Experimental Design Details
This study aims to understand consumer preferences and their WTP for carbon-neutral labels, focusing on the distinctions between transparent and standard labels. The main research questions include: (i) Are consumers willing to pay for carbon-neutral labels? (ii) Do consumers value transparent carbon-neutral labels more than standard ones, and if so, by how much? (iii) How do consumers' preferences for CO₂ reductions differ from CO₂ offsets? To gain insights into how much consumers can internalize the climate externality through carbon-neutral labels, the study further explores the following question: (iv) How much are consumers willing to pay to offset or reduce one tonne of CO₂ through carbon-neutral labels, and how does this compare to the social cost of carbon estimates?
The survey begins with an informed consent to participate in the survey and screening questions about age, tea consumption and purchasing habits. Participants under the age of 18, or those who never consume or purchase tea, are screened out. The DCE focuses on 80 teabags or a 200-gram box of tea or with the following attributes: carbon-neutral label, organic label, ethical trade label, and price. The sustainability labels are designed for the purpose of the survey and can take two levels, either the tea product has the label or does not have it. The price levels for the pre-test take seven levels ranging from £0.90 to £6.90 with £1 increments. However, based on participants' feedback in the pre-test, the price levels for the main survey will be adjusted if they are considered too high or too low.
I use a split-sample approach with three different samples. All samples receive identical surveys and choice experiment designs. The only difference is the type of the carbon-neutral label. The first sample is shown a standard carbon-neutral label, stating ‘CO₂ neutral.’ Samples 2 and 3 are shown a transparent carbon-neutral label with additional text stating the percentage of GHG offsetting and GHG reduction. Sample 2 is shown a carbon-neutral label indicating a 50% emission offset and a 50% emission reduction, while Sample 3 sees a carbon-neutral label indicating a 100% emission offset and no (0%) emission reduction.
Ngene software is used for generating DCE design, consisting of 16 choice tasks, with various combinations of attribute levels. There are two blocks, which means that each participant sees 8 choice tasks. There are three choice alternatives in each choice task: two tea product alternatives and “none of the two'' alternative. For the pre-test, a D-efficient design with a Multinomial Logit (MNL) model is used, and the parameter distributions from the pre-test are used for the final design using a Random Parameters Logit (RPL) model.