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The Role of Quality Infrastructure for Sustainable Development Jan Peuckert | Innovation Economics | Workshop, May 28th 2013, Geneva.

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Presentation on theme: "The Role of Quality Infrastructure for Sustainable Development Jan Peuckert | Innovation Economics | Workshop, May 28th 2013, Geneva."— Presentation transcript:

1 The Role of Quality Infrastructure for Sustainable Development Jan Peuckert | Innovation Economics | Workshop, May 28th 2013, Geneva

2 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

3 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

4 CONCEPT

5 The National Quality Infrastructure

6 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

7 THEORY

8 Economics of Quality Infrastructure Swann, P (1999): The Economics of Measurement Lambert, R (2010): Economic Impact of the National Measurement system Usuda, T & Henson, A (2012): Economic Impact of Measurement Standards Blind, K (2004): The Economics of Standards Swann, P (2010): The Economics of Standardization Frenzen, M & Lambert, R (2013): The Economics of Accreditation Nelson, P (1970): Information and Consumer Behavior Akerlof, G (1970): The Market for Lemons: Qualitative Uncertainty and the Market Mechanism Viscusi, WK (1978): A note on "lemons" markets with quality certification Vining, AR & Weimer, DL (1988): Information asymmetry favoring sellers

9 Quality Infrastructure StandardizationMetrology Conformity Assessment Accreditation Standard Measure- ment ProducerUser Product characteristics Product requirements Product quality Value Chain Quality Infrastructure as Signaling Mechanism

10 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 shrimps use of natural materials durability of goods

11 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 accreditation Measurement: Third party cannot perfectly identify compliance at reasonable costs Example: Environmental Analytics (air, water, soil) – Metrology in Chemistry Standardization: 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 biofuels Accreditation: Conflict of interest between consumers and certifiers Example: Risk of fraud / doubts about additionality of CDM projects

12 EMPIRICS

13 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 certification improves the long-term effects of environmental regulation on the competitiveness of businesses

14 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

15 CONCLUSIONS

16 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)

17 THANK YOU!


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