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Determinants of the price-premium for Green Energy: Evidence from an OECD cross-section

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Using data from a large, multi-country survey, this paper investigates the determinants of preferences for a completely green residential electricity system. Three important questions are addressed: (i) how much are households willing to pay to use only renewable energy? (ii) does willingnesstopay (WTP) vary significantly across household groups and countries? and (iii) what drives the decision to enter the (hypothetical) market for green energy and, given entry, what drives the level of WTP? The analysis here differs from previous ones in the literature in two distinct ways: first, data and analyses are comparable across countries and second, a comprehensive attempt to understanding 0 WTP and to accommodating unobserved heterogeneity is pursued. The survey data indicate, in common with prior analyses and market experience, a low WTP, about 9􀀀10%. This study addresses a key aspect: how important is income for understanding WTP, relative to more “attitudinal” determinants? Surprisingly, income exerts a small (and insignificant) effect on WTP, at the margin; this result is robust to accounting for censoring and unobserved heterogeneity. Key determinants of the WTP decision appear to be environmental attitudes, particularly membership in an environmental organization.

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  • Kiran Krishnamurthy, Chandra & Kriström, Bengt, 2013. "Determinants of the price-premium for Green Energy: Evidence from an OECD cross-section," CERE Working Papers 2013:7, CERE - the Center for Environmental and Resource Economics, revised 30 Jun 2014.
    • Handle: RePEc:hhs:slucer:2013_007
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    More about this item

    Keywords

    green electricity; willingness-to-pay; censoring; quantile regression; renewable energy;
    All these keywords.

    JEL classification:

    • C21 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models
    • C24 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Truncated and Censored Models; Switching Regression Models; Threshold Regression Models
    • Q42 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Alternative Energy Sources
    • Q51 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Valuation of Environmental Effects

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