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Determinants of the Price-Premium for Green Energy: Evidence from an OECD Cross-Section
Umeå University, Faculty of Social Sciences, Center for Environmental and Resource Economics (CERE). Umeå University, Faculty of Social Sciences, Umeå School of Business and Economics (USBE). The Beijer Institute of Ecological Economics, Royal Swedish Academy of Sciences, Stockholm, Sweden.ORCID iD: 0000-0002-9494-6467
2016 (English)In: Environmental and Resource Economics, ISSN 0924-6460, E-ISSN 1573-1502, Vol. 64, no 2, 173-204 p.Article in journal (Refereed) PublishedText
Abstract [en]

Using data from a survey of households in 11 OECD countries, this paper investigates the determinants of preferences for a completely green residential electricity system. Three important questions are addressed: (i) how much are households willing to pay to use only renewable energy? (ii) does willingness-to-pay (WTP) vary significantly across household groups and countries? and (iii) what drives the decision to enter the (hypothetical) market for green energy and, given entry, what drives the level of WTP? The analysis here differs from previous studies on green energy in two ways: first, data and analyses are comparable across countries and second, a comprehensive attempt is made to understand 0 WTP, and to accommodate-using a censored quantile regression (CQR) framework-unobserved heterogeneity. The survey data indicate a low WTP, at 11-12 % of current electric bill. This study also addresses a key question: how important is income for understanding WTP, relative to more "attitudinal" determinants? The effect of income overall appears ambiguous, with Tobit-like models indicating that income is not significant while the CQR indicates that income exerts a significant effect near the center of the distribution of WTP. Across all frameworks used, a key determinant of WTP appears to be environmental attitudes, particularly membership in an environmental organization.

Place, publisher, year, edition, pages
2016. Vol. 64, no 2, 173-204 p.
Keyword [en]
Green electricity, Willingness-to-pay, Censoring, Quantile regression, Renewable energy
National Category
URN: urn:nbn:se:umu:diva-122549DOI: 10.1007/s10640-014-9864-yISI: 000376683300002OAI: diva2:949875
Available from: 2016-07-25 Created: 2016-06-20 Last updated: 2016-07-26Bibliographically approved

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B. Krishnamurthy, Chandra KiranKriström, Bengt
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Center for Environmental and Resource Economics (CERE)Umeå School of Business and Economics (USBE)
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