Sunday, March 29, 2009

Certification: a response to low resource prices

Vendors can raise prices if they can put special "sustainable" labels on their products, as niche markets are willing to may for them. An article in the New York Times highlights this for forestry, and a recent article in a publication by the Nature Conservancy describes how that organization is using a "local" label to raise selling prices enough to justify the higher costs of using sustainable methods. This is internalizing externalities in action, but it's tough when only parts of the market are internalizing a large share of the costs.