The value of externalities for biofuels and implications for policy-led development: A discrete choice experiment with Australian consumers

Abstract

The sustainability credentials of biofuels, as substitutes for petrol and diesel, are in question with several economic and environmental issues through their lifecycle of production depending on the feedstock. The lack of understanding of the external impacts—or externalities—of different feedstocks impact policy interventions with environmental objectives. In this study, the value of externalities associated with different types of biofuel feedstock is estimated using discrete choice experiments with a sample of Australian fuel consumers. The results indicate that newer biofuel feedstock, like microalgae, can generate high consumer values relative to its agricultural-based predecessors. Consumers were found to be willing to pay more than double for biofuels that avoid a 10 % increase to food prices, an issue that has plagued the long-term viability of agricultural-based biofuels. Consumer values for biofuels with low lifecycle emissions were also substantial. Further modelling also revealed that existing biofuel policies and higher incomes had contradictory associations with consumer values. The results should inform policy on biofuels. In particular, the high non-market values for externalities suggest that policies should encourage the development of a more diversified range of feedstock use and related technologies—rather than prioritising market transition away from fossil fuels—to increase the production of more sustainable fuel alternatives. This will ensure that the transition from fossil fuels for transport maximises societal benefits.