Willingness-to-Pay for Emerging Technologies: A Study of Hydrogen Demand in the Ammonia Industry

Svetlana Ikonnikova and Jevgenijs Steinbuks

No 11338, Policy Research Working Paper Series from The World Bank

Abstract: This study introduces a novel quantitative method to assess the willingness to pay for emerging technologies, such as hydrogen, as substitutes for fossil fuels in industrial production. A three-step framework is developed to derive the willingness-to-pay function based on industrial competition and market entry theory, relying exclusively on pre-entry market information. First, a system of equations is specified linking domestic consumption, production, and prices to fossil input prices, which proxy marginal production costs. Second, the market equilibrium parameters required for numerical willingness-to-pay estimation are empirically estimated using industry-level data. Third, an industrial competition model incorporating entry by producers adopting new technology is constructed, allowing willingness to pay to be expressed as a function of conventional input costs, operational efficiency, and demand conditions. The framework is applied to hydrogen use in ammonia production, using consumption and trade data from 2000–24 for 16 major fertilizer-producing countries across four regions. The results highlight substantial cross-country heterogeneity, a binding hydrogen price threshold for large-scale adoption, and the limited effectiveness of carbon policies in accelerating hydrogen uptake.

Date: 2026-03-19
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