Private vs. public regulation: political economy of the international environment

Minimum standards set by a `World Environmental Organization' (WEO) and NGO labelling are promoted as alternative approaches to international environmental protection. We explore the potential inter-play between these two approaches when the WEO is subject to pressure from producers. We find that if WEO and NGO schemes are mutually exclusive then the existence of an NGO `alternative' increases industry resistance to WEO proposals and this may reduce welfare. If, however, the schemes are run in parallel, existence of the NGO lessens producer opposition to WEO activities. This allows the WEO to be `bolder' in its proposals, which is good for welfare. (C) 2004 Elsevier Inc. All rights reserved.