Thiebaut (2005) , then eco-labels may as well lead to a deterioration of the environment. This will happen when eco-labels stop consumers feeling guilty about their purchases and thus induce an increase in the consumption of the labelled good. This is most likely when the cost of the environmental improvement to the producer is relatively low, so that the difference between the price of the eco-labelled and conventional good is relatively small.

Positive eco-labels may also increase total demand and thereby emissions when they project a positive image on the non-labelled products of the producer or brand offering the eco-labelled product (Dosi and Moretto 2001).

In some circumstances eco-labels may not have any environmental impact. This is the case when the supply for the eco-labelled product exceeds its demand at the time when labelling is introduced (Mattoo and Singh 1994). This has so far been the case of green electricity in Finland, where in 2004 the total sales of green electricity covered 18.47% of the total supply of certified green electricity [authors calculations on the basis of the statistics presented by the Finnish Association for Nature Conservation].

social norm: the shared expectation within a society, organization or group as to what behavior is desirable (Coleman 1990, 242). The term social refer to the fact that the norm is sustained by other people’s approval and disapproval.

References

Bougherara, D. , Grolleau, G. and Thiebaut, L. 2005. Can Labelling Policies Do More Harm Than Good? An Analysis Applied to Environmental Labelling Schemes<a href=”http://ideas.repec.org/a/kap/ejlwec/v19y2005i1p5-16.html”.(2005) European Journal of Law and Economics 19(1), 5 -16.

Coleman, J., 1990. Foundations of Social Theory, Cambridge: Harvard University Press

Dosi, C. and Moretto, M. 2001. Is Ecolabelling a Reliable Environmental Policy Measure? Environmental and Resource Economics 18(1), 113-27.

Grankvist, G., Dahlstrand, U., & Biel, A. (2004). The impact of environmental labeling on consumer preference: Negative versus positive labels. Journal of Consumer Policy, 27, 213-230

Lombardini-Riipinen, Chiara. 2002 Buying Green: The Social Reward Trap

Mattoo, A. and Singh, H. V. 1994. Eco-labelling: Policy considerations. Kyklos 47(1)
, 53-65.

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