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Choosing to Pay More for Electricity: an experiment on the level of residential consumer cooperation

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  • Pierre-Olivier Pineau

Abstract

Reducing energy consumption and carbon emissions are two cornerstones of the fight against climate change. Signaling negative externalities of individual consumption on the environment is at the heart of public policies, and usually materializes through an increase in the price of polluting good and services. However, social resistance typically arises when such policies are implemented. In this experiment, we are interested in testing the context in which individuals would be willing to pay more for electricity. We use the situation of Québec (Canada), where low-cost hydropower sold below market value, akin to a consumption subsidy, leads to high residential consumption. Increasing regulated prices closer to their market value would result in a direct welfare gain and free some green energy, reducing greenhouse gases (GHG) in other sectors. The choice to pay more is a prisoner’s dilemma, and we find in this framework that giving clear and transparent information on the consequences of the price increase induces a majority of people to choose to pay more. In addition to the economic benefit of the public good, the presence of the environmental benefit increases contributions. Participants with a more severe budget constraint tend to contribute less. These results are encouraging for the development of efficient energy policies reducing GHG emissions. La réduction de la consommation d'énergie et des émissions de carbone sont deux pierres angulaires de la lutte contre le changement climatique. Signaler les externalités négatives de la consommation individuelle sur l'environnement est au cœur des politiques publiques, et se matérialise généralement par une augmentation du prix des biens et services polluants. Cependant, la résistance sociale se manifeste généralement lorsque de telles politiques sont mises en œuvre. Dans cette expérience, nous souhaitons tester le contexte dans lequel les individus seraient prêts à payer plus cher pour l'électricité. Nous utilisons la situation du Québec (Canada), où l'hydroélectricité à faible coût vendue en dessous de la valeur du marché, ce qui s'apparente à une subvention à la consommation, entraîne une forte consommation résidentielle. Une augmentation des prix réglementés plus proches de leur valeur de marché entraînerait un gain de bien-être direct et libérerait une partie de l'énergie verte, réduisant ainsi les gaz à effet de serre (GES) dans d'autres secteurs. Le choix de payer plus est un dilemme du prisonnier, et nous trouvons dans ce cadre que donner des informations claires et transparentes sur les conséquences de l'augmentation des prix incite une majorité de personnes à choisir de payer plus. En plus de l'avantage économique du bien public, la présence de l'avantage environnemental augmente les contributions. Les participants ayant une contrainte budgétaire plus sévère ont tendance à moins contribuer. Ces résultats sont encourageants pour le développement de politiques énergétiques efficaces réduisant les émissions de GES.

Suggested Citation

  • Pierre-Olivier Pineau, 2022. "Choosing to Pay More for Electricity: an experiment on the level of residential consumer cooperation," CIRANO Working Papers 2022s-18, CIRANO.
  • Handle: RePEc:cir:cirwor:2022s-18
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    References listed on IDEAS

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    More about this item

    Keywords

    Public good; Voluntary environmental action; Green electricity; Bien public; action environnementale volontaire; électricité verte;
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