A Nested Logit Model of Green Electricity Consumption in Western Australia
AbstractGreen electricity products are increasingly made available to consumers in many countries in an effort to address a number of environmental and social concerns. Most of the existing literature on this green electricity market focuses on consumer’s characteristics and product attributes that could affect participation. However, the contribution of this environmental consumerism to the overall environmental good does not depend on participation alone. The real impact made relies on market penetration for green consumers (the proportion of green consumers) combined with the level of green consumption intensity – the commitment levels, or proportion of consumption that is green. We design an online interface that closely mimics the real market environment for electricity consumers in Western Australia and use a three-level nested logit model to analyze consumers’ choice of green electricity products as well as their commitment levels. Our main conclusions are that the choice of green products is strongly influenced by beliefs in the nature of climate change, and trust in the government and utilities in delivering the product. When green products are selected, the vast majority select the minimum commitment possible, and this is insensitive to the premium being charged on green power, suggesting that we are largely observing a ‘warm glow’ for carbon mitigation
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Bibliographic InfoPaper provided by University of Western Australia, School of Agricultural and Resource Economics in its series Working Papers with number 148411.
Date of creation: 26 Apr 2013
Date of revision:
Green Power; Nested Logit; Warm Glow; Green Electricity; Environmental Economics and Policy; Institutional and Behavioral Economics; Resource /Energy Economics and Policy;
This paper has been announced in the following NEP Reports:
- NEP-ALL-2013-05-24 (All new papers)
- NEP-DCM-2013-05-24 (Discrete Choice Models)
- NEP-ENE-2013-05-24 (Energy Economics)
- NEP-ENV-2013-05-24 (Environmental Economics)
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