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South Korean Household’s Willingness to Pay for Replacing Coal with Natural Gas? A View from CO 2 Emissions Reduction

Author

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  • Seul-Ye Lim

    (Department of Energy Policy, Graduate School of Energy & Environment, Seoul National University of Science & Technology, 232 Gongreung-Ro, Nowon-Gu, Seoul 01811, Korea)

  • Hyo-Jin Kim

    (Department of Energy Policy, Graduate School of Energy & Environment, Seoul National University of Science & Technology, 232 Gongreung-Ro, Nowon-Gu, Seoul 01811, Korea)

  • Seung-Hoon Yoo

    (Department of Energy Policy, Graduate School of Energy & Environment, Seoul National University of Science & Technology, 232 Gongreung-Ro, Nowon-Gu, Seoul 01811, Korea)

Abstract
Coal is currently a major electric power generation source in South Korea when considering that forty-three percent of electricity that was generated during the first quarter of 2017 came from coal. The amount of CO 2 emissions from coal-fired power plant is two times larger than that from natural gas (NG)-fired power plant in the country. In this regard, the Korean government is trying to replace some amount of coal that is used for generation with NG to reduce CO 2 emissions. However, the cost of NG-fired generation is about 1.25 times higher than that of coal-fired generation. Thus, the policy-makers demand information about the household willingness to pay (WTP) for the replacement to mitigate CO 2 emissions. This paper applies the contingent valuation (CV) approach, and assesses the household’s WTP for replacing one kWh of coal-fired power with that of NG-fired power. For this purpose, a total of 1000 South Korean households were involved in the CV survey employing a dichotomous choice question. In addition to the current electricity price, KRW 121.52 (USD 0.11) per kWh, the respondents were willing to pay KRW 25.35 (USD 0.02) per kWh. The costs of NG-fired and coal-fired generation are KRW 100.13 and 78.05, respectively, per kWh. The difference between the two is KRW 22.08 per kWh, which is smaller than the mean additional WTP (KRW 25.35 per kWh). The household’s additional WTP is bigger than the actual additional cost. It is concluded that the switch of power generation source from coal to NG to reduce CO 2 emissions can be supported by South Korean households.

Suggested Citation

  • Seul-Ye Lim & Hyo-Jin Kim & Seung-Hoon Yoo, 2017. "South Korean Household’s Willingness to Pay for Replacing Coal with Natural Gas? A View from CO 2 Emissions Reduction," Energies, MDPI, vol. 10(12), pages 1-9, December.
    • Handle: RePEc:gam:jeners:v:10:y:2017:i:12:p:2031-:d:121308
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    Cited by:

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    9. Lee, Suh-Young & Lee, In-Beum & Han, Jeehoon, 2019. "Design under uncertainty of carbon capture, utilization and storage infrastructure considering profit, environmental impact, and risk preference," Applied Energy, Elsevier, vol. 238(C), pages 34-44.
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