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Consumer preference and willingness to pay for a renewable fuel standard (RFS) policy: Focusing on ex-ante market analysis and segmentation

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  • Shin, Jungwoo
  • Hwang, Won-Sik

Abstract

Total energy consumption of oil in 2050 is expected to increase to 1.6 times its level in 2005, and greenhouse gas (GHG) emissions in the transportation sector will be second only to the electricity sector. In order to reduce GHG emissions in transportation, leading countries have started to implement renewable fuel standard (RFS) policies. Other countries such as Korea have recently started implementing RFS policies in order to comply with the proposed global GHG reduction target. However, previous research did not consider the impact of RFS policy on consumer acceptance levels. Therefore, this study analyzes consumer preferences and willingness-to-pay (WTP) for RFS. To provide detailed policy strategies, this study conducts additional analysis using market segmentation and sensitivity analysis. The results indicate that consumers generally accept the cost of implementing an RFS policy if the cost falls between KRW 101.78/liter (USD 0.33/gal) and KRW 187.26/liter (USD 0.60/gal). In addition, consumer WTP for implementing an RFS policy changes when the income exceeds KRW 5 million (USD 4229.1) in driver group, and relatively lower-income groups tend not to support RFS policies. Based on the results of this study, we can suggest proper pricing policies for each income group and a public relations strategy to improve the level of policy acceptance.

Suggested Citation

  • Shin, Jungwoo & Hwang, Won-Sik, 2017. "Consumer preference and willingness to pay for a renewable fuel standard (RFS) policy: Focusing on ex-ante market analysis and segmentation," Energy Policy, Elsevier, vol. 106(C), pages 32-40.
    • Handle: RePEc:eee:enepol:v:106:y:2017:i:c:p:32-40
    DOI: 10.1016/j.enpol.2017.03.042
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