Estimating willingness to pay for E85 in the United States using an intercept survey of flex motorists

Abstract

Compliance with the Renewable Fuel Standard (RFS) in the United States will require price incentives for a substantial number of motorists with flex-fuel vehicles to switch to high ethanol-gasoline blends. Existing estimates of motorists’ willingness to pay for high-ethanol blends use data from Brazil, data generated when prices greatly favored low-ethanol blends, or stated preference data collected from mail and online surveys. We conducted an intercept survey of flex motorists as they refueled in five U.S. states. We overcome the problem caused by sample prices favoring low-ethanol blends by augmenting revealed preference data with stated preference data. A sample-selection problem arises because motorists with high willingness to pay seek out the relatively few stations that sell high-ethanol blends. We use responses from two questions to inform sample selection. We find the average U.S. motorist requires a substantial discount to switch to high ethanol blends beyond the price that equates the cost per mile of driving.