Abstract
This paper investigates the impact of eco-labels on the abatement of emissions in a market with horizontal product differentiation. A distinction is made between an end-of-pipe abatement method and a clean technology approach. In the former case underinvestment is likely to occur even if the marginal willingness to pay for abatement of consumers is equal to the social marginal benefit of abatement. The level of abatement depends on the number of firms and on the number of consumers. For a large market with few firms overinvestment in abatement is also possible. Clean technology abatement achieves a first best level regardless of market size if all consumers have a marginal willingness to pay for abatement equal to its social benefit.
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Clemenz, G. Eco-Labeling and Horizontal Product Differentiation. Environ Resource Econ 45, 481–497 (2010). https://doi.org/10.1007/s10640-009-9324-2
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DOI: https://doi.org/10.1007/s10640-009-9324-2