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The internalization of externalities in the production of electricity: Willingness to pay for the attributes of a policy for renewable energy

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  • Longo, Alberto
  • Markandya, Anil
  • Petrucci, Marta

Abstract

This paper investigates the willingness to pay of a sample of residents of Bath, England, for a hypothetical program that promotes the production of renewable energy. Using choice experiments, we assess the preferences of respondents for a policy for the promotion of renewable energy that: (i) contributes to the internalization of the external costs caused by fossil fuel technologies; (ii) affects the short-term security of energy supply; (iii) has an impact on the employment in the energy sector; and (iv) leads to an increase in the electricity bill. Responses to the choice questions show that our respondents are in favour of a policy for renewable energy and that they attach a high value to a policy that brings private and public benefits in terms of climate change and energy security benefits. Our results therefore suggest that consumers are willing to pay a higher price for electricity in order to internalize the external costs in terms of energy security, climate change and air pollution caused by the production of electricity.

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Bibliographic Info

Article provided by Elsevier in its journal Ecological Economics.

Volume (Year): 67 (2008)
Issue (Month): 1 (August)
Pages: 140-152

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Handle: RePEc:eee:ecolec:v:67:y:2008:i:1:p:140-152

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Web page: http://www.elsevier.com/locate/ecolecon

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Keywords: Non-market valuation Choice experiments Willingness to pay Renewable energy Energy security Greenhouse gases emissions;

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Citations

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Cited by:
  1. Ladenburg, Jacob & Möller, Bernd, 2011. "Attitude and acceptance of offshore wind farms—The influence of travel time and wind farm attributes," Renewable and Sustainable Energy Reviews, Elsevier, vol. 15(9), pages 4223-4235.
  2. Abdullah, Sabah & Mariel, Petr, 2010. "Choice experiment study on the willingness to pay to improve electricity services," Energy Policy, Elsevier, vol. 38(8), pages 4570-4581, August.
  3. Alberto Longo & David Hoyos & Anil Markandya, 2012. "Willingness to Pay for Ancillary Benefits of Climate Change Mitigation," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 51(1), pages 119-140, January.
  4. Ito, Nobuyuki & Takeuchi, Kenji & Tsuge, Takahiro & Kishimoto, Atsuo, 2010. "Applying threshold models to donations to a green electricity fund," Energy Policy, Elsevier, vol. 38(4), pages 1819-1825, April.
  5. Dombi, Mihaly & Kuti, Istvan & Balogh, Peter, 2012. "Aspects Of The Sustainable Utilization Of Renewable Energy Sources," APSTRACT: Applied Studies in Agribusiness and Commerce, AGRIMBA, vol. 6(5).
  6. Abdullah, Sabah & Jeanty, P W, 2009. "Demand for Electricity Connection in Rural Areas: The Case of Kenya," Department of Economics Working Papers 17070, University of Bath, Department of Economics.
  7. Ku, Se-Ju & Yoo, Seung-Hoon, 2010. "Willingness to pay for renewable energy investment in Korea: A choice experiment study," Renewable and Sustainable Energy Reviews, Elsevier, vol. 14(8), pages 2196-2201, October.
  8. repec:eid:wpaper:26/09 is not listed on IDEAS
  9. Zografakis, Nikolaos & Sifaki, Elli & Pagalou, Maria & Nikitaki, Georgia & Psarakis, Vasilios & Tsagarakis, Konstantinos P., 2010. "Assessment of public acceptance and willingness to pay for renewable energy sources in Crete," Renewable and Sustainable Energy Reviews, Elsevier, vol. 14(3), pages 1088-1095, April.
  10. Liao, Shu-Yi & Tseng, Wei-Chun & Chen, Chi-Chung, 2010. "Eliciting public preference for nuclear energy against the backdrop of global warming," Energy Policy, Elsevier, vol. 38(11), pages 7054-7069, November.
  11. Fouquet, Roger, 2010. "The slow search for solutions: Lessons from historical energy transitions by sector and service," Energy Policy, Elsevier, vol. 38(11), pages 6586-6596, November.
  12. Komarek, Timothy M. & Lupi, Frank & Kaplowitz, Michael D., 2011. "Valuing energy policy attributes for environmental management: Choice experiment evidence from a research institution," Energy Policy, Elsevier, vol. 39(9), pages 5105-5115, September.
  13. Nobuyuki Ito & Kenji Takeuchi & Takahiro Tsuge & Atsuo Kishimoto, 2012. "The Motivation behind Behavioral Thresholds: A Latent Class Approach," Economics Bulletin, AccessEcon, vol. 32(3), pages 1831-1847.
  14. Damigos, D. & Tourkolias, C. & Diakoulaki, D., 2009. "Households' willingness to pay for safeguarding security of natural gas supply in electricity generation," Energy Policy, Elsevier, vol. 37(5), pages 2008-2017, May.
  15. Solomon, Barry D. & Johnson, Nicholas H., 2009. "Valuing climate protection through willingness to pay for biomass ethanol," Ecological Economics, Elsevier, vol. 68(7), pages 2137-2144, May.

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