Supporting Public Goods with Voluntary Programs: Non-Residential Demand for Green Power

Abstract

The sale of “green power” (electricity generated using renewable energy sources such as wind, solar or geothermal power) to non-residential customers at a premium is one of several market-based approaches for supporting renewables. Why would profit-maximizing firms or budget-conscious institutions be willing to increase their own costs so as to provide environmental improvements which benefit everyone? The literature offers several possible motivations, including increasing “green” market share, public image enhancement and preemption of more stringent environmental regulation. This article tests the hypotheses that (1) firms and institutions purchasing green power are primarily motivated by the private benefits associated with making such a contribution; and (2) participating firms and institutions favor voluntary programs over more direct policy approaches to supporting renewables, such as taxation. Hypotheses are tested using data from a nationwide mail survey of non-residential green power customers. The results of this empirical analysis do not support either of the research hypotheses.