Essays on Environmental NGOs and Clean Technologies Adoption

Abstract

Chapter 1. We develop a model of NGO-firm partnerships. An NGO can share environmental expertise with one or two competing firms, and certify their 'clean' production, important for consumers with environmental concerns. The NGO may also obtain funds from a partner firm for an environmental project, important for consumers who derive project participation warm-glow. The NGO benefits from reduced environmental damage and project realization, while firms may gain or avoid loss of profitable custom. This model allows us to understand increasingly common partnerships between firms and NGOs as mutually beneficial in a competitive setting. 'Clean' production and/or the project may be independently viable on the market, supported by consumer preferences. A viable project can then support adoption of a non-viable 'clean' technology, leading to a 'cleaner' market. However, when 'clean' production is viable, we identify a 'dirty' production damage threshold below which the NGO prefers to obtain funds for a non-viable project and partners on production with only one firm, rather than forgo the project and partner on 'clean' production with both firms instead. Moreover, this damage threshold is increasing in consumers' environmental concern, and thus can generate counterintuitive situations: less environmental concern leads to a 'cleaner' market, whereas more concern leads to a 'dirtier' market. Chapter 2. Consumers choosing amongst horizontally-differentiated products (brands) that also embody some degree of an environmental attribute, suffer stigma if they make brown choices. The intensity of that stigmatization is declining in the fraction of other consumers making similarly brown decisions. It is common to suppose that people feeling such stigma would improve environmental outcomes. We show that while the threat of stigma makes it more likely that a consumer will choose the green option from a given menu, it can reduce the incentives for firms to offer green options in the first place. In an asymmetric duopoly setting social stigma can lower or increase the likelihood of clean technology adoption and in plausible circumstances drives the high-cost firm into a 'brown trap' or the low-cost firm into a 'green trap'. While increased competition reduces the 'green trap', it exacerbates the 'brown trap'. Chapter 3. The effect of warm-glow on number of NGOs and welfare is investigated within a charity market with ideologically differentiated public goods. In this setting ideology acts as a warm-glow multiplier on donations and high enough warm-glow can push welfare into negative territory — welfare would be higher if nobody donated. Under first-best we find that an optimal number of NGOs exists even though NGOs have no costs. Under free-entry we obtain the level of warm-glow that would induce the welfare-maximizing number of NGOs to enter. A social planner can determine donor population to behave overall as if they were experiencing the welfare-maximizing level of warm-glow, and thus optimize free-entry welfare, through one of two equivalent and revenue-neutral fiscal policies: by subsidizing/taxing donations either at the source, when the donors make them, or at the destination, when the NGOs receive them.