Consumer Willingness to Pay for E85

Concerns regarding energy security, resource sustainability, and environmental protection have heightened interests in renewable fuels and sparked the research and development of ethanol as a transportation fuel. This study examines consumers’ willingness to pay for ethanol from various potential feedstocks; corn, switchgrass and wood wastes. Data was collected via a survey of fuel consumers across the United States in 2009. Results show that consumers have a preference for E85 (a fuel blend with 85 percent ethanol and 15 percent gasoline) from corn, switchgrass and wood wastes compared to E0 (gasoline) and a preference for E85 from switchgrass and wood wastes, but not corn when compared to E10 (10 percent ethanol and 90 percent gasoline). Also, consumers have a preference for E85 compared to E10 but not compared to E0. Mean WTP for E85 was insignificant across all models, but significant for all other product attributes; percentage of fuel imported, percentage of greenhouse gas emissions reduced, and the proximity of fuel in driving distance. This suggests a WTP for a combination of fuel attributes associated with ethanol rather than just for E85.

Results suggest that price and proximity of the fuel have a greater impact on fuel selection than percentage of the fuel imported and reductions in greenhouse gas emissions. Republicans had a positive WTP for E85 compared to E10 and a negative WTP for E85 compared to E0 regardless of feedstock, which may suggest that Republicans actually have no preference for E85; however, these findings may also suggest that Republicans view E85 as a voluntary “policy” whereas E10 is an example of government intrusion in the free market. Thus, they may ultimately have preferences over the manner in which the blend is being introduced to the market. Across all models, those undecided in political affiliation, those previously familiar with ethanol, and those who prefer to devote U.S. farmland to food instead of fuel generally exhibited a lower WTP for E85 while Westerners, those worried about the environment, and those believe that reducing dependence on foreign oil is more important than environmental protection generally had a greater WTP for E85.