Classification Of Ethanol Consumers and Willingness to Pay for Reductions in Greenhouse Gas Emissions Through Purchases of E85

In recent years, the issues of energy dependency and renewable energy options have gained recognition with not only policy-makers but also mainstream consumers. Understanding consumer beliefs and preferences related to these issues is therefore relevant as innovative renewable energy markets have the potential to change conventional consumer purchasing decisions. This paper investigates the beliefs and behaviors of U.S. consumers related to E85 ethanol from corn and cellulosic feedstocks. Four distinct market segments are created so that the ethanol market can be investigated more in-depth. Overall familiarity with ethanol as an alternative fuel is high; however, individual segments vary on beliefs related to corn and cellulosic ethanol, purchasing Flex-Fuel Vehicles, general concern for the environment, and many other factors. In order to successfully market ethanol to a diverse market, the preferences, beliefs and behaviors of these four distinct segments should be taken into account. While environmental concern has waxed and waned over time, issues like as climate change have come to the forefront of both domestic and international discussion and policy. The role of greenhouse gas emissions in contributing to climate change has been acknowledged. As a major source of emissions, transportation fuels are an obvious source of potential reductions in greenhouse gas emissions. This study segments consumers into four distinct market segments and uses a contingent choice method to determine willingness to pay for reductions in greenhouse gas emissions through purchases of E85 ethanol blends. Overall, willingness to pay is estimated at about 0.18 cents per gallon for each percentage in emissions reductions when compared with gasoline containing no ethanol (E0). Willingness to pay for emissions reductions varies in significance and degree across the four market segments. The diversity between the four segments implies that marketing plans should take into account the heterogeneity of consumers and make efforts to account for their varied needs and preferences.