Ecomark was introduced in India in 1991. It followed similar ecolabel schemes in some other developed countries. While in the developed countries it has had only very limited acceptance, in India the scheme has found almost no takers. In an attempt to make the industry accept the scheme, it is now being suggested that the scheme may be made mandatory for government purchases and/or for export items. Ecolabel is also becoming an issue at WTO, and the ISO 14020 series deals with these. In view of all this. Liberty Institute had undertaken detailed study of the scheme last year.

As materials manager all of you are aware tliat in a competitive environment, resource conservation, waste reduction, waste utilisation, etc. are extremely important tools of your trade. Similarly, we found that a competitive environment would automatically meet many of the goals of the Ecomark scheme. And that label is an economic resource, just like any other, and therefore, performs much more effectively if labeling is competitive, than if it is imposed by regulations.

Following are some of the main features of our study. Labeling is for the communication of information. Information is not free.

Economics of Information:

Cost is involved in finding the information, putting it on the label, and in the process of assimilation of the information by users. The law of demand and supply is applicable to information.
Like in case of other goods, market is best placed to continually strive to achieves balance between demand and supply in case of information also.

Quality of the good, in this case credibility of the label is also a factor that influences supply and demand. Mandatory labeling regulations distorts the flow of information. Labeling regulations are based on certain product performance standards.

Effect of regulation:

Regulations on standards impose costs-provides a ceiling to performance.
• Restrains growth of knowledge,
• Slows down innovation and improvements,
• Reduces competition,
• Induces the growth of the unorganised sector.

Results in loss to the consumers and the environment, due to obstructing the development of newer and better products. In terms of international trade, such standards are often seen as a new form of protectionism.

Weak incentive structure:
If the standards are to be set and monitored by state agencies, then they suffer from lack of incentives to:
• Review the standards
• Ensure proper implementation
• Stop misuse of the label/certification
• Check spurious use of labels
• Politicisation of the standards

Life cycle analysis – attractive intuitively, but fraught with conceptual and practical problems. Suffers from either the problem of infinite regres, or gives rise to political bargaining to determining the cut-off.
Promotion of misinformation -e.g., a steel furniture manufacturer advertising his products as environment friendly or wood substitute.

Market based alternatives are available. The task is to recognise and facilitate competition among private agencies engaged in the business of certifying product performance. So that in order to protect their reputation and retain theirclientele, these information businesses continually investigate the demand for relevant information in the market, and strive to set improved standards as new technologies emerge while striking a balance with their economic viability.

Ecomark: The sign of the matka, the earthen pot.

Introduced in 1991. Has found hardly any takers so far. Apart from Eco-Eazy, the liquid detergent from the erstwhile Godrej Soaps. Now a paper manufacturer is said to have received the label, but tliere is no indication that it is being used.

Does the matka, an earthen pot, truly symbolise the environment friendly product?
• Depletion of fertile soil
• Inefficient energy consumption
• Short service life
• Recycling not possible
• Does not degrade back to the original soil
• Pottery from ancient civilisation provide crucial archeological evidence.

This is neither rhetoric, nor polemics. This is just an illustration oftlie fundamental problem associated with setting standards.

Performance of other labeling or certification schemes like ISI, Agmark, FPO, etc. have been quite mixed. Many big brand names do not seek to highlight their ISI certification.

Problem areas for Ecomark:

Product categories – arbitrarily chosen, and the quantum of impact of the category on the environment not really considered.

Product standards – relevance to Indian ground realities can be questioned. Standard setting- not truly objective. Just setting it above ISI, for instance, without providing any rationale. This also implies tliat somehow tlie earlier ISI standards may not have been appropriate.

Non-environmental criteria – giving weight to certain economic and political factors which in effect have negative impact on the environment (std. for filament bulbs and tubes, and no std. for CFLs)

Inability to upgrade the standards – certain ISI standards for example were set in the 1960s and 1970s. While many new products stay outside the purview. Ecomark has no standards for CFLs, while these are most efficient lighting devices available in the market. At the same time, because these are relatively new products, the fiscal policy of the government has ensured that these products are taxed to the tune of 80% to 100%.

Turf war among agencies – expanding environmental criteria to include health and safety aspects have given rise to conflict among food and health agencies and ecomark.

Politicisation of standards – refrigerators on efficiency, but not on CFC. The government wants to use the CFC issue as a bargaining counter against the West. While the frost-free and energy efficient refrigerators are not always good for Indian customers who have to live without electricity for hours during summer.

Agro-chemicals have been taken outside the purview of ecomark. Although, nutrients like phosphate from run-offs from agricultural field impose a greater burden on the environment, than phosphate from soaps. Likewise, lack of sanitary facility also contributes to the release of nutrient in the water bodies leading to eutrophication.

New Protectionism – Attempt to impose social and environmental standards on the developing countries are a form of protectionism being promoted by the developed world. At the same time, by not supporting a demand for free trade, the developing world is inflicting a higlier environmental costs on themselves.

Basel Convention has obstructed the flow of used lead to India. This has substantially affected recycling of used lead in batteries. No doubt that many of these recycling units are in the small and unorganised sector, and did cause environmental problems. But by allowing imports and facilitating these units to upgrade and benefit economics of scale, it may be more advisable to allow import of lead.

Recycling and reuse have been normal part of economic life for centuries. Paper has always been reused or recycled. Indeed, India is a major importer of waste paper because access to wood for virgin paper is limited. On the other hand, recycling need not be environmentally benign. It needs to be de-inked using chemicals and water, and secondly recycling process consumes energy. All these have economic and environmental implications, and no one solution can be applied to all.

Conclusions:

The report seeks to look at some of the issues identified below.
• A label is like any other product. Has to earn its credibility in the marketplace.
• Regulatory labeling suffers from knowledge problems: lack of appreciation of open ended nature of knowledge, takes away incentives for innovations
• Limitations of setting performance and product standards: relevance of the standard,
• Politicisation of the criteria setting procedure,
• Problems of implementation and monitoring of the standards: Problems with regularly updating the standards, lack of incentive to continually monitor the labeled products, unrestrained growth of spurious labels,
• Impact of the standards: Local ground realities, rise of vested interests, protectionism,
• Alternative approach: role of the market, label is an information product and is subject to the laws of supply and demand, labels as a product must compete in the market place in order to establish its relevance and credibility, information is not free and consumers have to bear the cost of additional information.

Competition in the market place, along with strict and efficient product liability adjudication system through the tort laws, offers a much more assured system of delivering better products to the consumers.

A label is an information product, and is best supplied by the market.
Brand names carry a high degree of credibility among consumers because it is assumed to contain a package of useful information about tlie product. Moreover, a brand name earns its credibility in tlie competitive environment of the market. A similar system should be allowed to develop in the product performance certification area as well.

There are many examples of such competitive certification schemes in the market. Ecotex, for textile is a good example of how the market supplies the information if there is a real demand for it. In the US, the Underwriter’s Laboratory (UL) runs an extremely efficient system of product certification, and even accepts responsibility for liability.

ISO 14020 is a voluntary management scheme. If made mandatory under a regulatory framework, then it would lose much of its effectiveness.

Market is environment friendly

In a competitive economy, wastes or pollutants tend to become useful resources.
Improvement in environment is value-added product that becomes technologically possible and economically viable only when economic growth takes place
A free market not only ensures economic progress, but also provides a win-win situation for the consumers, producers, and the environment as well.