ABSTRACT
On the supply side, an important question is the extent to which eco-labeling would increase production costs. The extent of cost increases would likely vary across products. The removal of dioxin from the wood-pulping process, for example, has involved tens of millions of dollars per plant (Harrison 1998). For the production of certifiable wood, Murray and Abt (1998) have estimated that 50% of the U.S. harvest can be produced at an on-the-ground cost increase of 10% or less; however, the remaining 50% would require cost increases up to 50%. Similar significant cost increases for certified wood are found in a host of other countries (see Sedjo, Goetzl, and Moffitt 1998). In addition, there are costs associated with maintaining the “ chain-of-custody” required to ensure that certified commodity flows are not contaminated with non-certified commodities. The existence of a price premium could be important in defraying these costs and could create additional incentives to produce more environmentally friendly eco-labeled goods.
