Ruhr Economic Papers

Ruhr Economic Papers #759

Equity and the Willingness to Pay for Green Electricity in Germany

by Mark A. Andor, Manuel Frondel and Stephan Sommer

RUB, RWI, 06/2018, 28 S./p., 8 Euro, ISBN 978-3-86788-884-4 DOI: 10.4419/86788884

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Abstract

The production of electricity on the basis of renewable energy technologies is a classic example of an impure public good. It is often discriminatively financed by industrial and household consumers, such as in Germany, where the energy-intensive sector benefits from a far-reaching exemption rule, while all other electricity consumers are forced to bear a higher burden. Based on randomized information treatments in a stated-choice experiment among about 11,000 German households, we explore whether this coercive payment rule affects households’ willingness-to-pay (WTP) for green electricity. Our central result is that reducing inequity by abolishing the exemption for the energyintensive industry raises households’ WTP substantially.

JEL-Classification: D03, D12, H41, Q20

Keywords: Stated-choice experiment; behavioral economics; fairness

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