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Article Excerpt
1. INTRODUCTION
Renewable energy sources (RES) are considered to be environmental sound from the viewpoint of dangerous emissions and resource depletion. Traditionally, in the past much of emphasis on climate change action has been based on the precautionary principle; now population awareness has increased and it is more widely accepted that climate change is a real issue to be dealt with. Also in Italy public interest in RES arose, as new efficient technologies to reduce carbondioxide emission and slow resource depletion have become commercially available on the market. Since 2005, among different sources, after the initial diffusion of wind farms, photovoltaic technology is approaching the stage of commercial operation narrowing the gap by comparison with wind power generation technology; in addition, in the last year biomass energy is also regarded as potential energy sources and studies have been carried out on the future exploitation of these RES. Unfortunately the supply cost of energy from RES is usually high with two important consequences on public opinion: (i) it prevents the widespread uptake of renewable energy systems in spite of their environmental soundness; (ii) there is need of public funding in order to support RES development. In this context, I assume that if consumers regard some environmental problems as important and think that promoting RES use will mitigate environmental damages, they are likely to attach a value to these RES. Therefore, insofar as consumers think positively of renewable energy technologies, this attitude will influence their willingness to pay (WTP), augmenting the premiums they are potentially apt to pay for such new technology and consequently will, potentially, reduce the needed amount of public funding. In this context and in reference to the "Renewable Sources" EU Directive 2001/77/CE the Italian Government goal, for 2010 is to attain the share of 22% in RES electricity production. More recently, in early 2007, UE new goals have indicated that RES should reach 20% of total energy resources by year 2020, together with a 20% goal of energy savings. In such context it becomes crucial to explore the existence of consumer's WTP in order to decisively increase the use of RES in electricity production.
The goal of this study is twofold. The first purpose of this study is to estimate consumers' WTP for the development of the RES use in Italy. To this end I use both a Stochastic payment card (SPC) method and a referendum approach. The SPC method allows me to consider that consumers have a range of economic values, or a valuation distribution in their mind (Cameron and Quiggin, 1994; Duborg et al. 1994) instead of a single economic value point estimation. In my framework I obtain the consumer's WTP with two different approaches (downward vs. upward elicitation format) but I don't focus much on the different elicitation formats while I focus on the different uncertainty degree that affects respondent's choices. There are several approaches to take care econometrically of this issue: i) individual stochastic valuation approach, and ii) dichotomous choice or so called referendum approach. After estimation of both, this paper introduces a comparison among these different approaches. Further econometric analysis allows to investigate how socio-demographic characteristics of respondents affect the WTP and whether these relations depend systematically on bids amount. The dependence of consumers' WTP on their views on the potential usefulness of alternative energy sources is also analyzed. In other words the aim is to examine to what extent various attitudinal, behavioural, and demographic variables are associated with WTP and also whether these relationships are function of bids amount.
The second purpose of this study is to estimate the market sustainability of the 22% Italian goal in renewable electricity production. The setup of this paper is as follows: section 2 briefly reviews the theoretical background and shows the methodology approach while section 3 sets out some detail on survey design and on data description; section 4 refers to empirical study and presents results from regression analysis; further discussion on the empirical results and their policy implications is provided in the final section.
2. BACKGROUND AND METHODOLOGY
The contingent valuation (CV) method is becoming a common technique for evaluating goods that are not physically traded and it has been used to evaluate environmental benefits in financial terms when markets do not exist, in order to provide information necessary for conducting cost-benefit analysis. On the use of RES several surveys have been performed in the United States (Farhar, 1999; Roe et al. 2001; Vossler et al. 2003), United Kingdom (Batley et al. 2001), Australia (Ivanova, 2005) Spain (Alvarez-Farizo and Hanley, 2002) and Japan (Nomura and Akay, 2004). As far as I know in Italy, only one survey (Bollino and Polinori, 2006, 2007) has been performed and data have been collected to draw suggestions about consumer energy sources preferences. These prior studies have found a modest consumer's WTP if compared with national policy energy goals, as in Ivanova (2004) for Queensland and Batley et al. (2001) for UK.
These studies are not fully comparable because they differ in terms of survey periods, countries, institutional context, survey typology, elicitation format, as well as for methodology and econometric technique used, but it can be useful to summarize their empirical results in order to better understand different...
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