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Public, Private and Nonprofit Regulation for Environmental Quality

Authors


  • We are deeply indebted to Nur Ata, Helmuth Cremer, and Rim Zaabar for support, constructive comments, and suggestions. We also thank two anonymous referees and the editor for helpful suggestions. Comments by participants at EPEE, University of Evry seminar, PET 2005, EARIE 2006, and EEA 2006 are gratefully acknowledged.

Abstract

This paper studies the welfare implications of different institutions certifying environmental quality supplied by a monopoly. The monopolist can voluntarily certify the quality of the product through an eco-label provided either by an NGO or a for-profit private certifier (PC). The NGO and the PC may use advertisement to promote the label. We compare the NGO and PC regimes with the regime where the regulator imposes a minimum quality standard. The presence of a private certifier in the market decreases the scope for public intervention. The availability of green advertisement reinforces the above result.

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