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

Why Flex-Fuel Failed? A Household Perspective SAEE Luleå L INDA A NDERSSON Economics Unit Luleå University of Technology Together with Kristina Ek, Åsa Kastensson & Linda Wårell 1

The raise and fall in the Swedish Ethanol E85 market 250 000 200 000 Volume, m³ 150 000 100 000 50 000 0 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2

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? 3

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 4

Purpose The purpose of this study is to analyze which are the most important factors affecting the households’ choice of fuel . 5

6 Volume, m3 10000 15000 20000 25000 30000 5000 Ethanol E85 volumes & price difference 0 2005-01 2005-05 2005-09 2006-01 between Ethanol E85 & Petrol 2006-05 2006-09 2007-01 2007-05 Consumed volume E85 2007-09 2008-01 2008-05 2008-09 2009-01 2009-05 2009-09 2010-01 2010-05 2010-09 2011-01 Price difference gasoline and E85 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 -4 -3 -2 -1 0 1 2 3 Price difference, kr/l

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 7

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 8

Potential factors affecting the households choose of fuel 9

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

Stated fuel choice at different price levels (%) Ethanol Statement Petrol 95 E85 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 86 14 was 12 SEK/litre ? 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 58 42 was 12 SEK/litre ? 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 10 90 was 12 SEK/litre ? 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 3 97 was 12 SEK/litre ? 11

Comments ” Have been driving on E85 only the last years - until the liter price became the same as for petrol.” ”I f ollow 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.” 12

Factors of importance when fuelling (%) Disagree Agree Do not Statements entirely entirely know I feel a personal responsibility to make environmental 13 14 31 25 13 4 considerations when fuelling I choose E85 since I believe it is better from a climate 24 12 23 16 18 7 impact point of view I do not believe that E85 is particularly good for the 19 26 20 7 7 21 environment I think environmental consideration is more important than 20 19 32 16 10 3 the price of fuels 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 46 8 9 8 17 12 and more petrol 13

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 14

Regression results Statements Coefficient t 5.412* 14.46 Constant Price ratio between Ethanol E85 and Petrol 95 -7.554* -21.55 -0.1913* -3.54 Car mechanic has recommended fuel less E85 E85 will damage the engine of my car -0.187* -3.50 -0.094*** -1.58 E85 is competing with food production Difficult to find place to fuel E85 -0.148** -2.55 Personal responsibility to take environmental 0.185** 2.47 consideration E85 better from a climate point of view 0.482* 6.82 0.514* 10.40 Rho Note: *,**,*** => Significance at 1%, 5% and 11 % level 15

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 16

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! 17

With financial support from: 18