Willingness to pay for energy efficient household appliances : a choice experiment

Abstract

Global warming and resource depletion has become an increasing environmental concern in recent decades. This has prompted governments to implement policy instruments such as energy labelling for household appliances, and to review the effectiveness of such policies. Energy labelling aims to promote energy conservation by bridging information asymmetry and providing consumers with information on energy usage for household appliances. This study utilises a Discrete Choice Experiment (DCE) to elicit consumers’ Willingness-To-Pay (WTP) for energy efficient household appliances in Singapore. From a sample of 100 respondents, the study utilises three fixed parameter conditional logit models and three random parameter mixed logit models and found that consumers in Singapore are significantly, on average, willing to pay an additional S$293.69 to S$454.57 for a more energy-efficient refrigerator. Consumers’ WTPs are also heterogeneous by demographics and attitudinal variables, including respondents’ scores on the Dominant Social Paradigm based on an Explanatory Factory Analysis (EFA). Implicit discount rates show that respondents were motivated by both public benefits in terms of environmental conservation, and private benefits from future cost savings. Findings conclude that the energy efficiency paradox is not evident in Singapore.