Prague Economic Papers 2019, 28(4):465-478 | DOI: 10.18267/j.pep.713

Household Ecological Preferences and Renewable Energy Spending

Maciej Malaczewski
Department of Econometrics, University of Lodz, Lodz, Poland

In this paper, we propose a model that demonstrates the influence of household ecological preferences on their acceptance of spending on renewable energy. The model discusses the production of energy from both non-renewable and renewable sources, the quality of the natural environment, pollution emissions, and utility maximization. If households choose to reduce pollutant emissions, they should reduce their levels of consumption. The main aspect that distinguishes the proposed model is the assumption of complementarity between physical capital and energy. This complementarity exists due to the fact that non-renewable natural resources are the main energy source throughout the world. The presented model is solved and analysed in detail. Our analysis of the model leads to the conclusion that maximizing the utility share of the total production spent on renewable energy generation depends on the relation of both preference parameters, not on each individual preference parameter. Since the presented model helps to explain several economic mechanisms, it may become incorporated into a larger model.

Keywords: ecological preferences, complementarity between natural resources and capital, energy, natural resource use, pollution
JEL classification: O44, Q32, Q43

Received: July 28, 2017; Accepted: November 13, 2018; Published: September 3, 2019  Show citation

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Malaczewski, M. (2019). Household Ecological Preferences and Renewable Energy Spending. Prague Economic Papers, 28(4), 465-478. doi: 10.18267/j.pep.713
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