Compatibility of Eco-Labeling Scheme with WTO and Its Potentially Conflicting Impacts

Abstract

As there is an overwhelming global consensus that greenhouse gas emissions must be reduced to mitigate global warming, many countries have established eco-labeling or other similar schemes at regional, national and international levels. And the incentive to use eco-labeling to products for the purpose of providing information pertaining to environmental friendliness continues to rise. Although eco-labeling scheme is considered a means to protect and conserve the environment while promoting sustainable production and consumption, it may constitute a protectionist measure and operate as a trade barrier in international trading system. For instance, eco-labeling schemes that countries establish and develop as part of their commitment to taking action on climate change have tendency to influence international trading system. As eco-labeling informs consumers about the environmental friendliness of products, including their environmental characteristics and the environmental impact of their performance, they may influence preference and behavior of consumers. Consequently, this may significantly affect the trading system as market is likely to shift in response to change in consumer demand in products.