Private Provision of Public Goods: Subscription Mechanisms in Voluntary Green Electricity Programs

Abstract

Voluntary green electricity programs are a rich setting to study private provision of public goods. A defining feature of these programs is the type of subscription mechanism used for enrolling residential customers in the program. We collected primary data on programs’ subscription mechanisms – along with data on company, consumer, and program characteristics – as a basis to analyze company mechanism choice, residential customer enrollment rate, and program revenue. A company characteristic – whether for-profit or nonprofit – helps to explain choice of subscription mechanism. The program’s price premium interacts with its mechanism type to explain enrollment rate in a manner consistent with theoretical predictions in the literature. Several consumer and program characteristics, along with mechanism type, explain program revenue. Several variables explain program revenue but not enrollment rate. This difference is not predicted by theory, and instead can be explained as a behavioral response of program enrollees.

Keywords: public goods provision, green price premium, green tariff, renewable energy, voluntary environmental program