The Role of Quality Infrastructure for Sustainable Development
Jan Peuckert | Innovation Economics | Workshop, May 28th 2013, Geneva
Introduction
Development and diffusion of sustainable technologies are affected by two classical market failures:• (environmental) externalities• information asymmetries about environmental quality
Environmental economics focus on the externality problem (getting prices right)• Internalizing externalities through taxes and environmental regulations• Free-riding problem in the absence of an external authority may be solved by collective action• Both self-governance and regulation rely on sanctioning mechanisms
Information asymmetries can be reduced by Quality Infrastructure improvements• Allow for better governance (enforcement of compliance with rules / regulation)• Create incentives for provision of environmental quality• Steer technological change towards sustainable development
Outline
Concept• The National Quality Infrastructure• The International System of Quality Infrastructure
Theory• Economics of Quality Infrastructure Elements• Environmental Quality and Information Asymmetry• Quality Infrastructure as Signaling Mechanism• Need for a Quality Infrastructure of Sustainability
Empirics• Impact of Environmental Quality Infrastructure• Improving the Assessment of Quality Infrastructures
CONCEPT
The National Quality Infrastructure
The International System of Quality Infrastructure
Metrology• International Bureau of Weights and Measures (BIPM)• International Organization of Legal Metrology (OIML)
Standardization• International Electrotechnical Commission (IEC)• International Communication Union (ITU)• International Organization for Standardization (ISO)
Accreditation• International Accreditation Forum (FIA)• International Laboratory Accreditation Cooperation (ILAC)
Conformity Assessment• Mainly private businesses: TÜV, SGS, Bureau Veritas
THEORY
Economics of Quality Infrastructure
Swann, P (1999): The Economics of MeasurementLambert, R (2010): Economic Impact of the National Measurement systemUsuda, T & Henson, A (2012): Economic Impact of Measurement Standards
Blind, K (2004): The Economics of StandardsSwann, P (2010): The Economics of Standardization
Frenzen, M & Lambert, R (2013): The Economics of Accreditation
Nelson, P (1970): Information and Consumer BehaviorAkerlof, G (1970): The Market for Lemons: Qualitative Uncertainty and the Market MechanismViscusi, WK (1978): A note on "lemons" markets with quality certificationVining, AR & Weimer, DL (1988): Information asymmetry favoring sellers
Quality Infrastructure
StandardizationMetrology
Conformity Assessment
Accreditation
StandardMeasure-ment
Producer UserProduct characteristics
Product requirements
Product quality
Value Chain
Quality Infrastructure as Signaling Mechanism
Environmental Quality and Information Asymmetry
Environmental claims are often related to impacts (e.g., pollution emissions) of the production process
Search Goods•quality is observable before purchase
Experience Goods•quality is observable after purchase
Post-Experience / Credence Goods•quality is difficult or impossible to observe by the consumer
genetically unmodified
food
dolphin-safe tuna
energy-efficiency
of appliances
carbon content of products
fuel-efficiency
of cars sustainable landuse for biofuels
ecological packaging
turtle friendly shrimpsuse of
natural materials
durability of goods
Need for an Environmental Quality Infrastructure
Need for eco-labels to incentivize environmental performance• Otherwise the consumer / regulator cannot identify environmental quality• Only what can observed can be understood, controlled, predicted and changed
Most of the literature on eco-labels wrongly assumes perfect certification• Certification must be viewed as noisy (Mason, 2006, 2008)• Imperfections justify the need to improve metrology, standardization and accreditationMeasurement: Third party cannot perfectly identify compliance at reasonable costs• Example: Environmental Analytics (air, water, soil) – Metrology in ChemistryStandardization: Standards may not be perfectly correlated with “environmental friendliness”• Example: Indirect Land Use Change (ILUC) factors in the reporting by fuel suppliers;
currently no credible methodology for calculating the full indirect impacts of biofuelsAccreditation: Conflict of interest between consumers and certifiers• Example: Risk of fraud / doubts about additionality of CDM projects
EMPIRICS
Impact of Environmental Quality Infrastructure
• Subjective data provided by the WEF:“Complying with environmental standards in your country … 1 = significantly reduces competitiveness, 7 = helps long-term competitiveness by encouraging improvements in products and processes”
• We find evidence that, besides regulatory design (regulatory pressure and openness), also the relative intensity of ISO 14001 certification improves the long-term effects of environmental regulation on the competitiveness of businesses
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010,0
50,000
100,000
150,000
200,000
250,000
300,000
Number of ISO 14001 certifications
Africa / West Asia Central / South America North America EuropeFar East Australia / New Zealand
Improving the Empirics of Quality Infrastructure
Composite indicator (Liedtke & Matteo, 2011): (1) capabilities and(2) international recognition / integration
• Metrology• Number of Calibration and Measurement Capabilities (CMCs) in relation to population• Number of Key or Supplementary Comparisons
• Standardization and Certification• Number of ISO 9001 certifications in relation to population• Number of Technical Committee (TC) participations
• Accreditation• Number of accredited bodies
CONCLUSIONS
Role of Quality Infrastructure for Sustainability
Reducing environmental quality information asymmetries:• Standardization: development of performance-based environmental quality criteria• Metrology: reliable assessment of environmental quality• Accreditation: credibility of environmental quality information• Conformity Assessment: precise and unbiased disclosure of environmental quality
Creation of market incentives for environmental performance
Influence on the competitiveness effect of environmental regulation (externality problem)• Signaling / monitoring of environmental performance• Response to sophisticated foreign demand / reduction of de facto barriers• Incentives for the development and diffusion of environmental technologies• Long-term effects on innovation (system functions)
THANK YOU!