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Mandatory versus voluntary payment for green electricity

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  • Elcin Akcura

    ()
    (EBRD)

Abstract

Renewable energy sources have a critical role to play in contributing to the diversity, sustainability and security of energy supplies. The main objective of the paper is to gain an understanding of the support mechanism of renewable energy sources most preferred by households in the United Kingdom. This paper analyses households’ preferences and willingness to pay under a mandatory scheme where all households contribute compared to a voluntary scheme where only those who wish to pay to support renewables do so (such as the green tariffs offered by electricity suppliers in the UK). Two self-designed contingent valuation method (CVM) surveys are used to explore whether the type of payment option has an impact on households’ willingness to pay (WTP) for increasing share of renewable energy in electricity generation. The paper also investigates whether the type of payment mode affects respondents’ self-reported certainty of paying their stated valuations. The results indicate that the likelihood of paying a positive amount for supporting renewable energy is higher under a mandatory scheme compared to a voluntary payment option in the UK. Respondents have a higher level of certainty in paying their stated WTP under a mandatory payment scheme.

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Bibliographic Info

Paper provided by European Bank for Reconstruction and Development, Office of the Chief Economist in its series Working Papers with number 161.

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Length: 34 pages
Date of creation: Oct 2013
Date of revision:
Publication status: Published in Working papers 161, European Bank for Reconstruction and Development
Handle: RePEc:ebd:wpaper:161

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Web page: http://www.ebrd.com/pages/research/publications/workingpapers.shtml
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Keywords: contingent valuation method; renewable energy; willingness to pay; zero inflated ordered probit model;

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