Residential willingness-to-pay for reducing carbon emissions from electricity generation in Hong Kong

In 2010, the HKSAR Government proposed a 2020 target of reducing the ratio of CO 2 emissions to GDP by 50-60% of the 2005 level. A major policy to achieve the target was to change the fuel mix of electricity generation, which currently relies heavily on coal. If implemented, the policy would substantially increase the share of natural-gas-fired and nuclear power. However, the Fukushima nuclear disaster in March 2011 has sharply changed the perception of nuclear-power safety, resulting in calls to revise the government’s proposed fuel mix change. Without nuclear power imports, however, local natural-gas-fired generation becomes the only practical, though more costly, supply-side alternative to meet the government’s target. The question thus arises as to the amount that Hong Kong residents are willing to pay for reducing the emissions from coal-fired generation. If their willingness-to- pay (WTP) is substantially less than the increases in their electricity bills triggered by the government’s fuel mix proposal, the proposal would have to be revised to gain public support, thus altering Hong Kong’s electricity future.

This proposed project aims to estimate the WTP of Hong Kong residents by the contingent valuation method (CVM). It entails collecting consumer preference data via a telephone survey and analyzing the survey responses via a regression analysis. The project bears important policy implications because: •
If the WTP estimate is large, a high target could be set without strong public objection.
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If the WTP estimate is small, public support for the high target may require financial mitigation of the ensuing bill increase, possibly with taxpayer money or utility shareholders’ earnings. Alternatively, the high target policy may have to be revised to win public support. •

The Fukushima disaster and its aftermath suggest that the WTP estimate for nuclear power could be substantially less than the WTP estimate for natural-gas-fired generation. As a result, a publicly acceptable fuel mix would contain less nuclear power. Knowing the WTP for nuclear power will enable us to formulate a fuel mix that can better match what Hong Kong residents want and support.