Industrialists hand in hand with environmentalists: how eco-labeling schemes can help firms to raise rivals' costs

Gilles Grolleau (1) , Lisette Ibanez (2) , Naoufel Mzoughi (3)

1 LAMETA - Laboratoire Montpelliérain d'Économie Théorique et Appliquée
2 LEF - Laboratoire d'Economie Forestière
3 ECODEVELOPPEMENT - Unité de recherche d'Écodéveloppement

Industrialists may promote eco-labeling schemes in order to gain the support of environmentalists and ultimately gain market protection. Beyond the environmental effects of such coalitions, these schemes can provide industrialists a legitimate way to disadvantage rivals, frequently foreign rivals, by raising their costs. We consider a Stackelberg model that determines the conditions under which a domestic firm has incentive to impose an eco-label in order to raise the costs of its foreign rivals. The effects of eco-labeling on domestic social welfare are ambiguous. Policy recommendations are drawn. Notably, factors that may help policy makers to identify situations more vulnerable to undesirable outcomes from a welfare viewpoint are developed.

Mots clés: ECO-LABEL; ENVIRONMENTAL PROTECTIONISM; RAISING RIVALS' COST; INDUSTRIE

Domaines: Economies et finances

Gilles Grolleau, Lisette Ibanez, Naoufel Mzoughi. Industrialists hand in hand with environmentalists: how eco-labeling schemes can help firms to raise rivals' costs. European Journal of Law and Economics, 2007, 24 (3), pp.215-236. ⟨10.1007/s10657-007-9034-6⟩. ⟨hal-01072408⟩