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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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Author Info
Alberto Longo (Queen’s University Belfast and University of Bath)
Anil Markandya (University of Bath and Fondazione Eni Enrico Mattei)
Marta Petrucci (University of Bath)

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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.

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Publisher Info
Paper provided by Fondazione Eni Enrico Mattei in its series Working Papers with number 2006.132.

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Date of creation: Nov 2006
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Handle: RePEc:fem:femwpa:2006.132

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Related research
Keywords: Non Market Valuation; Choice Experiments; Willingness to Pay; Renewable Energy; Energy Security; Greenhouse Gases Emissions;

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Find related papers by 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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