Estimating Willingness to Pay for E85 in the United States Using an Intercept Survey of Flex Motorists

Kenneth Liao, Sebastien Pouliot, Bruce A. Babcock
June 2018  [16-WP 562] (Revised)

Abstract: Compliance with the Renewable Fuel Standard (RFS) in United States will require price incentives for a substantial number of motorists with flex-fuel vehicles to switch to high ethanol-gasoline blends. Existing estimates of motorists’ willingness to pay for high-ethanol blends use data from Brazil, data generated when prices greatly favored low-ethanol blends, or stated preference data collected from mail and online surveys. We conducted an intercept survey of flex motorists as they refueled in five US states. We overcome the problem caused by sample prices favoring low-ethanol blends by augmenting revealed preference data with stated preference data. A sample-selection problem arises because motorists with high willingness to pay seek out the relatively few stations that sell high-ethanol blends. We use responses from two questions to inform sample selection. We find the average US motorist requires a substantial discount to switch to high ethanol blends beyond the price that equates the cost per mile of driving.

Keywords: Biofuel, E85, Ethanol, Gasoline, Renewable Fuel Standard, Intercept Survey.

JEL codes: Q18, Q41, Q42, C25.

Acknowledgements: The authors are thankful for critiques and suggestions from three anonymous referees and the editor James Vercammen. The authors acknowledge support from the Biobased Industry Center at Iowa State University, the National Science Foundation under Grant Number EPS-1101284 and by the USDA National Institute of Food and Agriculture Hatch project 1010309.

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