A Household Perspective SAEE Lule L INDA A NDERSSON Economics Unit - - PowerPoint PPT Presentation

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Why Flex-Fuel Failed? A Household Perspective

SAEE Luleå

LINDA ANDERSSON Economics Unit Luleå University of Technology

Together with Kristina Ek, Åsa Kastensson & Linda Wårell

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The raise and fall in the Swedish Ethanol E85 market

Volume, m³

50 000 100 000 150 000 200 000 250 000 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

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Outline

• Motivation of the study
• Development of the Ethanol E85 market
• Potential factors affecting the choice of fuel
• Survey & model specification
• Results
• Conclusions – what can we learn?

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Motivation of the study

• 2030 - fossil fuel-independent vehicle fleet
• Increased national target for renewable energy – How

will biomass be used in the future energy system?

• Modeling the energy system & biofuels
• Adding the household perspective
• Ethanol E85 – interesting case study

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Purpose

The purpose of this study is to analyze which are the most important factors affecting the households’ choice of fuel.

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Ethanol E85 volumes & price difference between Ethanol E85 & Petrol

• 4
• 3
• 2
• 1

1 2 3 5000 10000 15000 20000 25000 30000 2005-01 2005-05 2005-09 2006-01 2006-05 2006-09 2007-01 2007-05 2007-09 2008-01 2008-05 2008-09 2009-01 2009-05 2009-09 2010-01 2010-05 2010-09 2011-01 2011-05 2011-09 2012-01 2012-05 2012-09 2013-01 2013-05 2013-09 2014-01 2014-05 2014-09 2015-01 2015-05 2015-09 2016-01

Price difference, kr/l Volume, m3 Consumed volume E85 Price difference gasoline and E85

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Important factors of the Ethanol E85 market

• Pump Act
• Policy instruments

– tax exemptions – environmental bonus – local benefits

• Price on Ethanol E85 versus Petrol
• Debates about pros & cons

– food production – motor damage – climate impact

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Survey

• 1 200 flex-fuel owners
• 42% response rate
• Including:
• driving habits & motives for buying flex-fuel car
• filling habits
• attitudes & norms concerning

fuels & environmental engagement

• socioeconomic information

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Potential factors affecting the households choose of fuel

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Factors of importance when buying a flex-fuel car (%)

Statements Disagree entirely Agree entirely Do not know I wanted to fuel E85 for economic reasons 32 14 21 15 13 5 I bought the car for environmental reasons 22 10 23 17 24 3 I wanted a lower vehicle tax 23 10 19 18 24 6 I wanted to take part of the environmental bonus 47 8 10 7 16 12 It did not matter that it was a flex-fuel car, other factors were more important 20 9 19 15 29 8

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Stated fuel choice at different price levels (%)

Statement Ethanol E85 Petrol 95 Which alternative would you choose next time you fuel if the cost of Ethanol 85 was 6 SEK/litre and the cost of Petrol 95 was 12 SEK/litre? 86 14 Which alternative would you choose next time you fuel if the cost of Ethanol 85 was 9 SEK/litre and the cost of Petrol 95 was 12 SEK/litre? 58 42 Which alternative would you choose next time you fuel if the cost of Ethanol 85 was 12 SEK/litre and the cost of Petrol 95 was 12 SEK/litre? 10 90 Which alternative would you choose next time you fuel if the cost of Ethanol 85 was 15 SEK/litre and the cost of Petrol 95 was 12 SEK/litre? 3 97

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Comments

”Have been driving on E85 only the last years - until the liter price became the same as for petrol.” ”I follow the recommendations of my car mechanic to fuel petrol - since E85 lubricates less.” ”I only fuel petrol since I do not know anything about

• E85. Since the price is the same I use what I am familiar
• with. Simply lack of knowledge.”

”To motivate consumers to choose green cars, the political decisions need to be long term and not loose focus after a few years - like in the case of E85.”

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Factors of importance when fuelling (%)

Statements Disagree entirely Agree entirely Do not know I feel a personal responsibility to make environmental considerations when fuelling 13 14 31 25 13 4 I choose E85 since I believe it is better from a climate impact point of view 24 12 23 16 18 7 I do not believe that E85 is particularly good for the environment 19 26 20 7 7 21 I think environmental consideration is more important than the price of fuels 20 19 32 16 10 3 I am worried that E85 is competing with food production 31 13 15 10 6 25 I am worried that E85 will damage the engine of my car 30 12 14 16 23 5 My car mechanic has recommended me to fuel less E85 and more petrol 46 8 9 8 17 12

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Model specification

• Binary probit random effects model
• Dependent variable: Stated choice of fuel

Ethanol E85=1, Petrol=0

• Explanatory variables: price, perception of E85 versus

petrol, preferences for environment and climate

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Regression results

Statements Coefficient t Constant 5.412* 14.46 Price ratio between Ethanol E85 and Petrol 95

• 7.554*
• 21.55

Car mechanic has recommended fuel less E85

• 0.1913*
• 3.54

E85 will damage the engine of my car

• 0.187*
• 3.50

E85 is competing with food production

• 0.094***
• 1.58

Difficult to find place to fuel E85

• 0.148**
• 2.55

Personal responsibility to take environmental consideration 0.185** 2.47 E85 better from a climate point of view 0.482* 6.82 Rho 0.514* 10.40 Note: *,**,*** => Significance at 1%, 5% and 11 % level

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Conclusions

• Large variations in households’ values &

beliefs regarding fuel choice

• Price – money matters
• Policy instruments are important
• Information – initially & along the way
• Political decisions lead the way

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Contact information

Linda Andersson Luleå University of Technology Economics Unit SE-971 87 Luleå, Sweden Email: Linda.Andersson@LTU.se

Thank you for your attention!

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With financial support from: