Public, private and nonprofit regulation for environmental quality

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. © 2009 Wiley Periodicals, Inc.