The Korean public's willingness to pay for expanding the use of solid refuse fuel

Abstract

Solid refuse fuel (SRF), a solid fuel that is produced from non-hazardous combustible waste, can mitigate greenhouse gas emissions compared with fossil fuels. The Korean Government plans to enhance the ratio of combustible waste converted into SRF from 16% in 2014 to 100% in 2020 by increasing the number of facilities that make and use SRF. This paper attempts to investigate empirically the Korean public's willingness to pay (WTP) for expanding the use of SRF. The WTP data were obtained from a one-and-one-half-bounded dichotomous choice contingent valuation survey of 1000 households. Because a considerable number of respondents (62.6%) gave a zero WTP response, we applied a spike model to treat the WTP data with zero observations. The spike model fitted the data well considering that all the coefficient estimates are statistically significant at the 1% level. The yearly mean WTP was computed as KRW 2479 (USD 2.17) per household for the next 10 years, which is also statistically meaningful at the 1% level. Expanding the value to the national population gives us KRW 46.4 billion (USD 40.5 million) per year. The present value of the total public WTP amounts to KRW 369.0 billion (USD 322.3 million) using a social discount rate of 5.5%. We can conclude that Korean households are ready to shoulder some of the financial burden to expand the use of SRF.