Green economics : a case study of South African's willingness to pay for climate change mitigation / Alicia Fourie

• Main Author: Fourie, Alicia
• Language: en
• Published: 2014
• Online Access: http://hdl.handle.net/10394/11745

Climate change is the greatest environmental challenge that the world is currently facing due to expanding economies, an increase in population and claims on the earth. Nevertheless, individuals are exploiting resources from the environment at a rate that is unsustainable but they are only harming themselves because certain individuals adopt the same exploitative strategy and resources are depleted. Literature suggests that there is no clear value for the environment. Neoclassical economists argue that the way to assign a monetary value to the environment is by allocating a price to the environment. ·However, this poses some challenges as the environment is not a market resource. To overcome this problem, one can try to establish a monetary value for the environment by asking consumers whether and how much they are willing to pay for green initiatives such as green accommodation, organic food and wine. Literature furthermore recommends that the way to allocate a price is by asking individuals if they are willing to pay to mitigate climate change. This dissertation addresses the latter by asking day visitors at Spier, a wine farm in Stellenbosch, Western Cape, South Africa, whether or not they are willing to pay extra for certain green initiatives. Furthermore it determines how green behaviour predicts willingness to pay for green products. Methods that are suggested by literature to determine willingness to pay are the travel cost method, hedonic pricing method and the contingent valuation method. This dissertation however concentrates on which factors influence a consumers' willingness to pay. By understanding and knowing which factors influence willingness to pay, more sustainable business practices can be identified. Three methods are employed in the analysis of the data collected through a survey: Firstly, cross tabulations were drawn up to determine if statistically significant differences occur between the different types of environmentally friendly visitors, demographic factors and willingness to pay. Secondly, principle components are extracted from the 25 green principles which consumers apply at home to identify six types of green visitors. Lastly, these six types of green visitors and demographic variables were inserted into a logistic regression in order to determine which variables explain a visitor's willingness to pay extra for green accommodation, organic food or wine. The results show that demographic factors are not significant in predicting the willingness to pay for green accommodation, organic food and wine of day visitors at Spier. Willingness to pay is rather a function of existing environmental behaviour in those that actively engage in conserving the environment, through their behaviour and consumption habits, exhibiting a greater likelihood of willingness to pay than those who do little to mitigate the environmental impacts of their consumption. This supports the idea that consumers must be educated to make lifestyle changes and that environmental awareness is not a function of gender or other demographic variables. === Thesis (MCom (Economics))--North-West University, Potchefstroom Campus, 2012