Wouldn't it be great to have carbon footprint labels right on the products we buy? That way, we could use our dollars to tell big corporations that we actually care about climate change. Unfortunately, according to a new experiment, adding so-called "carbon reduction labels" may not have any impact on what we buy—unless the labels are designed just right.
The idea of labeling products based on their environmental impact is relatively new, but it's hardly without precedent. Car commercials, for one, routinely tout higher gas mileage and lower emissions in the hope of selling more cars and even pick-up trucks. That's more or less what the United Kingdom-based Carbon Trust hoped for when it created its carbon reduction labels, which, they explain on their website, "can be used to publicly brand ... products to communicate their sustainability credentials, build your reputation and drive sales with today’s ever more environmentally aware consumers and business buyers."
Indeed, according to standard economic theory, "one would expect that the presence of an environmental label should lead to an increase in price when consumers value the environmental attribute," economists Mika Kortelainen, Jibonayan Raychaudhuri, and Beatrice Roussillon write in the journal Economic Inquiry. To be sure, there is actually some evidence from surveys and lab experiments to back those claims.
Adding so-called "carbon reduction labels" may not have any impact on what we buy—unless the labels are designed just right.
But, the economists explain, there aren't many studies that look at whether people will be more likely to buy environmentally friendlier products, like those the Carbon Trust certifies, out in the real world. So Kortelainen, Raychaudhuri, and Roussillon decided to conduct their own.
For their study, the team gathered data on sales of 43 different detergents sold at a well-known supermarket chain in the U.K. Five of those detergents carried a Carbon Trust carbon reduction label, which indicated how much carbon was sent into the environment over each product's lifecycle. Crucially, the team was able to collect data both before and after the carbon-labeling system went into effect in early 2008, allowing them to isolate the effect of the Carbon Trust label itself on prices and demand.
Labeling products based on the carbon emissions it took to make them had no effect on prices or sales figures for Carbon Trust-certified detergents, the team found—probably because of the labels themselves, they argue.
"We think that the most plausible explanation for our results is that customers find it difficult to notice, understand, and compare carbon footprints of different detergents and therefore do not reward carbon-labeled or less carbon intensive products with a price premium," they write, noting that the labels appear on the back of a package and indicate simply how much carbon is emitted to wash one load of laundry—not something that's easy for most consumers to process. The team suggests that simplifying labels, even to the point of removing any sort of quantitative data, and putting labels on the front of packaging could improve the effectiveness of carbon-footprint labels.
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