The Effect of Risk Characteristics on the Willingness to Pay for Mortality Risk Reductions from Electric Power Generation
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The objective of this study is to estimate willingness to pay (WTP) for the reduction of mortality risks caused by fossil fuel (natural gas, coal and oil) versus nuclear electric power generation systems and to examine the influence of risk characteristics involved with electric power generation on WTP. A choice experiment was conducted to achieve these objectives. The attributes for nuclear risks in the experiment included the probability of disasters and the expected losses if a disaster occurs. We find evidence of (i) a baseline effect (where WTP is sensitive to hypothetical versus actual baseline expected mortality); (ii) a ‘labeling effect,’ where, surprisingly, the term ‘nuclear’ has no effect on WTP, but the term ‘fossil-fueled power generation’ results in lower WTP; and (iii) disaster aversion, meaning that people focus on the conditional loss from a nuclear disaster, not the probability. We also find that the WTP for reducing deaths from a nuclear disaster is about 60 times the WTP for routine reducing fossil-fuel generation-related deaths.
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Environmental and Resource Economics
Volume 33, Issue 3 , pp 371-398
- Cover Date
- Print ISSN
- Online ISSN
- Kluwer Academic Publishers
- Additional Links
- choice experiment
- coal-fired generation
- nuclear power
- risk characteristics
- willingness to pay
- Industry Sectors
- Author Affiliations
- 1. Mizuho Information & Research Institute, Tokyo, Japan
- 2. Resources for the Future, Washington, DC, USA
- 3. Department of Rural Economy, University of Alberta, 515 General Services Building, Edmonton, T6G 2H1, Canada
- 4. Central Research Institute of the Electric Power Industry, Tokyo, Japan