Metro Manila Households’ Willingness to Pay for Renewable Energy as a Climate Change Mitigation Measure: A CVM Study

• Main Authors: Tan, Rosalina, Sugiyama, Masahiro, del Barrio Alvarez, Daniel, Castillo, Gem B., Tan, Nelson Matthew P.
• Format: text
• Published: Archīum Ateneo 2023
• Subjects: Climate change mitigation; Contingent valuation method; Renewable energy; Willingness to pay; Oil, Gas, and Energy; Social and Behavioral Sciences; Sustainability
• Online Access: https://archium.ateneo.edu/economics-faculty-pubs/209; https://doi.org/10.1007/s11625-023-01403-3
• Institution: Ateneo De Manila University

This study used the contingent valuation method (CVM) to investigate households’ preferences and willingness to pay (WTP) for renewable energy sources of electricity supply in Metro Manila, Philippines. Through a face-to-face survey of 250 households in December 2021, respondents were asked to state their WTP for an increase in the share of renewable energy (RE) in electricity supply. The over-all proportion of “yes” answers to the WTP question was only 49.6%. Mean WTP for an additional 20% share of RE in electricity supply was estimated to be 7.4–10.6% of monthly electricity bill, equivalent to about PhP197-283 (US$4.00–5.74) per month per household. Results of the binary probit regressions indicate that people would be more likely to pay for RE if the additional cost was lower and household income was higher, in accordance with economic theory. Other factors that significantly influenced WTP are education, electricity bill and awareness about RE and climate change (positive effects), and household size and delays in electricity bill payment (negative effects). The study also found that while Metro Manila residents were concerned about climate change (CC) and its harmful consequences, they had less knowledge and a lower appreciation of RE as a CC mitigation measure, which negatively affected WTP. These findings suggest that extensive information campaigns are needed to raise awareness about the link between RE and CC to gain more support for the RE transition program. Further, the low WTP derived in the study highlights the urgency of measures to overcome market size, technical and financing constraints, and to address regulatory hurdles that raise transaction costs (such as the long permitting process for RE projects), to achieve cost competitiveness in RE systems.