Working Paper

The Potential Role of Carbon Labeling in a Green Economy

Apr 17, 2012 | Mark A. Cohen, Michael P. Vandenbergh


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 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 influence of product labeling on consumer and firm behavior. Next, we consider the role of governments and nongovernmental organizations, concluding that global, 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.

Growing consumer interest in “green” products has led many companies to develop and market products with environmental attributes—a significant number of which claim to focus on reducing carbon emissions. This approach, carbon labeling, clearly identifies the carbon footprint—the total amount of greenhouse gas emissions required to create, distribute, and use a consumer product—allowing consumers to make more informed purchasing decisions. Manufacturers and firms whose goods possess a positive environmental attribute to consumers have incentive to disclose this information and, presumably, increase sales and brand reputation among eco-conscious consumers. Still, the question remains: can this kind of labeling bring about meaningful reductions in carbon emissions?

In a new discussion paper, RFF University Fellow Mark Cohen and Michael Vandenbergh examine industry and market studies of product sales and consumer surveys of label awareness. They find that global third-party monitors play an integral role in setting standards and providing credible product information. The authors note the importance of considering the entire life cycle of a given product to develop a global standard for measuring and reporting.

While significant challenges to establishing effective programs for carbon labeling exist, Cohen and Vandenbergh assert that careful analysis and selection of product categories could ultimately bring about meaningful reductions in carbon emissions.