Postprint version. Published in Journal of Environmental Economics and Management, Volume 103, June 1, 2020.
The definitive version is available at https://doi.org/https://doi.org/10.1016/j.jeem.2020.102344.
Increasingly, non-governmental organization (NGO) and industry eco-labels compete. Environmental benefits may increase or decrease with entry by an industry label, depending on the shape of consumers’ willingness to pay and the shape of the distribution of forest compliance costs. Using geospatial data from forests in Cameroon and Gabon to proxy for compliance costs, I test whether lower compliance cost forests are more likely to participate in stricter labels. Next, I use a semi-nonparametric estimator to estimate parameters for willingness to pay and the distribution of forest compliance costs to calculate benefits with and without label competition. I find that, in this context, eco-label competition decreases environmental benefits by 17%. The industry label lures away a sufficient number of forests that would have chosen an NGO standard in autarky, overwhelming gains from broader participation and a stricter NGO standard. The distribution of forest compliance cost is skewed toward high cost forests. Willingness to pay is bowed: initial increases in protection have a high marginal willingness-to-pay but additional increases are less valuable. Industry certified wood prices are predicted to be 14–28% higher than uncertified wood. NGO certified wood prices are predicted to be 9–17% higher than industry certified wood.
© 2020 Published by Elsevier Inc.
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