Valuing Environmental Externalities Of Thermal Power Industry Based On Choice Model

Along with the rapid development of economy, serious environmental externalities are facing China, especially the environmental pollution of thermal power industry. One of the core issues to address environmental externalities is that policy makers need to quantify the environmental external costs to serve as a basis for policy formulation. However, without transaction price in the traditional sense, external costs of pollution gas or greenhouse gas cannot be quantified by market. Since1970s, the study and application of NMVT have been carried out in more than50countries, such as the United States, United Kingdom, Australia, and so on. NMVT has become the significant basis of formulating the environmental policies in developed countries. With its advantages of obtaining data, Choice model (CM), one of the methods of NMVT, is more widespread applied. The study and application about CM in the external costs of thermal power industry in China is scant. The paper first collates and summarizes methods of NMVT, and then points out the advantages in the external cost assessment of CM. Four attributes including air quality, acid rain, greenhouse gas emission reductions, additional payment of electricity bill are chosen to make the relative analysis in this study. Based on the CM and the data from questionnaires, the consumer’s willingness to pay (WTP) for pollutant and CO2emissions reduction is evaluated. This paper also analyzes the effect of cheap talk script method.The results indicate that respondents have different preferences to four environmental attributes. Preference to air quality is significantly better than greenhouse gas emission reductions (CO2) and acid rain (SO2, NOx). However, the preferences vary with rural residents and urban residents. Urban residents’order of preference is air quality, greenhouse gases and acid rain while rural residents’is acid rain, air quality and greenhouse gases.The results show that the marginal WTP per household for good air quality is3.52Yuan per month while2.83Yuan per month for CO2emissions reduction about6%-10%and3.89Yuan,3.36Yuan,3.35Yuan per month respectively for no acid rain, mild acid rain, moderate acid rain.Chinese people are willing to pay192Yuan to292Yuan per household for environmental improvement every year. The environmental external cost of thermal power industry in China is between774billion Yuan to1174billion Yuan in the year2011. The short cheap talk script method is not completely effective in decreasing the upward bias of the WTP evaluation.