Multiplication of Environmental Labelling and Information Schemes (ELIS) : implications for environment and trade

This report explores potential effects of the recent rapid growth in Environmental Labelling Information Schemes (ELIS) around the world, with a focus on the implications of ELIS multiplication for environmental effectiveness and international trade. As empirical work on the environmental effects of ELIS multiplication is just beginning to appear, insights from the theoretical literature on label competition are presented. Modelling suggests that competition between labels may reduce environmental performance relative to a single label with strict environmental goals, though stylised modelling may not accurately reflect the complex real-world interactions of schemes. The analysis is complemented with an overview of empirical studies on environmental effects, including evidence that label competition has led to market-driven convergence of standards in some sectors, such as forest certification. However, it is important that convergence leads to more holistic and streamlined ELIS rather than acting as a weakening influence on the stringency and quality of standards or how schemes are implemented, to maximise environmental effectiveness. Multiplication of ELIS could have implications for the ways that labelling schemes interact with international trade, particularly in terms of market access and international competitiveness. Although difficult to demonstrate empirically, the conditions that could lead to such effects are described conceptually in the report, noting particularities of certain types of schemes such as quantitative footprints. The report also documents a range of ways that government and non-government bodies have responded to ELIS multiplication, such as mutual recognition of schemes and creation of “focal” schemes or standards that can lead to market convergence. Such responses could also alter trade effects of ELIS under certain conditions, for example if a particular voluntary scheme becomes sufficiently dominant in a country to be perceived as a “de facto” market entry requirement by suppliers in other countries.