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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 security of energy supply; (iii) has an impact on the employment in the energy sector; (iv) and 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.

Suggested Citation

  • Longo, Alberto & Markandya, Anil & Petrucci, Marta, 2006. "The Internalization of Externalities in The Production of Electricity: Willingness to Pay for the Attributes of a Policy for Renewable Energy," International Energy Markets Working Papers 12111, Fondazione Eni Enrico Mattei (FEEM).
    • Handle: RePEc:ags:feemie:12111
    DOI: 10.22004/ag.econ.12111
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    More about this item

    Keywords

    Consumer/Household Economics; Resource /Energy Economics and Policy;

    JEL classification:

    • Q42 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Alternative Energy Sources
    • Q48 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Government Policy
    • Q51 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Valuation of Environmental Effects

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