Energy taxation and renewable energy: Testing for incentives, framing effects and perceptions of justice in experimental settings

This paper presents an experimental investigation of individual preferences for the consumption of green electricity under alternative payment vehicles for the promotion of renewables. The experimental design involves individual choice treatments as well as public choice treatments. We study differences in subjectspsila demand behaviour for green electricity with respect to free-riding, crowding-out effects and some other behavioral effects such as fiscal illusion. Our data highlight the large extent of free-riding in the private provision of the public good ldquoenvironmental qualityrdquo. Under the public choice treatments, subjects are willing to pay far higher contributions to green electricity than under the individual choice treatments. Moreover, regression analysis shows the sensitivity of average WTP to some subjective fiscal variables and identifies crowding-in as well as crowding-out effects. The conclusion can be drawn that individuals prefer binding collective contributions rather than individual market-driven activities in this field.