International Ecolabel Vs National Ecolabels

We consider a vertically differentiated model with two identical countries each having initially one firm. We compare two options: a unique international ecolabel set up by an international authority and two national ecolabels set up non-cooperatively by two national non-governmental authorities. The governments decide then to open or not their economies, then firms choose their environmental qualities and prices. We prove that relative to the case of national ecolabels, the international label lets the global welfare as it is or improves it. However, the improvement is always at the expense of one of the two countries, in which case the international label is not feasible unless the beneficiary country offers a compensation to the aggrieved one.