The potential role of carbon labeling in a green economy

Over the past several years, labeling schemes that focus on a wide range of environmental and social metrics have proliferated. Although little empirical evidence has been generated yet with respect to carbon footprint labels, much can be learned from our experience with similar product labels. We first review the theory and evidence on the role of product labeling in affecting consumer and firm behavior. Next, we consider the role of governments and nongovernmental organizations, concluding that international, multistakeholder organizations have a critical part to play in setting protocols and standards. We argue that it is important to consider the entire life cycle of a product being labeled and develop an international standard for measurement and reporting. Finally, we examine the potential impact of carbon product labeling, discussing methodological and trade challenges and proposing a framework for choosing products best suited for labeling.

► Economic theory provides rationale for product information on carbon footprint. ► Small but growing evidence that labels will affect demand and product choice. ► International protocol using multi-stakeholder process is needed. ► Product priority should be based on life-cycle emissions and likely behavior changes. ► International trade law poses low risk for voluntary private carbon footprint labels.