Factors affecting drivers' willingness to pay for biofuels: the case of Italy
Introduction
Since the green revolution of the 1970s, the increasing environmental awareness of large sectors of the market spurred companies to focus on the eco-friendliness of their products and services.
The willingness of consumers to pay a premium for a green offer was among the driving factors of such process. Marketing campaigns advertised as green also products for which the effective benefits to the environment were, at best, limited and superficial. As a consequence of this so-called greenwashing phenomenon, consumers dazed by the hype of environmental claims developed in recent years diffidence in green claims that often reached open mistrust. To cope with this barrier erected by consumers, companies can rely on certification schemes with green labels being released by independent bodies to certify that a given product complies with specific environmental criteria.
The article fills a gap in literature by focusing on the biofuel sector, analyzing specific dimensions that received so far little attention by empirical analyses. We want to investigate the effects of different determinants of consumers' Willingness To Pay (WTP) for a product that a) has significant environmental impacts and b) is almost completely undifferentiated, and to assess whether hypothetical green labels for biofuels “at the pump” might make a difference.
The specific choice of the sector investigated has been driven by the consideration that biofuels represent the perfect ground for testing our hypotheses: they are a sheer example of products where the environmental friendliness is the only dimension (other than price) on which producers can differentiate their offer. Consumers' WTP could be hence genuinely ascribed to the sustainability of the product, with no intertwining effects of other qualitative variables as in the case of most product categories. Our article provides an added value not only by building new empirical evidence on a topic which gained broad relevance in the ongoing debate on future energy scenarios; indeed, to the knowledge of the authors, it represents the first empirical investigation aimed at analyzing if and how certification schemes would be able to affect consumers' WTP for biofuels. Moreover, while existing labeling initiatives focus on the upstream relationships between feedstock producers, industrial processors and distributors, the article aims at shedding light on the so-far unexplored aspect of downstream certification. The focus is indeed on end-consumers and their willingness to award a premium price to biofuels labeled as green, this representing a novelty aspect of the paper.
The article is organized as follows. After introducing the biofuel sector and existing evidence on consumers' WTP, we provide an overview on the theoretical framework of consumer behavior in the domain of sustainability, introducing the research hypotheses aimed at investigating the role of variables such as socio-demographics or biofuel knowledge in spurring WTP. The subsequent section is dedicated to an overview on green certification, and the relative research hypothesis on the role of green labels.
The Methods section describes how we gathered data for a cross-sectional study based on a sample of 260 individuals living in Northern Italy (n = 260). Also, the statistical model adopted for the analyses is described, and the variables specified, in detail. The Results section presents the evidence emerging from the statistical analysis of the dataset, while in the Discussion and Conclusions section we provide a thorough interpretation of them. Insights on policy implications and hints for future research building on the knowledge developed are also presented.
Section snippets
Biofuels: overview and consumers' WTP
Do biofuels work? This is the tormenting question that practitioners and scholars are constantly confronted with (Chum et al., 2014, Frank et al., 2013). The increasing relevance of the debate on biofuels and the contradictory evidence emerging from both media and academia spurred indeed great interest and curiosity within the public at large. Clearly, the elusive answer to such a broad question has to be it depends, given the extreme heterogeneity of variables that lead to different products
Factors influencing pro-environmental behaviors
Research on pro-environmental behavior and its predictors is vast (Bamberg and Möser, 2007, Hines et al., 1987, Lee et al., 2014, Steg et al., 2014). Many studies attempted at identifying the defining features of an ideal green consumer or the psychological processes explaining her behaviors (Blok et al., 2015, Maniatis, 2015). Early research consisted of correlational studies focusing on socio-demographic features in an attempt to segment the market as to profile green consumers,
The role of certification in the biofuel sector
Certification is a form of communication along the supply chain allowing buyers and all interested parties to recognize whether a product complies with given criteria. Recent literature has proved that Ecolabels can be effectively used as communicational tools to drive consumers' behaviors towards greener products. For instance Testa et al. (2015) show how the use of the EU Ecolabel and the FSC certification are able to affect the choice to purchase green products in the tissue paper and
Methods: survey data and empirical model
The study is based on a sample of2601 participants (mean age 34.0, 57.8% females) recruited between June and December 2013 in the provinces of Venice, Padua and Brescia
Results
The dependent variable we have selected for our model is a proxy of the willingness to buy biofuel, since this product once commercialized on large scale might entail a premium price “at the pump” due to high R&D costs. In light of this, measuring the WTP is the most effective way to check the real availability of potential consumers (drivers) to purchase the product. Almost one fifth of the respondents of our survey (17.7%) declare their unwillingness to pay any premium price for biofuels.
Discussion and conclusions
The results of our model have implications both for policies and for managerial strategies. The first and most relevant implication for policies concerns the lower WTP shown by those consumers who are more aware and well informed on biofuels. Public policies aiming to support a demand-pull diffusion of biofuels on the market should hence cope with this problem: there is a clear tendency by the “upper” share of the market to refuse to pay a premium price for biofuels.
Negative campaigning and
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