Consumer preference and willingness to pay for a renewable fuel standard (RFS) policy: Focusing on ex-ante market analysis and segmentation. (July 2017)

• Record Type: Journal Article
• Authors: Shin, Jungwoo; Hwang, Won-Sik
• Is Part Of: Energy policy. Volume 106(2017)
• Page Start: 32
• Page End: 40
• Publication Date: 2017-07
• Subjects: Renewable fuel standard -- Willingness-to-pay -- Choice experiments -- Market segmentation -- Multinomial probit model; Energy policy -- Periodicals; Politique énergétique -- Périodiques; Electronic journals; 333.79
• DOI: 10.1016/j.enpol.2017.03.042
• Languages: English
• ISSNs: 0301-4215

Abstract

Abstract: Total energy consumption of oil in 2050 is expected to increase to 1.6 times its level in 2005, and greenhouse gas (GHG) emissions in the transportation sector will be second only to the electricity sector. In order to reduce GHG emissions in transportation, leading countries have started to implement renewable fuel standard (RFS) policies. Other countries such as Korea have recently started implementing RFS policies in order to comply with the proposed global GHG reduction target. However, previous research did not consider the impact of RFS policy on consumer acceptance levels. Therefore, this study analyzes consumer preferences and willingness-to-pay (WTP) for RFS. To provide detailed policy strategies, this study conducts additional analysis using market segmentation and sensitivity analysis. The results indicate that consumers generally accept the cost of implementing an RFS policy if the cost falls between KRW 101.78/liter (USD 0.33/gal) and KRW 187.26/liter (USD 0.60/gal). In addition, consumer WTP for implementing an RFS policy changes when the income exceeds KRW 5 million (USD 4229.1) in driver group, and relatively lower-income groups tend not to support RFS policies. Based on the results of this study, we can suggest proper pricing policies for each income group and a public relations strategy to improve the level of policy acceptance. Highlights: We analyze consumer preferences and willingness-to-pay for Korea's RFS policy. We also conduct market segmentation and sensitivity analysis. Korean consumers will accept the cost between KRW 101.78/liter and KRW 187.26/liter. Preference structure for RFS policy is changed when income exceeds KRW 5 million. Relatively lower-income groups tend not to support RFS policies.