Ecolabels, uncertified abatement, and the sustainability of natural resources: an evolutionary approach

Abstract

This study presents an evolutionary model where firms decide their environmental strategy, which may include certification of voluntary abatement by joining an eco-label, in settings where conservation outcomes exert an influence on the price premia that certified and uncertified green firms receive. Findings support that either certified or uncertified voluntary abatement can be sustained in the long run as a result of market incentives, but not simultaneously. When certified abatement takes place in the long-run, it results in an improvement in the state of the natural capital as compared to situations where abatement is not certified. However, certification practices that are not attractive enough for companies to subsist in equilibrium can generate transitional dynamics eroding conservation outcomes. Moreover, given the endogenous nature of environmental conservation on firms’ abatement decisions, temporary policies increasing the state of the environment can change the long-term incentive structure of the system favoring certification of abatement. A context of applicability of the model is illustrated by tourism uses of natural resources.