Bioenergy, Consumer Decision-Making and Shaping the River Flow

Abstract

All of us are consumers of energy. Even utility companies consume some form of energy to produce power and energy. Businesses are consumers of energy as are homes and individuals. In this chapter, we take the perspective of demand for energy. We explore theories of consumption, demand and consumer behavior that provide insights on how consumers make decisions regarding new forms of energy such as renewable energy. We look for explanations that may help consumers reduce or relinquish their fossil fuels-based energy consumption habits and why this has not occurred at this time. While examining the consumption side of the economic equation, we acknowledge that there are major issues in moving from a resource-based energy paradigm to a knowledge-based energy paradigm. The data on consumption is heartening as there are lead consumers such as institutions and major corporations that are adopting renewable forms of energy. Some countries have explicit goals to adopt renewable sources of energy. All these examples demonstrate that we are reaching critical mass regarding problematic awareness of the issues related to fossil fuel consumption. The next steps are cognitive awareness, affective sentience, consumer preference formation and evolution, belief shifting, adoption and advocacy. If history is plausible, this is the most likely path or model of adoption and diffusion of renewable forms of energy.

Appendices

Glossary

• Aggregate Demand is the total amount of expenditure in nominal terms on goods and services.

• Biomass is organic waste from agricultural, livestock and lumber industry products, dead trees or foliage. Biomass can be used as fuel and to make transportation fuels like ethanol and biodiesel.

• Consumer surplus is the added satisfaction gained by a consumer over and above the price the consumer was prepared to pay.

• Cost-benefit analysis is the use of economic analysis of tangible and intangible gains and losses from a policy or program on targeted samples or populations.

• Derived demand is demand for the underlying product or service as is demand for a form of energy so that heating, transporting, processing or consuming can be achieved.

• Economies of scale exist where a production or distribution facility exhibits decreasing average long-run costs because of increases in size or scale.

• Marginal utility is the increase in satisfaction an individual derives from use or consumption of one additional unit of a good or service.

• Neoclassical theory is based on Alfred Marshall’s writings. There was a shift to the study of diminishing marginal utility from optimal allocation of scarce resources based on a division of labor of the classical economists.

• Propensity to consume explains the amount of resources or income expended to achieve a certain amount of consumption.

• Utility maximization is the point at which the consumer maximizes satisfaction from spending under a given income amount.

Questions

• 1. Is climate change man-made? If so, what evidence would you consider to explain your point of view?

• 2. What attributes should a perfect fuel have? Based on your understanding, what is a perfect fuel?

• 3. Is there a market for a renewable fuel such as ethanol? Assess it from a consumer perspective.

• 4. Is there a market for a renewable fuel such as biodiesel? Assess it from a consumer perspective.

• 5. What according to you are current problems consumers face in adopting biofuel?

• 6. What costs and benefits are consumers who adopt biofuel likely to face?

• 7. What cognitive barriers influence consumer adoption of biofuel?

• 8. What beliefs affect the consumer decision to choose renewable fuels such as biofuel?