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Greenhouse gas emission reductions as a motivator of e85 purchases across market segments

Abstract

Background

Climate change has become a concern of both policy makers and consumers. Transportation constitutes a key source of greenhouse gas (GHG) emissions; hence, alternative transportation fuels with reduced GHG emissions are of increasing interest as a potential strategy for decreasing emissions. However, consumer views on achieving emission reductions through the use of alternative fuels have not been widely studied. Understanding consumer preferences related to alternative fuels is relevant as new fuel options become available.

Methods

This study uses a two-step cluster analysis of opinion variables to segment consumers into four market segments (Potential activists, Environmentals, Neutrals, and National interests). Cluster profiles are examined based on demographics and opinion variables related to concerns about national security, food versus fuel, perceived effects of personal actions, perceived effects of other's actions, and environmental issues. Willingness to pay (WTP) for reductions in GHG emissions through purchases of ethanol blends is estimated via conjoint analysis from a national survey.

Results

Estimates reveal that WTP varies in significance and magnitude across the four segments. In particular, the Environmentals market cluster is the only cluster consistently willing to pay a premium for emission reductions.

Conclusions

Market opinion clusters play a significant role in WTP for emission reductions through purchases of E85. Results suggest the existence of a potential niche market consisting of consumers with strong environmental concerns who are willing to pay a premium for renewable fuels in order to reduce GHG emissions.