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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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