Green goods: consumers, product labels, and the environment

This study examines the rather complex nature of environment information for consumers and assesses problems of eco-labels as a means of providing consumers with information. The paper highlights that while surveys find that consumers are willing to pay extra for environment-friendlier products, actual sales figures show that the actual demand is very small. This mismatch has been attributed to "consumer scepticism" generated by unverified or misleading environmental claims. In response, numerous organisations, both private and public, have developed eco-labelling schemes.

While eco-labels can help in overcoming the problem of consumer scepticism, there are a number of problems with such schemes:

• experts who are charged with the task of developing an eco-labelling scheme will not be able rationally to select product categories and will not be able to take into consideration all the physical effects which a product has on the environment during its life-cycle
• because there are no purely objective ways of awarding , secondary stakeholders (manufacturers, environmentalists and others) are able to exert influence at every stage in the eco-labelling process and thereby affect the outcome in a distorting manner
• eco-labels tend to obscure relevant product information and may mislead consumers into purchasing products which, under the circumstances, result in the consumption of more resources and the emission of more chemicals into the atmosphere and into water courses, than other non-eco-labelled products
• eco-labels can lock firms and industries into particular technologies, distorting the prices and other information which consumers utilise to make product selection decisions, and thereby ensuring that resources are not allocated to their most efficient uses.