Can eco-labels reduce carbon emissions? Market-wide analysis of carbon labeling and locally grown fresh apples

Abstract

AbstractDespite the heightened efforts to implement eco-labeling schemes as the market-based vehicle for improving environmental quality, the overall effectiveness of eco-labels are still uncertain due to complex and sometimes unexpected market responses. In this paper, we assess the overall changes in carbon emissions resulting from two types of labeling on fresh apples, carbon labels and location designation labels (e.g., locally grown), both of which can have mixed implications for carbon emissions due to fluctuating supply chain factors. We employ an equilibrium displacement model that integrates existing estimates of differences across production systems, and our own estimates of consumer responses to labels in order to simulate the changes in prices, trade flows and estimate carbon impacts across several scenarios in the US fresh apple market. We find that both labels ultimately affect market outcomes and overall carbon emissions. With location designation labels, consumers’ preference for local products leads to a net decrease in carbon emissions during the local growing season, while the interaction of various market dynamics results in a subsequent net increase in carbon emissions during the local off-season. The interaction of a carbon label with the location label lowers the overall attractiveness of products and reduces the quantity demanded, and thus, reduces the carbon emissions in both seasons. Overall, providing the location designation label increases annual carbon emissions, whereas providing both the location designation and carbon labeling decreases annual emissions. In short, the dynamics and interdependency of labeling strategies are important to consider in the context of eco-labeling.