Private provision of environmental public goods: Household participation in green-electricity programs

Green-electricity programs provide an opportunity to study private provision of an environmental public good in a field setting. The first part of this paper develops a theoretical framework to analyze household decisions about voluntary participation in green-electricity programs. We consider different participation mechanisms and show how they relate to existing theory on either pure or impure public goods. The models are used to examine the implications of participation mechanisms for the level of public-good provision. The second part of the paper provides an empirical investigation of actual participation decisions in two green-electricity programs—one based on a pure public good and the other based on an impure public good. The data come from original household surveys of participants and nonparticipants in both programs, along with utility data on household electricity consumption. The econometric results are interpreted in the context of the theoretical models and are compared to other studies of privately provided public goods. r 2006 Elsevier Inc. All rights reserved. JEL classification: H41; Q42