Preferences for Energy Efficiency vs. Renewables: What Is the Willingness to Pay to Reduce CO2 Emissions?

- Willingness to pay for mitigation policies is elicited in two EU countries.
- WTP per ton of CO2 emissions avoided is €133 in Italy and €94 PPS in Czech Republic.
- There is considerable heterogeneity in WTP for CO2 emissions driven by income.
- Within-sample mean income elasticity of WTP is 0.74 and 0.35, respectively.
- A direct “benefit transfer” implies an income elasticity of WTP of one.

Concerns about climate change are growing, and so is the demand for information about the costs and benefits of mitigating greenhouse gas emissions. This paper seeks to estimate the benefits of climate change mitigation, as measured by the public's willingness to pay for such policies. We investigate the preferences of Italian and Czech households towards climate change mitigation policy options directly related to residential energy use. We use discrete choice experiments, which are administered in a standardized fashion to representative samples in the two countries through computer-assisted web interviews. Our preferred estimates of the willingness to pay per ton of CO2 emissions avoided is €133 for the Italians and €94 Euro for the Czech respondents (at 2014 purchasing power parity). We find evidence of considerable heterogeneity in WTP driven by income. The two samples differ in their within-sample income elasticities of WTP, but comparison across the two countries suggests an income elasticity of WTP of one-or even greater than one for certain mixed logit specifications.