Using a choice experiment to explore the public willingness to pay for the impacts of improving energy efficiency of an apartment

Abstract

It is quite important to improve energy efficiency of an apartment in South Korea since it is the most common residential space. The government needs information about the public willingness to pay (WTP) for the impacts of the improvement. This article explores the public WTP employing a choice experiment (CE). To this end, four attributes of reduction in greenhouse gas emissions, abatement in air pollutant emissions, betterment in residential convenience, and enhancement energy security were selected for the impacts. The price attribute was the additional price involved in improving energy efficiency of an apartment per 3.3m2. A total of 1000 interviewees were surveyed across the country through person-to-person interviews. A mixed logit model was applied in estimating a utility function from the gathered CE data to allow for preference heterogeneity. All the coefficient estimates for the utility function showed statistical significance. The marginal WTP estimates for a 1%p reduction in greenhouse gas emissions, a 1%p abatement in air pollutant emissions, betterment in residential convenience, and enhancement in energy security were KRW 31,740 (USD 28.2), 13,289 (USD 11.8), 64,799 (USD 57.6), and 119,723 (USD 106.4) per 3.3m2, respectively. These figures indicate the price premium for an apartment with improved energy efficiency.