A better carbon footprint label

Abstract

Based on insights from behavioral economics, it is suggested to extend carbon footprint labeling with information about relative performance, using the well-known “traffic light” color scheme to communicate relative performance. To test this proposition, the impact of a carbon footprint label on Danish consumers' choice of ground coffee was tested in a 3 price levels × 3 levels of carbon emission × 3 certifying organizations × 2 organic labeling conditions discrete choice experiment. Participants were randomly assigned to two slightly different variants of the experiment: In one condition, participants saw the original Carbon Trust label and in the other condition they saw the same label, but with traffic light colors added to communicate the product's relative performance in terms of carbon footprint. All included attributes were found to have a significant impact on consumer choices. As expected, price and carbon footprint were negatively related to choice. Further, participants preferred organic to non-organic coffee and certification by a public authority. The effect of the carbon label is significantly stronger the more environmentally concerned the consumer is. Using colors to indicate relative carbon footprint significantly increases carbon label effectiveness. Hence, a carbon footprint label is more effective if it uses traffic light colors to communicate the product's relative performance.