Which factors influence the expansion of bioenergy? An empirical study of the investment behaviours of German farmers

Christian Reise, Oliver Musshoff, Karol Granoszewski and Achim Spiller

Ecological Economics, 2012, vol. 73, issue C, 133-141

Abstract: The German government is planning to increase the share of renewable energy sources. In this context, it is important to understand the decision-making behaviour of farmers regarding investments in renewable energy systems that generate energy from biomass and farmers' reactions to investment-support measures. To study this behaviour, we conduct a survey and confront farmers with a hypothetical opportunity to invest in a biogas plant. Our findings reveal that farmers have heterogeneous investment thresholds. Their investment decisions are mainly driven by capital costs and the subjective perception of the risk resulting from the investment. Other decision parameters like sustainability and non-monetary objectives that are also examined in this paper, play only minor roles. However, bounded rationality is an important factor. Moreover, the influence of an investment subsidy was analysed. Only about half of the amount of the subsidy — as expected according to normative forecast models — is reflected in an increased willingness to invest. Furthermore, farmers who have previously invested in bioenergy plants show lower investment thresholds and have stronger reactions to the subsidy. Regarding the expansion of renewable energies these findings are meaningful for policy impact analysis.

Keywords: Sustainability; Bioenergy; Policy impact analysis; Investment behaviour; Bounded rationality; Survey analysis (search for similar items in EconPapers)
Date: 2012
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Citations: View citations in EconPapers (24)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecolec:v:73:y:2012:i:c:p:133-141

DOI: 10.1016/j.ecolecon.2011.10.008

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