Influencing Car Buying Decisions from an Environmental Perspective - a Conceptual Framework Based on Real Option Analysis



Influencing Car Buying Decisions from an Environmental Perspective - a Conceptual Framework Based on Real Option Analysis

Authors

N A Krueger, J Pareigis, SAMOT / Karlstad University, SE

Description

The aim of this paper is to provide an overview of TDM measures of how to achieve an environmental friendly car fleet. One important contribution is that we address the uncertainty faced by consumers and producers by means of real option analysis.

Abstract

Influencing Car Buying Decisions from an Environmental Perspective
- A Conceptual Framework Based on Real Option Analysis

Due to the strong connection between economic growth and traffic demand it seems that promoting a more environmental friendly car fleet is essential in order to decrease emissions from car traffic. We discuss whether this is a necessary target for public policy intervention and public traffic demand management. The aim of this paper is to provide an overview of measures of how to achieve this and to briefly evaluate them according to key outcome variables as political feasibility, effectiveness and public attitudes. One important contribution is that we address the uncertainty faced by consumers and producers by means of real option analysis. According to real option analysis, uncertainty creates thresholds for both consumers and producers when investing in green technology. Furthermore, real option analysis provides a framework for analyzing how to reduce this threshold. We evaluate traffic demand measures as social marketing and transport pricing and show how uncertainty faced by consumers and producers may explain the sluggish adoption and diffusion of environmental friendly cars. The main results from our analysis is that we advocate measures to reduce perceived consumer uncertainty like certification, better communication of research results and to focus on health impacts. Considering the supply side, we find that it is promising to focus on prescribed emission levels per car and to induce innovative investments by reducing uncertainty via a credible commitment to a clear time path of emission targets per car for a significant time period ahead.

Publisher

Association for European Transport