Price Impacts of Carbon Reduction Labels: Evidence From Scanner Data

Abstract

We investigate the effects of the introduction of carbon reduction labels on the prices of detergents using a detailed scanner level data set which records consumers’ transaction prices before and after the introduction of the carbon labels. In contrast to other empirical studies looking at the impact of environmental labels using scanner or household data, we utilize a quasi-experimental setting to address our research question. We use a standard difference-in-difference estimation strategy to investigate the average effect of the carbon label on detergent prices. We find that having a carbon label has no impact on detergent prices on average, i.e., there is no “carbon premium”. To examine if there are product-specific price premia for detergents with different levels of carbon emissions (i.e., with different carbon footprints), we utilize a more flexible approach known as the synthetic control method. We do not find evidence that the prices for the counterfactual synthetic detergents without the label would have been any different than the prices for the actual carbon labeled detergents.