Eco-labelling and the trade-environment debate

Abstract: In this paper the authors consider the effectiveness of eco-labels as a substitute for alternative, but trade-restrictive, environmental policies. Specifically, while there are concerns that eco-labelling requirements increase the cost of international trade, due to their potential for misuse as technical trade barriers, little attention has been given to the environmental benefits of eco-labelling. The authors show that incentive problems inherent in eco-labelling policies make it a very weak tool of environmental policy. Despite this, they argue that eco-labelling schemes may remain popular, owing to the lack of alternative WTO compliant environmental policies. They also use this framework to consider the economic and political conflicts facing the EU with regard to its policies on genetically modified organisms.