Does consumer willingness to pay for higher environmental standards vary between ecolabelling and generic improvement options? Avocados and the Great Barrier Reef

Reducing nutrient emissions into the Great Barrier Reef (GBR) from avocado production has become a major policy focus for the Queensland and Australian Governments. The study tested consumer support for two broad types of price signalling: 1. Ecolabels, where consumers voluntarily select foods labelled with higher environmental credentials; and 2. Environmental standards, where consumers prefer foods to be produced above minimum standards despite corresponding price increases. These types of mechanisms address market friction problems, where information about factors such as quality, health, sustainability and environmental impacts does not flow through to consumers, and the supply chain does not transmit consumer demands for those factors through to producers. There is potential for governments to design these mechanisms as market based instruments that combine regulatory and funding power with commercial forces to drive changes in consumer and producer activity. Three different experiments were included in the study: 1. A Best Worst Scaling experiment which assessed how important environmental issues are to consumers relevant to other issues, 2. A Choice Experiment which assessed the extent to which consumers might pay extra for an ecolabelled avocados, and 3. A Contingent Valuation experiment which assessed the extent to which consumers might pay extra for higher environmental standards. The best-worst scaling experiment confirmed that while factors such as price, the unique nature of avocados and organic status are important, many other factors are not perceived as significantly different. One environmental factor was important: minimising adverse environmental impacts on land and water, whereas another as significantly unimportant: minimising greenhouse gas emissions. The statement about reducing water quality impacts on the GBR was positive but not significant. The contingent valuation experiment showed that respondents who had visited the GBR or plan to in the future, as well as those who thought condition had declined and poor water quality was a key threat, were those most likely to support universal higher standards, while those who were younger were prepared to pay more. Average willingness to pay extra was estimated at $0.28 per avocado. The choice experiment revealed that willingness to pay for an ecolabelling option was higher in households with lower consumption rates. The average premium for better protection of the Great Barrier Reef was estimated to be $0.48 per avocado. Not all households would support higher payments. It was estimated that 24.6% of consumers would support the universal higher standards, and 7.3% of consumers would purchase ecolabelled avocados at the higher prices. An additional group would support higher standards for all avocados produced in Australia. Across 9.4M households in Australia, of which 79.7% consume avocados, the annual willingness to pay is estimated at $45.64M for the universal higher environmental standards option and $23.35M for the voluntary ecolabelled option. Based on these results, we recommend further research and development of mechanisms to improve transmission of price signals between consumers and producers.