Willingness-to-Pay for Eco-Labelled Forest Products in Northern Ireland: An Experimental Auction Approach

Woodlands provide a variety of market and non-market benefits, but deforestation arising from pressures on landowners to clear forested areas for other land uses may cause irrevocable loss of these benefits. Landowners need to be encouraged to create or retain wooded areas on their land, and manage them sustainably.
A proposed solution is the use of an eco-labelling scheme. Eco-labelling is a process by which branding is applied to a product to assure a customer that the product is “environmentally-friendly”. Customers are willing to pay more for eco-labelled forest products and an eco-label allows producers of forest products to differentiate themselves in the market or enter new markets entirely. It acts as a market-based instrument to encourage sustainable forest management.

Through the use of an experimental second price Vickrey auction, this study determined that people are willing to pay an average of 88p more for every £1 on a low cost, frequently purchased eco-labelled wood product. This positive willingness-to-pay is related to the consumers’ knowledge of the environment, their conservation-orientated beliefs and higher levels of education. Information presented also determines willingness-to-pay, with consumers favouring less information about the product’s credentials, preferring to be told the product is generally “eco-friendly” and “sustainable”.