The internalization of externalities in the production of electricity: willingness to pay for the attributes of a policy for renewable energy

Alberto Longo, Anil Markandya, Marta Petrucci

Research output: Contribution to journalArticle

184 Citations (Scopus)

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 short-term security of energy supply; (iii) has an impact on the employment in the energy sector; and (iv) 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.
Original languageEnglish
Pages (from-to)140-152
Number of pages13
JournalEcological Economics
Volume67
Issue number1
DOIs
Publication statusPublished - 15 Aug 2008

Keywords

  • Energy Policy
  • Valuation of Environmental Effects
  • Alternative Energy Sources

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