Is Ecolabelling a Reliable Environmental Policy Measure?

The rationale of ecolabelling is to enable firms to reap the willingness-to-payfor the environmental attributes of goods by helping consumers toidentify ``green'' products. By so doing, ecolabelling is expected tostimulate spontaneous environmental innovation and to reduce aggregatedpollution. Our analysis however outlines situations under whichecolabelling could induce perverse effects, namely increased investment inconventional technologies before the labels are awarded, and examineswhether restricting the issue of labels could constitute an antidote. Copyright Kluwer Academic Publishers 2001