Improving Eco-labelling as an Environmental Policy Instrument: Knowledge, Trust and Organic Consumption

Eco-labels have an import role in promoting green consumption since most eco-labelled products are credence goods, implying that the valued process attributes they contain are not observable to the consumer even after purchase or consumption. Therefore, the consumers rely heavily on eco-labels as a reassurance that these attributes are actually delivered. We argue that the label will only have the desired effect if the consumers know the production standards underpinning it and have trust in the label. We test this argument using organic food as our example. The empirical results obtained on the basis of our analysis of Danish purchasing data on actual purchases combined with detailed survey data show that the higher the level of knowledge of labelling attributes and the higher the degree of trust in the label, the more likely consumers are to buy organic food.