Warm glow from green power: Evidence from Australian electricity consumers

Abstract

Green electricity products are increasingly made available to consumers in many countries in order to address a number of environmental and social concerns. Most of the literature on this green electricity market focuses on consumers’ characteristics and product attributes that could affect participation. However, the contribution of this environmental consumerism to the overall environmental good does not depend on participation alone. The real impact relies on market participation for green consumers (the proportion of green consumers) combined with the level of green consumption intensity – the commitment levels, or proportion of consumption that is green. We design an online interface that closely mimics the real market decision environment for electricity consumers in Western Australia and use an error component model to analyze consumers’ choice of green electricity products and their commitment levels. We show that product attributes have limited impact on the choice of green products; however, there is still great potential for better participation by improving the design of green electricity programs. When green products are selected, most respondents select the minimum commitment possible, and this is insensitive to the premium being charged on green power, suggesting that we are largely observing a buy-in ‘warm glow’ for carbon mitigation.