South Korean Household’s Willingness to Pay for Replacing Coal with Natural Gas? A View from CO2 Emissions Reduction

Abstract

Abstract:Coal is currently a major electric power generation source in South Korea when considering that forty-three percent of electricity that was generated during the first quarter of 2017 came from coal. The amount of CO 2 emissions from coal-fired power plant is two times larger than that from natural gas (NG)-fired power plant in the country. In this regard, the Korean government is trying to replace some amount of coal that is used for generation with NG to reduce CO 2 emissions. However, the cost of NG-fired generation is about 1.25 times higher than that of coal-fired generation. Thus, the policy-makers demand information about the household willingness to pay (WTP) for the replacement to mitigate CO 2 emissions. This paper applies the contingent valuation (CV) approach, and assesses the household's WTP for replacing one kWh of coal-fired power with that of NG-fired power. For this purpose, a total of 1000 South Korean households were involved in the CV survey employing a dichotomous choice question. In addition to the current electricity price, KRW 121.52 (USD 0.11) per kWh, the respondents were willing to pay KRW 25.35 (USD 0.02) per kWh. The costs of NG-fired and coal-fired generation are KRW 100.13 and 78.05, respectively, per kWh. The difference between the two is KRW 22.08 per kWh, which is smaller than the mean additional WTP (KRW 25.35 per kWh). The household's additional WTP is bigger than the actual additional cost. It is concluded that the switch of power generation source from coal to NG to reduce CO 2 emissions can be supported by South Korean households.

Willingness to Pay Price Premium for Smartphones Produced Using Renewable Energy

“…Similarly, consumers' WTP price premium for a RE100 smartphone can be elicited through the application of the CV method. The use of the CV technique is conceptually correct in the measurement of economic benefits [6,[13][14][15]. The CV method directly asks respondents to determine their WTP contingent on a proposed situation.…”

Residential Consumers’ Willingness to Pay Price Premium for Renewable Heat in South Korea

“…In the literature, a number of studies dealt with the additional WTP or price premium in the area of energy [15][16][17][18][19][20][21][22]. These studies analyzed consumers' WTP and found that consumers determine their preference in an ethical and environmentally friendly way in order to mitigate greenhouse gas and air pollutants emissions or to protect the environment.…”

“…There have been many case studies where price premium has been examined for the use of renewable energy-based electricity in place of fossil fuels-based electricity, since renewable energy has been mainly used for electricity generation [15][16][17][18]. In addition, the price premium for electricity from a non-distributed generation source over that from distributed generation source [19]; the price premium for electricity that is generated without emitting thermal discharge water over that with emitting thermal discharge water [20]; the price premium for electricity from coal-fired power plant over that natural gas-fired power plant [21]; and, price premium for eco-friendly goods over conventional goods were analyzed [22] in the literature.…”

“…The one-and-one-half-bounded dichotomous choice question method that is provided by Cooper et al [31] is able to resolve problems, such as the inefficiency of the first method and the inconsistency of the second method. The merits of the format have promoted its application in a substantial number of previous studies [21,[34][35][36][37][38]. Consequently, this article utilizes the question method.…”

“…It is such situations that this paper attempts to assess the consumers' additional willingness to pay (WTP) for RH over heat that is produced from fossil fuels for residential heating. It has been regarded in various sectors, including transportation, electricity, food, and industrial product [13][14][15][16][17][18][19][20][21][22]. To the best of the authors' knowledge, however, the study of measuring the price premium for RH over heat produced using fossil fuels is not found in the literature.…”