Have you seen that I've paid to go green? A quantitative study on how product visibility impacts consumers' intention to pay a price premium for green steel and ammonia products

Abstract: Are consumers willing to pay a price premium for green product alternatives? This is a key question for companies evaluating whether to decarbonise their businesses. For so-called hard-to-abate industries, decarbonisation will require significant investment, and thus this question is of great importance. Many hard-to-abate industries stand for significant portions of global emissions, such as steel and ammonia, which represent approximately 7% and 2% of global emissions respectively. Understanding the consumer willingness to pay for products using these materials will be key in unlocking decarbonisation and thereby significantly reducing global greenhouse gas emissions. The conceptual framework used in the study is an expanded version of the Theory of Planned Behaviour, where product visibility is added as a variable to the original model to see if it impacts the willingness to pay a premium ("WTPP") Intention for a green alternative, due to a potential green signalling effect. According to green signalling theory, consumers buy green products to signal to their environment that they can afford to spend money on more costly green products and thereby gain social status. The purpose of this study is to test whether product visibility affects how much more a consumer indicates they are willing to pay for a green product alternative. Visibility is expected to positively impact willingness to pay intention. An experiment was devised using an online survey with 1402 respondents, where visible or non-visible products containing steel or ammonia were randomly assigned to respondents and WTPP Intention for a green alternative was measured. The results of the study indicate that on average consumers show a WTPP Intention of 15.7% for green alternatives containing steel or ammonia. Further, the results show that consumers have a higher WTPP Intention for non-visible products compared to visible products. Although opposite to the predicted outcome, this result could be explained by prosocial signalling theory. In cases when individuals are intrinsically motivated to purchase green products, they might be more likely to engage in altruistic acts if their actions are less visible to their peers.