Full Title: Differentiation of Natural Gas Markets by Climate Performance
Author(s): Alan Krupnick and Clayton Munnings
Publisher(s): Resources for the Future (RFF)
Publication Date: April 23, 2020
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Any commodity can be described by its unique set of attributes. These attributes can include intrinsic characteristics, such as what the commodity is (e.g., natural gas), and where, how, and by whom it was produced. These attributes can quantify the externalities associated with production, processing, transport, and consumption. For instance, in the case of coffee, the price partially reflects how, where, and by whom it is grown and processed, as well as how much, and can also reflect a variety of external benefits. For example, “rainforest alliance” coffee signals protection against deforestation, “shade-grown” coffee signals lower biodiversity loss, and “fair trade” coffee signals that a purchase reduces economic inequality. A range of certification bodies transform these signals of value into an expectation of reality and integrity, often via labeling, facilitating consumer choice and price premiums. In this way, coffee, a commodity, has been transformed into a differentiated product based on the underlying attribute profile.