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Ecolabels, uncertified abatement, and the sustainability of natural resources: an evolutionary approach

Journal of Evolutionary Economics volume 25, pages 623–647 (2015)Cite this article

Abstract

This study presents an evolutionary model where firms decide their environmental strategy, which may include certification of voluntary abatement by joining an eco-label, in settings where conservation outcomes exert an influence on the price premia that certified and uncertified green firms receive. Findings support that either certified or uncertified voluntary abatement can be sustained in the long run as a result of market incentives, but not simultaneously. When certified abatement takes place in the long-run, it results in an improvement in the state of the natural capital as compared to situations where abatement is not certified. However, certification practices that are not attractive enough for companies to subsist in equilibrium can generate transitional dynamics eroding conservation outcomes. Moreover, given the endogenous nature of environmental conservation on firms’ abatement decisions, temporary policies increasing the state of the environment can change the long-term incentive structure of the system favoring certification of abatement. A context of applicability of the model is illustrated by tourism uses of natural resources.

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Notes

  1. Other relevant motivations for firms to undertake corporate social responsibility efforts not captured in the model presented here are the existence of externalities, public goods and altruism, as well as contract incompleteness (Crifo and Forget 2014), or political strategic interactions between corporate advocates and conservation stakeholders (Buckley 2013).

  2. We thank one of the anonymous referees for this comment.

  3. http://www.toinitiative.org/

  4. http://www.blueflag.org/

  5. We thank one of the anonymous referees for these remarks.

  6. Arguably, more than one certification program may be available for companies, and the same holds true for alternative uncertified abatement practices. In such cases, the model simply reduces all certified alternatives (or all uncertified alternatives) into one. It remains an open question to explore fully the potential interaction between different alternative abatement strategies of the same type - certified or uncertified.

  7. The model abstracts from the relevant potential dynamic impact over time of eco-innovations on production costs and hence on profits, induced as a consequence of the evolution of the environmental strategies of firms. The need to simplify in certain aspects of the model is imposed by the complexity of dealing with a three-dimensional dynamic system. Extending the model by including dynamic costs to account for the role of eco-innovations could represent a research avenue to be pursued in future research.

  8. Arguably, in the cases of joint consumption of a private good and the natural resource’s services, the price may include an additional component, common to the three strategies, which depends on the quality of the natural resource. However, this component can be neglected since the dynamics of strategy selection only depend on comparative payoffs. Nevertheless, it would be relevant in evaluating welfare effects of the creation of the ecolabel.

  9. The analysis of the case where the natural resource condition has a negative effect on price premiums is possible but it is not presented here due to space constraints. The authors can prove on request that, in that case, almost all equilibria can be stable either simultaneously or not.

  10. Assuming critical depensation allows consideration of the effect on the population configuration of changes in the minimum viable size of the resource, \( \underset{\bar{\mkern6mu}}{K} \). (See section 4.) However, notice that we admit the possibility of a standard logistic equation for the replenishment function since we allow \( \underset{\bar{\mkern6mu}}{K}=0 \).

  11. Without detriment to our analysis, we skip a forth isocline composed of equilibrium populations where only certified and uncertified green firms exist, with equal profits. This isocline is inconsequential since, as stated in proposition 2 later in the text, equilibria with certified and uncertified green firms can never be stable.

  12. If some brown firms act as promoters of the ecolabel, the creation of this scheme will reduce the differentiation premium and, therefore, will increase the payoff of being brown compared to being uncertified green, so the argument holds a fortiori.

  13. Trajectories iii and v in Figure 6.b are qualitatively equivalent to trajectories i and ii respectively in Figure 6a.

  14. http://ec.europa.eu/environment/ecolabel/facts-and-figures.html retrieved October 2nd, 2014.

  15. http://ec.europa.eu/environment/emas/documents/articles_en.htm retrieved September 2nd, 2014.

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Acknowledgments

We received helpful comments from John Maxwell, Carmen Arguedas, participants in the Fourth World Congress of Environmental and Resource Economists. We thank three anonymous referees for their helpful comments and directions. Remaining errors are our own. We are also grateful for the financial support of the University of Innsbruck.

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Authors and Affiliations

  1. Department of Public Finance, University of Innsbruck, Universitaetsstrasse 15/4, 6020, Innsbruck, Austria

    Esther Blanco

  2. The Vincent and Elinor Ostrom Workshop in Political Theory and Policy Analysis, Indiana University, 513 N. Park Avenue, Bloomington, IN, 47408, USA

    Esther Blanco

  3. Department of Applied Economics, University of the Balearic Islands, Carretera de Valldemossa Km. 7.5, 07122, Palma de Mallorca, Spain

    Javier Lozano

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Correspondence to Esther Blanco.

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Blanco, E., Lozano, J. Ecolabels, uncertified abatement, and the sustainability of natural resources: an evolutionary approach. J Evol Econ 25, 623–647 (2015). https://doi.org/10.1007/s00191-015-0403-y

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Keywords

  • Ecolabels
  • Evolutionary games
  • Sustainable management
  • Voluntary abatement

JEL classifications

  • M14
  • Q28
  • C73