Private Environmental Preference (PEP) towards Pollution

Reduction: A Structural Equation Modeling Approach

By

Mu-Qing Huang

A thesis submitted in conformity with the requirements

for the degree of Master of Science in Forestry

Faculty of Forestry University of Toronto

 

©  Copyright  by  Mu-‐Qing  Huang  2012

   

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Private Environmental Preference (PEP) towards Pollution Reduction: A

Structural Equation Modeling Approach

Mu-Qing Huang

Master of Science in Forestry

Faculty of Forestry University of Toronto

2012

Abstract Private Environmental Preference (PEP), measured by the willingness to spend on pollution

reduction and its casual factors. A PEP model is constructed for Canada, China, India, and USA

using data from the World Value Survey and Structural Equation Models. The results revealed

that the most important factors are: environmental organization membership, acknowledgement

of global environmental problems, Machiavellian attitudes towards money, and confidence in

governing bodies. Other significant factors include: the acknowledgement of local environmental

problems, income level, occupational characteristics, and work ethic. The acknowledgement of

global problems and confidence in governing bodies increase PEP, while Machiavellian attitudes

towards money reduce PEP across all four countries. Environmental organizational membership

on PEP increase PEP in Canada and USA, but decrease PEP in India. White-collar occupational

characteristics have a positive effect on PEP in Canada, but negative in China and India. Policy

recommendations are provided given these observations.

   

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Acknowledgments

Foremost, I would like to express my most sincere gratitude to my advisor Professor Shashi Kant

for this precious opportunity to study at University of Toronto. His patience, enthusiasm, and

immense knowledge on the research topic have helped me throughout the entire duration of my

study and are extremely vital to the successful completion of this thesis.

Next, I would like to offer my deep appreciation to the rest of my thesis committee: Professor

Dilip Soman and Professor Peggy Smith for their detailed edits, insightful comments, and

stimulating questions. I could not have done it without your incredible input.

Last but not least, I would like to thank my family, my parents Weicheng Huang and Jianghe

Niu, for their unconditional love and support in my various endeavors.

   

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Table of Contents

1. Introduction ................................................................................................................................1

2. Literature Review ......................................................................................................................8 2.1 Why Study Private Environmental Preference (PEP)? ...................................................................... 8

2.2 Environmental Preferences vs. Attitudes: Differences, Characteristics and Measurements ............ 12

2.3 The Use of World Value Survey (WVS) in Private Environmental Preference (PEP) Studies ....... 19

2.4 Common Influencing Factors for Private Environmental Preference (PEP) ................................... 23

2.5 Private Environmental Preferences (PEP) towards Pollution Reduction ......................................... 27

3. Model of Private Environmental Preferences towards Pollution Reduction ....................30 3.1 The Awareness of Environmental Problems ..................................................................................... 30

3.1.1 Acknowledgement of Global Environmental Problem ............................................................. 31

3.1.2 Acknowledgement of Local Environmental Problems ............................................................. 31

3.1.3 Environmental Organization Membership ................................................................................ 32

3.2 Personal capabilities ......................................................................................................................... 33

3.2.1 Income ....................................................................................................................................... 33

3.2.1 White-collar Occupational Characteristics ............................................................................... 34

3.2.1 Work Ethics ............................................................................................................................... 34

3.3 External and Social Attitudes ........................................................................................................... 35

3.3.1 Machiavellianism Attitude towards Money .............................................................................. 35

3.3.2 Marital Status ............................................................................................................................ 36

3.3.3 Democratic Attitudes ................................................................................................................ 37

3.3.4 Education Level ........................................................................................................................ 37

3.3.5 Interpersonal Trust ..................................................................................................................... 38

4. Data Used and its Source ........................................................................................................40 4.1 Source of Data - World Value Survey (WVS) .................................................................................. 40

4.2 Data Selection for the Study ............................................................................................................. 41

4.3 Details of the WVS Data collection ................................................................................................. 41

4.4 Factor Measures for the PEP Model ................................................................................................. 42

   

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5. Data Analysis Methods ...........................................................................................................46 5.1 Latent Variables and Measurement Model Estimation ..................................................................... 46

5.2 Estimation of the Structural Model ................................................................................................... 47

5.3 Multiple Group Comparison (MGC) Analysis ................................................................................. 50

6. Results ......................................................................................................................................51 6.1 Private Environmental Preferences (PEP) of Respondents of Four Countries ................................ 51

6.2 Factors and Measurement Model of PEP .......................................................................................... 52

6.3 Structural Model of PEP .................................................................................................................. 55

6.4 Multiple Group Comparison (MGS) ................................................................................................. 59

7. Discussion ................................................................................................................................62 7.1 The Level of PEP towards Pollution Reduction in the Four Countries ............................................ 63

7.2 Insignificant Factors to Private Environmental Preference (PEP) ................................................... 65

7.3 Cross Country Similarities in PEP ................................................................................................... 69

7.4 Cross-Country Differences in PEP ................................................................................................... 73

8. Conclusions and Limitations ..................................................................................................70

9. References ................................................................................................................................83

   

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List of Tables

Table 1.1. Factors in the existing literature shown to have influence on Private Environmental

Preferences (PEP) .........................................................................................................................33

Table 4.1. Latent factors and their respective indicator variables for the proposed PEP Model ..51

Table 6.1. PEP Means across USA, Canada, India and China .....................................................58

Table 6.2. Paired sample t-test for the mean PEP scores across the four countries ......................59

Table 6.3. Standardized factor loadings for the independent and dependent factors in the final

PEP model ......................................................................................................................................60

Table 6.4 Cronbach’s Alpha for PEP factor measure for the four countries .................................61

Table 6.5. Goodness-of-fit indices for the models of the Canada, China, India and USA ............63

Table 6.6. PEP model parameter estimates for Canada and USA .................................................64

Table 6.7. PEP model parameter estimates for China and India ...................................................65

Table 6.8. The direct and indirect effect of environmental organization member and income level

on PEP for Canada, China, India and USA. ..................................................................................66

Table. 6.9. Critical value for comparative parameter estimate for Canada, China, India and USA

PEP model ......................................................................................................................................67

   

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List of Figures

Figure 3.1. Preliminary structural model of Private Environmental Preferences (PEP) towards

General Pollution Reduction .........................................................................................................46

Figure 6.1. Private Environmental Preference (PEP) structural model towards Pollution

Reduction ......................................................................................................................................62

   

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List of Appendices

Appendix 1. Private Environmental Preference (PEP) structural model for Pollution Reduction:

Standard Parameter Estimates for Canada ...................................................................................105

Appendix 2. Private Environmental Preference (PEP) structural model for Pollution Reduction:

Standard Parameter Estimates for USA .......................................................................................106

Appendix 3. Private Environmental Preference (PEP) structural model for Pollution Reduction:

Standard Parameter Estimates for China .....................................................................................107

Appendix 4. Private Environmental Preference (PEP) structural model for Pollution Reduction:

Standard Parameter Estimates for India .......................................................................................108

Appendix 5. Final factors and their respective indicator survey questions .................................109

Appendix 6. Survey methodologies for each of the four chosen countries .................................111

Appendix 7. Normal Q-Q plot of logarithmic transformed mean PEP Scores for Canada .........115

Appendix 8. Normal Q-Q plot of logarithmic transformed mean PEP Scores for USA .............116

Appendix 9. Normal Q-Q plot of logarithmic transformed mean PEP Scores for China ...........117

Appendix 10. Normal Q-Q plot of logarithmic transformed mean PEP Scores for India ...........118

 

   

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Chapter 1

Introduction

Environmental pollution refers to the general process of releasing contaminants into the

environment and the subsequent environmental degradation which results in the reduction of the

capacity of the environment to meet social and ecological needs (Hill, 2010). Pollution can lead

to a wide range of other environmental problems. These problems are often serious and can pose

a threat to the sustainability of humanity. Given the seriousness of pollution, numerous

international agreements have been generated to prevent pollution. Examples of international

agreements on pollution-related environmental problems include: the Association of Southeast

Asian Nations (ASEAN) Agreement on Transboundary Haze Pollution (an environmental

agreement signed in 2002 between all ASEAN nations to reduce haze pollution in Southeast

Asia1); the Basel Convention on the Control of Transboundary Movements of Hazardous Wastes

and Their Disposal (an international treaty that was designed to reduce the movements of

hazardous waste between nations, and specifically to prevent transfer of hazardous waste from

developed to less developed countries (LDCs)2); the Asia-Pacific Partnership on Clean

Development and Climate (aims to develop and accelerate the deployment of cleaner, more

efficient energy technologies to meet national pollution reduction, energy security and climate

change concerns in ways that reduce poverty and promote economic development 3); the Kyoto

                                                                                                                         1  ASEAN  countries  who  have  signed  onto  the  agreement  include  Malaysia,  Singapore,  Brunei,  Myanmar,  Vietnam,  Thailand,  Laos  and  Cambodia.  2  The  Basel  Convention  is  signed  by  175  countries,  including  Canada,  China,  India  and  USA.    3  The  Partnership  includes  Australia,  Canada,  India,  Japan,  the  People's  Republic  of  China,  South  Korea,  and  USA.  

   

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Protocol (a set of binding obligations intended to require industrialised countries to reduce their

emissions of greenhouse gases4).

The effectiveness of international environmental agreements comes from participation. If

all of the biggest polluting countries fail to participate in these pollution reduction actions, it will

render these efforts ineffective. The international effort to reduce pollution is widespread;

however, not all of the biggest polluters have signed on and ratified these treaties/agreements.

For example, the USA has not ratified the Kyoto Protocol; and more recently, Canada, Russia,

France and Japan have announced that they do not wish to renew the Protocol (Weaver, 2011).

The inability to reach complete international participation with some of the agreements points to

a more fundamental problem with many environmental initiatives - different countries have

different viewpoints on how to manage environmental concerns. In the case of Kyoto Protocol,

Weaver (2011) has demonstrated the presences of differences in the ways which the developed

and developing countries view the environment; thus, leading to different inclinations in their

preferred way of dealing with the environment. The willingness to participate in environmental

projects is different between the Annex I and Annex II countries of the Kyoto Protocol; some

countries are more willing to contribute towards the environment, whereas others are less willing

(Weaver, 2011).

Weaver (2011) has demonstrated that there are differences in the willingness to

participation in pollution reduction projects on the international level, while others have

demonstrated differences in the willingness to participate on an individual level as reflected in

the difference in their environmental preferences. For example, Franzen and Meyer (2010) have

showed there are differences in the environmental preferences of individuals across 26 different

                                                                                                                         4  The  protocol  includes  37  industrialized  countries  including  Canada  and  USA.      

   

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countries. Preference refers to individual’s attitudes toward a set of objects and it is typically

reflected in explicit decision-making processes (Lichtenstein & Slovic, 2006). An environmental

preference refers to an inclination to choose the option that brings more gain towards

environmental goals compared to any other competing goals. For example, the decision to

participate or not participate in an environmental agreement is reflective of one’s environmental

preference. Individual preferences has been show to play important roles in national and macro-

scaled phenomenon, such as the relationship between national economic development and

pollution levels outlined in the Kuznets curve (McConnell, 1997; Andreoni & Levinson, 2001).

Therefore, it is crucial to understand the differences in environmental preferences of the citizens

in each country, as well as the sources contributing to these differences.

The increased understanding in environmental preference across different countries has

important political implication because it can enlarge the scale of the action impact through

increased levels of international collaboration. A stronger level of individual preference is more

likely to be reflected on the national decisions. For example, Georgescu-Roegen (1958)

investigated the effect of strong to weak preferences on national market demand. The results

showed that a critical threshold is needed for a preference to translate into a visible action force.

Consumer preferences vary on a continuum, and a stronger preference is more likely to generate

market demand compared to weaker preferences. Following this line of logic, a stronger

individual preference towards the environment is more likely to push the national decisions to

include more environmental considerations. Georgescu-Roegen’s study provided convincing

evidences to the simple, but important idea: in order to encourage international collaboration on

pollution reduction projects, it is necessary to increase the PEP of each nation at the individual

level.

   

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Environmentalism is a commonly used term to express people’s preferences toward the

environment. Environmentalism can be defined based on values, such as different worldviews; or

it can be defined based on types of behaviours, such as behaviours in the public sphere and

private spheres (Meadowcroft, 1992). Value-based environmentalism categorizes people

according to the ways in which their worldviews, values, attitudes, and norms differ when

dealing with environmental issues (Meadowcroft, 1992). Behaviour-based environmentalism

categorizes people according to the types of pro-environmental behaviours (PEB) in which they

engage (Stern, 2000). The theory of environmentally significant behaviour suggests three distinct

types of environmentalism: 1) environmental activism; 2) non-activist environmental behaviours

in the public sphere; and, 3) non-activist environmental behaviours in the private sphere (Stern,

2000). Environmental activism refers to participation in environmental social movements. Non-

activist behaviours in the public-sphere include actions such as: compliance with environmental

public policies. Private-sphere environmentalism refers to the ways in which individuals behave

privately, such as recycling and green expenditures (Stern, 2000). A distinct pattern of social-

psychological and socio-demographic factors are associated with each type of behaviour (Stern,

2000).

Private Environmental Preference (PEP) is a form of behaviourally-based

environmentalism in the private sphere. It refers to an inclination to incorporate environmentally

conscious considerations into individual actions and it is measured using monetary and financial

means (Svart, 1976). PEP has been shown to be the root cause of a few key socio-economic

relationships described in the literature, and it is highly useful in explaining the relationship

between these various social and economic factors. For example, PEP has been used to perfect

the understanding of the inverted U-shaped Kuznets curve (McConnell, 1997; Andreoni &

   

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Levinson, 2001). Israel and Levson (2004) found that national-level variables, such as

technological limitations (John & Pecchenino, 1994), institutional constraints (Jones & Manuelli,

2001), and a ‘return-to-scale’ (Andreoni & Levinson, 2001) are insufficient to explain the

inverted U-shaped relationship between pollution and income. McConnell (1997) and Andreoni

and Levinson (2001) demonstrated that the inclusion of individual preference into the model

provides a better explanation of the inverted U-shape relationship. Furthermore, PEP is also

useful in understanding many applied commercial and social issues; for instance: golf courses

(Limehous et al., 2010), where the PEP is measured through the price premium for

environmentally certified courses; housing prices, where PEP is reflected through a tendency to

choose a distant location from a point source pollutant in spite of a higher housing price

(Brasington & Hite, 2005); general social costs, where a preference towards the environment has

added social value (Hazilla & Kopp, 1990); and tourism, where PEP is reflected through the

increased economic benefits in coral reef diving (Pendleton, 1994). On the national level, PEP

plays an instructional role that is critical in the designing of effective policy regulations. An

understanding of PEP can help foster a much needed collaborative attitude between the private

and public sectors towards issues on pollution reduction.

Unfortunately, PEP has not been examined as thoroughly in the pollution reduction

literature. Pollution studies are commonly conducted at the firm level, where PEP is associated

with firm profitability (King & Lenox, 2002); or in relation to point source pollutants, such as

carbon reduction and the Kyoto Protocol (Akter & Bennett, 2011). Very few studies have

examined general PEP in terms of non-point source of pollution at multiple levels, such as going

from individual level to national and international levels. Kollmann et al. (2012) conducted

multi-level studies of the willingness to pay for pollution from the individual level to

   

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international level for the European countries, but no multi-level studies have been conducted

across developed and developing countries. This current study is the first study of non-point

pollutants across multiple level of analysis for both the developed and developing countries:

Canada, China, India and the USA. The study will built a Private Environmental Preference

(PEP) model that answers the following questions:

1. What are some attitudinal, socioeconomic, and demographic factors that influence Private

Environmental Preferences (PEP) in the specific contexts of pollution reduction for

Canada, China, India and USA?

2. How do these factors influence the PEPs in each country? Are the effects of these factors

the same or different for each country? If different, in what respect?

3. What are some policy recommendations for all four countries given the relationships

between these attitudinal, socioeconomic, and demographic factors and PEP?

Some of these influencing factors can be measured and observed directly, while others

can be made visible only through the moderating effects they have on other factors. Structural

equation modeling (SEM) is an excellent tool that can be used to build the current model due to

its ability to flexibly model complex relationships, including the relationships between latent and

observable variables. Canada, China, India and the USA are countries that occupy the largest

geographical area and/or have some of world’s highest population density (The World Factbook,

2012). In addition, these four countries are some of the largest air emission polluters across the

globe. According to the Carbon Dioxide Information Analysis Center (CDIAC)'s 2010 estimates

report, China is the world’s biggest emission polluter (Boden et al., 2012), the USA is the second,

India is the third, and Canada is the ninth biggest polluter ((Boden et al., 2012). An

understanding of the similarities and differences between these countries may be an excellent

   

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starting point to achieve global mutual understanding on the reduction of pollution; therefore, I

have selected these four countries for my study. The World Value Survey (WVS), a global

research project, provides data on people’s attitudes and beliefs, as well as their PEP, for about

100 countries (including the four target countries); accordingly, I will use the data from this

survey (WVS, 2012).

The next chapter starts with a literature review on existing studies on PEP in the context

of pollution reduction, the utility and implication of PEP studies, the use of WVS in the PEP

literature, and the trends in PEP studies. Chapter Three describes the proposed PEP model

towards pollution reduction. Chapter Four provides an overview of the World Value Survey

(WVS) data and how the WVS data was collected, sampled, and chosen for the current study.

Chapter Five explains the methodologies used to estimate the models, including factor analysis,

structural equation models, and multiple group comparison. Chapter Six presents the results of

the estimate, which includes: the parameter estimates of final models. The final model deviates

from the proposed models moderately; these deviations provide empirical evidence for key

cultural differences. Chapter Seven provides a detailed discussion of the results, including:

explanations for each model component, as well as, similarities and differences across the four

countries.    

   

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CHAPTER TWO

LITERATURE REVIEW

Private environmental preference (PEP) is defined as the individual’s willingness to

spend toward pollution reductions, and it is influenced by multiple attitudinal factors. PEP has

important implications for human life through its effects on commercial industry profitability, as

well as human psychological well-being. This chapter demonstrates these implications by

reviewing the use of PEP in the green consumer literature. The concept of ‘preference’ is often

confused with ‘attitudes’. This notion is inaccurate because they are distinct concepts albeit with

close connections. The chapter explains the relationship between environmental preference and

attitudes, as well as suitable survey designs that are needed to sufficiently measure and study

PEP. The World Value Survey (WVS) is a powerful survey that can be used to measure

environmental attitudes and preferences across the Canada, China, India and USA. Its ability to

capture attitudes and preferences is demonstrated by reviewing existing literature that has

employed WVS in their datasets. It has been widely observed that people differ in their

willingness to spend towards the protection of various environmental goods and services, and

numerous factors have been proposed to explain the differences in PEP. A summary of these

influencing factors will be provided. Some of these factors are also documented in the context of

pollution reduction. The literature will be reviewed and gaps will be highlighted.

2.1 Why Study Private Environmental Preference (PEP)?

Private environmental preference (PEP) can be defined as a preferential concern towards

the environment over other concerns, such as a personal financial concern. A preference towards

the environment is expressed when an individual is willing to trade personal financial resources

   

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for environmental benefits. PEP is popular in the consumer psychology literature due to its

ability to help industries predict and explain financial gains (or losses). For example, a consumer

can express his or her private environmental preference by purchasing environmentally friendly

products even if the cost for the particular purchase is higher. The willingness to pay a premium

for environmental benefits is widely studied in the literature (Ek, 2005; Chau et al., 2010;

Whitmarsh & Palmieri, 2011). The effects of profitability are mixed: a higher level of PEP can

translate to increased purchases for some industries (Ek, 2005), while suppressing others

(Whitmarsh & Palmieri, 2011).

A higher level of PEP is beneficial to the green energy sector, such as in the

establishment of wind power. Wind power is a renewable energy source with relatively small

negative environmental impact; however, the cost of wind power can be expensive. Wind energy

can be an economically feasible choice, if customers with a preference towards the environment

are willing to pay a premium for green electricity. Ek (2005) studied the public and private

preferences of Swedish residents towards renewable energy and wind power. The paper analyzed

the attitudes, as well the foundations of these attitudes, towards wind power among electricity

consumers. Private environmental preference is measured by their general attitude towards wind

power. Respondents answered the question: “What is your general attitude towards wind power?”

using a 5-point scale, where one represented a negative attitude and five a positive. The study

examined two groups of independent variables: 1) attitudes toward different electricity sources

and their environmental impact; and, 2) attitudes toward social choice in the energy sector. The

results showed that that PEP toward green energy decreases with income and age (Ek, 2005). In

addition, people with interests in environmental issues (i.e, those who already regularly purchase

green products) are more likely to be in favor of green electricity (Ek, 2005). These results

   

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suggest that the successful introduction of wind energy can be more easily achieved in a town

with wealthy and older residents, and among people with higher levels of environmental

awareness (Ek, 2005).

A high PEP can translate to financial benefits to the renewable energy sectors;

unfortunately, such benefits are not always observed across other industriesAquaculture is an

important component of water sustainability. It seems that the industry profitability is influenced

by people’s perception of the environmental impacts of the practice (Whitmarsh & Palmieri,

2011). However, it is unclear how much of consumer behavior is shaped by their environmental

preference. Whitmarsh & Palmieri (2011) used PEP to understand the relationship between

environmental attitudes, preferences, and the consumption of Scottish farmed fish. The paper

uses a survey method and studied the public attitude towards salmon. Six performance indicators

were used: three pertaining to socio-economic benefits and three pertaining to environmental

damage. Environmental preference is measured by a priority weight attached to minimizing the

environmental impacts of salmon farming. The result revealed that purchasing behavior is

influenced by environmental preferences, and provided a clear answer to the relationship

between aquaculture and PEP: an increased concern towards the environmental performance of

the salmon industry is associated with a lower propensity for buying salmon—a high PEP means

fewer salmon purchased (Whitmarsh & Palmieri, 2011).

The building and housing markets are mainly driven by consumer demands. It is

therefore important to understand the behaviors and preferences of the consumer. PEP is

observed to have an impact on the housing sector; however, its effect is complicated and it varies

depending on specific consumer interest groups. Chau et al. (2010) used surveys and choice

experiments to estimate the effect of environmental preference on building attributes in Hong

   

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Kong. More specifically, the study addressed how green residents and conventional residents

differ in their PEP. PEP was measured by an individual’s choices among different pairs of cards

with different environmental attributes, such as landscaping activities and indoor energy

consumption. The results showed that, overall, both green and conventional building residents

had strong environmental preferences and are willing to pay more for various aspects of

environmental performance (Chau et al., 2010). For example, residents were more willing to pay

for energy conservation than indoor air quality, noise level reduction, landscape area

enlargement, and water conservation. In addition, those who currently lived in a green building

were willing to pay significantly less than conventional residents for enlarging the landscape area

within the residential development (Chau et al., 2010). The complex relationship between PEP

and the housing market suggests the multifaceted nature of PEP, thus, specific studies need to be

conducted to study the effect of PEP on specific industry practices.

The multifaceted nature of PEP broadened its implication from industry profitability into

other areas, such as its effect on the human psychological well-being. It has been suggested the

PEP have an important implication on the psychological well-being of modern human lives

(Kaplan et al., 1972; Ulrich, 1983). These psychological healing benefits further make

environmental preference an intriguing subject to study. For example, the psychological

restoration effect, such as restoring a sense of mental peace, is an important reason why

individuals frequently display preferences towards the environment. It has been widely noted

that people tend to prefer natural over constructed environments: the level of self-reported

preferences for natural scenes are significantly higher than preferences for urban scenes (Kaplan

et al., 1972; Ulrich, 1983). Van den Berg et al. (2003) further validated the healing effect of

environmental preferences. In their study, PEP is measured by a beauty rating of different

   

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landscapes that represent a natural vs. simulated environment. The participants rated their moods

using a word list, before and after viewing videos clips of different landscapes. The result

showed that exposure to a natural environment is associated with positive changes in moods and

better performance on concentration tests than exposure to a manufactured environment (Van

den Berg et al., 2003). In a related study by Staats et al. (2003), it was found that fatigued

participants show a less favorable attitude toward walking in an urban environment than those

participants who were refreshed and energetic.

To summarize, PEP is an integrative research topic that requires knowledge from a few

different fields, such as psychology, economics, and management sciences. It is an area that is

not frequently discussed in the scientific literature due its complex nature. As demonstrated in

this section, PEP has a close relationship with modern society through its contribution towards

both economic and psychological well-being. It is for these reasons that PEP deserves serious

research attention.

2.2 Environmental Preferences vs. Attitudes: Differences, Characteristics and

Measurements

Before any further discussion on environmental preference can take place, it is important

to understand the distinction between attitudes and preferences. Attitudes and preferences are

two distinctive concepts that are often used interchangeably in behavioural science literature.

However, they are two distinct concepts with key fundamental differences. In the most simplistic

terms, preference can be viewed as a collection of attitudes, or the outcome of these attitudes

(Eagly & Chaiken, 1996; Lichtenstein & Slovic, 2006).

The concept of “attitude” originated from social psychology. It is defined as “a

psychological tendency that is expressed by evaluating a particular entity with some degree of

   

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favour or disfavour” (Eagly & Chaiken, 1996). The theoretical literature on attitudes is broad and

approaches to measuring attitudes range from simple approaches that use straightforward ranking

and rating questions, to more complex approaches that distinguish attitudes, perceptions, values,

and beliefs (Sudman & Bradburn, 1982; Tanur, 1992; Aday, 1996). On the other hand,

preferences are perceived as an individual’s collective attitude towards a set of objects; it is the

sum of the multiple attitudes. A preference is typically reflected in an explicit decision-making

process (Lichtenstein & Slovic, 2006). Preference refers to the set of assumptions related to

ordering alternatives according to different criteria, such as the degree of happiness, satisfaction,

gratification, enjoyment, or utility each alternative provides. It is a process which results in an

optimal “choice” (Lichtenstein & Slovic, 2006). The concept of preference is often defined as

individual utility; therefore, the strength of the preference is often assessed and documented

using monetary units (Tsetlin, 2009). Common methods used to measure preference include the

willingness to pay or to accept a certain good (Miller et al., 2011).

In the context of environmental science, preference is sometimes viewed as a function of

the evaluative and cognitive assessment of an environment’s psychological effect on the human

psyche (Craik, 1973). For example, Chiappori and Ekeland (2009) suggested that environmental

preference is a two-stage decision-making process. In the first stage, resources are allocated

among the aggregated group; in the second stage, individuals make environmental choices that

are contingent upon the first choice. Therefore, private preferences are unidentifiable without the

study of additional influencing factors which are integral parts of the decision making process

and important elements of PEP.

Environmental preferences can be stable or unstable (Craik, 1973). These preferences are

shaped by regular exposure to real-world discussions and policies on the class of public goods

   

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(Kahneman et al., 1999). For example, people occasionally show stable attitudes and preferences

towards broadly defined classes of public goods and services, such as holding relatively stable

views about the amount of money that should be spent on policies related to these classes of

goods and services (Kahneman et al., 1999). Regular exposure to the different classes of

environmental goods and services has a powerful and deterministic influence on an individual’s

preference towards these issues.

In areas where people do not have significant prior experience, preferences appear to be

unstable and constructed from a wide range of factors (Kahneman et al., 1999). These factors all

have influences on preferences. Consequently, the understanding of these factors becomes very

important when dealing with unstable preferences because they have deterministic on the

outcome of the preferences. To illustrate the importance of these influencing factors, Kahneman

and Tversky (1984) discussed the power of framing in altering an individual’s environmental

preference. “Framing” refers to the phenomenon where different choices are generated for the

same question if that question is worded differently. For example, the willingness to pay for

environmental goods can differ depending on if the goods are worded as a gain or a loss

(Kahneman and Tversky, 1984). People are particularly reluctant to give up an environmental

good that is in their possession, compared to a good that is yet to be acquired. This reluctance is

called the ‘endowment effect’ (Thaler, 1980).

The difference between Willingness to Pay (WTP) and Willingness to Accept (WTA) is

widely documented across the literature. For example, Kahneman et al. (1990) studied the

Willingness to Pay (WTP) and Willingness to Accept (WTA) of college students using tokens

and other incentives, such as coffee mugs. The results showed that students were less likely to

trade coffee mugs the longer these coffee mugs were in their possession. Horowitz and

   

15  

McConnell (2002) performed a meta-analysis and compared the WTP and WTA literature. The

result that showed that the difference between WTP and WTA remains statistically significant

after removing other effects, such as the income effects. Their study provided statistical evidence

for the endowment effect and the constructive nature of environmental preferences.

The ‘framing’ and ‘endowment’ effects both demonstrate and support the constructive

nature of environmental preference. Subsequently, many researchers adopt the constructive

approach to attitudes, treating environmental attitudes as being constructed in a process in which

individuals attempt to take account of their personal values that economize cognitive effort

(Irwin et al., 1993). In other words, people construct their preferences on the basis of their

expectations about how their preferences affect particular sets of people or things they value.

Irwin et al. (1993) conducted a study comparing the improvements in consumer goods, such as a

better camera, with improvements in air quality. The single stimulus response (where the person

is asked to agree or disagree with the statement) favoured improvements in consumer goods,

whereas a choice response (where the person is asked to choose between multiple options)

favoured improvement in air quality (Irwin et al., 1993). This findings of preference reversals

further provided strong evidence for the constructive nature of environmental preferences (Irwin

et al., 1993).

The literature that studies the influencing factors for environmental preferences can be

divided into two major streams: studies that focus on values, beliefs and other social

psychological factors and studies that focus on socio-demographic factors associated with

environmentalism. Individuals may hold several value orientations, and value orientations may

vary across individuals, social-structural groups, and culture (Stern et al., 1995). The

composition of theses value orientations affects beliefs about the consequences of attitude

   

16  

objects (Stern et al., 1995). For example, a strong value orientation may lead an individual to

exercise selective attention to information regarding the consequences of a particularly valued

object (Stern et al., 1995). An environmental value may serve as a social amplifier for valued

information, influencing an individual’s preference by leading people to accept information that

is consistent with their values. For example, someone who values economic development above

other social goals may be especially likely to accept information suggesting that environmental

protection will compromise economic goals. Someone who values nature may accept

information that supports a belief that any environmental change is a dire threat to nature (Stern

et al., 1995). As the result, environmental preferences are often consistently linked to certain

human values (Stern et al., 1995).

Stern et al. (1994) summarized three important values that underlie the bases of

environmental preferences: (1) egoistic, (2) social-altruistic, and (3) biosphere value orientations.

Egoistic values predispose people to protect aspects of the environment that affect them

personally, or to oppose protection of the environment if the personal costs are perceived high

(Stern et al., 1994). Egoistic values prevent individuals from incorporating considerations of

environmental justice and environmental protection as a public goal (Stern et al., 1994).

However, egoists who believe environmental changes can threaten them personally will display

pro-environmental behaviors and high environmental preferences (Stern et al., 1994). Altruistic

values install individuals with a sense of obligation towards the environment. Individuals act on

the obligation when they believe adverse consequences are likely to occur to others (i.e.,

awareness of negative environmental consequences) and that they personally can prevent or

ameliorate these consequences (Stern et al., 1994). Examples of such behaviours include

purchase of lead-free gas (Heberlein & Black, 1976), energy conservation (Black et al., 1985)

   

17  

and recycling (Hopper & Nielson, 1991). Biospheric values are prominent in the thinking of

many ecologists and environmentalists. This value orientation leads individuals to judge

preferences on the basis of costs to ecosystems and the biosphere, rather than, on human utility.

In an empirical study by Stern et al. (1993), the authors hypothesized that environmental

preferences can be activated not only by values, but also attitudes towards these values. People

commit themselves to action when pro-environmental personal norms are activated by beliefs

that an environmental condition has adverse consequences for the self (egoistic value), and other

ecological beings (biospheric orientation), and by ascription responsibility to themselves to

prevent these consequences (Stern et al., 1993). The study included three measures of

environmental concerns, four environmental behaviours, and an assessment of willingness to pay

income taxes for the environment. The study results supported the idea that willingness to pay is

related to the three value orientations, as well as environmental attitudes. The study revealed and

validated a connection between value-belief-attitude and preference relationships; the differences

in preferences can be traced back to differences in beliefs and attitudes regarding broad issues

(Stern et al., 1993).

While values and attitudes all play important roles in the determination of preferences,

contextual information is another important factor to consider when studying environmental

preferences. Individuals often engage in unconscious reviews of the immediate effects of a

decision when forming a preference. This review process is called the multi-attribute utility

calculation, a theory useful when studying environmental preferences that are not stable

(Gregory et al., 1993; Stern et al., 1993).

The multi-attribute utility theory was proposed by Gregory et al. (1993) to explain

environmental preferences. It emphasizes the need to pay closer attention to the multi-

   

18  

dimensional nature of environmental values and the constructive nature of human preferences.

The theory suggests that if people can make choices based on their preferences, and if these

choices satisfy a few key axioms, one can assign monetary utility to the environmental good(s)

(Gregory et al., 1993). The theory is relevant to the current study because the private

environmental preference is measured using the willingness to pay for pollution reduction. In

order for the current study to accurately reflect the relationship between the different variables

and PEP, the theory suggests that the following criterions be met:

1) Accommodate the multidimensionality of environmental preferences. The

multidimensionality of environmental goods is symbolized by multiple uses. The complexity of

environmental values necessitates that environmental preference studies be sensitive to the

diversity of values. Each study should properly define the aspect of EP it is measuring and make

a clear distinction between the different preferences in the literature.

2) Minimize response refusals. In survey questionnaires, participants often report that

they care about the environment, yet they would not pay for environmental goods and services.

The discrepancy between the stated environmental preference and the willingness to pay often

causes inaccuracy in the understanding of preferences. A good survey design should not include

items that can cause these discrepancies. One such survey design technique is to avoid the use of

monetary values on environmental goods.

3) Exclude irrelevancies. The predictive value of models is always increased when

additional independent variables are added. As the result, it is often hard to decide when to stop

adding additional variables into the model. Environmental preference is a complex construct;

therefore, it is especially difficult to discern variables that are less significant to the model.

   

19  

However, a good model includes only factors that are relevant to the definition of the

environmental preferences defined in the study. Parsimony can introduce clarity into the

relationship between various variables.

4) Separate facts from values. Survey measures require respondents to have a knowledge

of environmental goods and services, as well as knowledge of their preferences regarding these

goods and services. However, studies can become problematic if the level of scientific

knowledge required is too high. A scientifically complex knowledge of environmental goods and

services can be barriers for respondents to express their preferences. Therefore, environmental

preference studies should avoid using scientific jargon; and instead, focus on the basics.

2.3 The Use of the World Value Survey (WVS) in Private Environmental Preference (PEP) Studies

The previous section provided important background information on the characteristics of

environmental preferences and attitudes, as well as the criteria for a survey design that is needed

to sufficiently conduct an unbiased study of PEP. The World Value Survey (WVS) is an

excellent survey that can be used to study preferences because it meets all of the criteria outlined

by the multi-attribution utility theory. As the result of this match, WVS has been chosen as the

data source for the current study. WVS is a highly robust and comprehensive survey with high

geographical, content and temporal coverage. It documents human attitudes and beliefs across

different socio-eco-political domains, and how they change over time. The survey contains a

total of 255 questions, covering topics such as: support for democracy, tolerance of foreigners

and ethnic minorities, support for gender equality, the role of religion and changing levels of

religiosity, the impact of globalization, attitudes toward the environment, work, family, politics,

national identity, culture, diversity, insecurity, and subjective well-being (WVS, 2012). WVS

   

20  

surveys have been conducted in almost 100 countries, making it the only source of empirical data

on attitudes covering a majority of the world’s population (nearly 90%) (WVS, 2012). Its broad

spectrum of attitudes and preferences across various socio-eco-political domains makes WVS

one of the most ideal choice to study the complex nature of PEP.

Given the survey comprehensiveness, many other researchers have used the WVS to

understand the relationship between attitudinal factors and environmental preferences across

different geographical areas. The relationships between these attitudinal domains and

environmental preferences are often examined using quantitative models to shed light on the

complex variable interactions. Furthermore, WVS surveys have been used to assess PEP across

multiple levels, from individual to international. Each unit of observation reveals different levels

of detail; therefore, investigations of environmental preferences are often conducted at multiple

levels in order to arrive at a more complete understanding. Lu and Zhang (2010) used the WVS

to study the value of private environmental preferences at the individual level. They asked the

specific question: what is the necessary increase in income to compensate for a decline in

environmental quality? In their study, an individual's happiness is used as a dependent variable

for income and environmental quality. Econometric models and multivariate regression methods

are used to explain the happiness derived from a clean environment. The results indicated that in

order to maintain the same level of happiness, approximately 11,000 Yuan is needed to

compensate people for a marginal change in environmental equality (Lu & Zhang, 2012).

Pollution reduction and the protection of the environment have been viewed as projects that do

not generate net economic revenue for its actors. This study highlighted the incentives for

pollution reduction by pointing out its ability to bring utility to the public.

   

21  

Industrial pollution is both a national and an international concern. Understanding the

relationship between individual environmental preferences and economic incentives at the local

level is important to introduce small-scale policy changes; however, these regional efforts are not

enough to introduce large-scale improvement on the national or international level. Torgler and

García-Valiñas (2007) broadened their research scope to the national level and examined

environmental preference for the citizens of Spain. The research team empirically investigated

the determinants of individuals’ attitudes towards preventing environmental damage. Using the

WVS and the European Value Survey, they investigated individual environmental preferences

across the periods of 1990, 1995 and 2000. In their study, environmental preference is measured

by a single question—‘I would agree to an increase in taxes if the extra money were used to

prevent environmental damage’. Probit models were used to understand the relationship between

a wide spectrum of independent variables. Overall, the empirical results showed that increasing

political awareness and discussion help to increase an individual’s preference towards the

environment. A political climate with high levels of social capital and trust provides a good

foundation to encourage environmental preferences. The team recommended that international

agencies, governments, and organizations invest in social capital pay-off schemes, which are

policies that encourage social interactions between different interest groups, as a way to

encourage pollution reduction initiatives in Spain (Torgler & García-Valiñas, 2007).

More recently, the use of WVS has become even more sophisticated. Researchers are

gradually expanding their models to combine multiple levels of analysis into a single study when

studying environmental preference. The resourceful use of the WVS has advanced the

understanding of EP tremendously. Using multiply level analysis, Franzen and Meyer (2010)

studied EP on both individual and international levels across 26 countries. Data from the WVS,

   

22  

the International Social Survey Programme, and the Health-of-the-Planet (HOP) were used to

study the willingness to pay for environmental protection and attitudes towards human-

environment interaction. The results showed that within-country differences in PEP are much

larger (85 per cent of the total variance) than between-country differences (15 per cent of the

total variance). The wealth predictor explains most of the variations among the different

countries (Franzen & Meyer, 2010). However, an individual’s preference towards the

environment does not solely depend on the national income. Such preferences also depend on an

individual’s socio-demographic characteristics (Franzen & Meyer, 2010). For example,

individuals who live in high-income households have a higher concern for the environment than

individuals in low-income households (Franzen & Meyer, 2010). Franzen and Meyer’s

observation confirms the prosperity assumption, which states that an individual’s environmental

preference, or willingness to pay for environmental quality, increases with income.

Inglehart (1995) is one of the pioneers using the WVS to study environmental attitudes

and preferences. He empirically examined environmental preferences across 43 countries

between 1990 and 1993. Ingelhart’s goal was to determine why given publics are sufficiently

concerned about environmental problems that they are willing to make financial sacrifices, as

well as undertaking other actions in order to help protect the environment. Two findings emerged

from Inglehart’s study. First, public support for environmental protection is shaped by subjective

culture factors. The public in certain cultural regions tend to rank support for environmental

protection relatively high. People with post-materialist values, which value the quality of life

over economic and physical security, are much more apt to give high priority to protecting the

environment and members of certain environmental groups (Inglehart, 1995). Second, mass

support for environmental protection tends to be greatest in countries that have relatively severe

   

23  

environmental problems (i.e., air pollution, water pollution) (Inglehart, 1995). The author coined

the term “the challenge-response model”, which is the idea that people are concerned about the

environment because they currently face problems. The model is supported because the citizens

in countries with severe pollution do tend to be more willing to make financial sacrifices in order

to protect the environment.

Additional influencing factors for PEP have been proposed and studied. These factors

come from different domains; they can be attitudes, values, socio-economical, and/or

psychological factors. These studies used data from a variety of sources (that are not limited to

the WVS). An examination of these factors is useful in expanding the horizon of the PEP

literature. The following sections will review the additional influencing factors for PEP.

2.4 Common Influencing Factors for Private Environmental Preference (PEP)

PEP is influenced by a wide range of factors. The influencing factors vary depending on

the specific context that the study is engaged in. Marquart-Pyatt (2012) conducted a

comprehensive study on PEP using the International Social Survey Program (ISSP) environment

(2000) dataset, which provides information from over 30,000 individuals in 27 countries. She

applied multi-level models: individual level and country-level are used to empirically analyze

concerns about the environment. The study used factor analysis techniques and identified three

dependent variables: environmental threat awareness, environmental efficacy, and willingness to

pay. Each factor is measured by five indicator questions. Twelve independent variables — two

individual level and ten national level — are proposed to explain the dependent variables. The

individual independent variables are income and education. The national variables include: GDP,

industrialization level, liberal democracy attitudes, environmental NGO membership, ecological

footprints, ecosystem wellbeing, air pollution, sulfur dioxide and carbon dioxide emissions, and

   

24  

water quality. The results show that at the individual level, education and age have influences on

the PEP (Marquart-Pyatt, 2012). At a national level, variables like national wealth and political

features have a moderate influence on PEP (Marquart-Pyatt, 2012). However, environmental

conditions have a more pronounced influence on PEP (Marquart-Pyatt, 2012). The study stresses

the importance of the environmental concern’s dimensionality for future cross-national

scholarship.

Gender is found to influence charitable spending in some cases (Eckel & Grossman, 2001;

Torgler, 2006). For example, Schahn & Holzer (1990) found that women showed more concern

towards the environment in areas that related to household behavior, whereas men had a better

understanding of the environmental problems. This finding suggests that the effect of gender on

environmental preference is domain specific. Whether gender has a positive, negative, or no

effect on environmental preference depends on the specific context that the preference is directed

towards (Schahn & Holzer, 1990). However, not all studies supports the distinct effect gender

has on environmental preference. Brown and Taylor (2000) explored the effect of gender on

public goods contributions. They subjected one group of respondents to a hypothetical treatment

where no actual payments are expected, and another group of respondents to a real treatment

where actual payment is expected. Results indicate that men are three times more biased than

women in the hypothetical treatment. From this study, Brown and Taylor concluded that some

influence gender has can be contributed to this response bias, rather than actual influence (Brown

& Taylor, 2000).

Marital status has also been documented to exert an influence on environmental

preference. Married people tend to be more compliant towards environmental pollution reduction

   

25  

actions since they are more constrained by social networks and community responsibility (Tittle,

1980).

Income has been widely studied in the literature and a positive relationship is generally

found. The financial situation of the individual has an positive influence on PEP. Veisten et al.

(2004) showed that unemployed people had lower preferences for environmental protection

policies. The protection of environmental goods is not just a public good, but it can be viewed as

a normal good.5. Therefore, the demand for environmental quality should increase with income

(Franzen, 2003).

Education is another popular variable in the literature. There is a tendency in the

literature to present a positive relationship between formal education levels and environmental

preferences (Witzke and Urfei, 2001; Israel and Levinson, 2004; and Veisten et al., 2004).

Informational education, such as one’s knowledge towards the environment, also matters; thus,

environmentally aware citizens have stronger EP (Carlsson & Johansson-Stenman, 2000; Hidano

et al., 2005).

Another set of factors that have been attracting research attention are political attitudes

and involvement. It has been shown that left-wing party voters have higher preferences towards

the environment, whereas right-wing party voters have lower preferences towards the

environment in the face of economic development (Witzke and Urfei, 2001). Last, but not least,

a few studies have considered participation in voluntary environmental organizations (Whitehead,

1991; Blomquist & Whitehead, 1998; Carlsson & Johansson-Stenman, 2000). Usually,

individuals who participate actively in environmental institutions have higher preferences for

                                                                                                                         5  The  consumptions  of  normal  goods  always  increase  with  income  (Alarie,  Y.  &  Bronsard,  1990).  

   

26  

environmental protection. There are many additional factors that have been proposed in the

studies of PEP. Some of these factors are summarized in Table 1.1.

Table 1.1. Factors in the existing literature shown to influence Private Environmental Preferences (PEP). Papers Influencing factors for PEP PEP is measured by: Zeidner & Shechter, 1988

Degree of anger and anxiety aroused by air pollution, perceived degree of pollution severity, propensity to pay towards pollution abatement, methods of coping with air pollution, age, perceptions of tax inadequacy, and personality variables

Coping mechanism towards pollution

Stern, 1993 Gender, self-interests, egoism, concerns for other species and concerns for others

Environmental values

Benerjee & McKeage, 1994

Condition of existing environment. Green products, values (materialism)

Guagnano et al., 1994

Ascription of responsibility, awareness of consequences, perceived personal costs, income

WTP for environmental tax

McConnell, 1997 Income Demand for clean air

Jorgensen & Syme, 2000

Household income, price, attitude towards paying

WTP for storm water quality

Laroche et al., 2001

Convenience, demographic factors (i.e., age, gender, income, family status, etc.), attitudes

WTP for green products

Hokby & Soderqvist, 2003

Knowledge about existing environmental conditions, views towards the types of ecosystem services, income

WTP for environmental improvements

Torgler & Garcia-Valiñas, 2008

Age, gender, number of children Willingness to pay for pollution reduction

Menz & Welsch, 2010

Age willingness to pay for air quality

Chang & Hu, 2011 Financial subsidies from central vs. local government

Environmental investments

Garrod et al., 2012 Types of benefits provided by the environmental goods

Choices between the different landscapes

   

27  

Walton, 2012 Pre-existing environmental knowledge, social attitudes

Choice between development and wilderness preservation

 

 

2.5 Private Environmental Preferences (PEP) towards Pollution Reduction

Given the usefulness of PEP in various contexts, multiple studies have used PEP to

examine pollution reduction projects, such as the motivation behind public support for different

policy programs and the willingness to pay for carbon reduction schemes. Akter and Bennette

(2009) studied the WTP of different carbon pollution reduction schemes for 600 Australian

households. The study aimed to capture the preference for the Carbon Pollution Reduction

Scheme (CPRS), which is an emission trading scheme proposed by the Australian government.

The group used a series of rating survey questions to map out environmental preferences. The

WTP for the new carbon scheme is found to be influenced by four attitudes and beliefs: (1) the

belief about a future temperature rise; (2) the perception of policy failure; (3) the possibility of

reaching global agreement; and (4) the level of exposure to the media. The household has a

higher WTP if they believe that: a future temperature rise will be significant; the probability of a

carbon scheme failure is low; and, the scheme can generate international support. In relation to

exposure to media, citizens who watched environmental documentaries are more likely to exhibit

PEP (Akter & Bennette, 2009).

PEP is heavily influenced by one’s attitude and beliefs towards the environment—what

an individual is willing to do to reduce the level of carbon pollution partly depends on his or her

own perception of the environment. Viscusi & Zeckhauser (2006) studied the relationship

between the expected scale of unmitigated climate change and respondents’ WTP for mitigation

of climate change. The results were generally positive and linear. The WTP varies substantially

   

28  

depending on a respondent's perceptions of the impact of climate change. The importance of

perception, belief and attitudes towards the environment is highlighted in another study by

Berrens et al. (2004). The group studied the household WTP for the ratification of the Kyoto

Protocol, the international treaty on carbon pollution reduction. It was found that WTP is

positively related to a range of attitude and belief factors, such as the effort used to acquire

relevant information, political ideology, and the perceptions of the effectiveness of the Protocol

(Berrens et al., 2004).

Another recent study revealed the visible relationship that PEP has on pollution reduction

through its moderating effect on climate change policies (Millard-Ball, 2012). More than 600

local governments in the US have climate action plans to reduce the level of carbon emissions,

but it is unclear whether these plans have any causal effects on emission levels (Millard-Ball,

2012). Emission reduction planning can reduce the information barrier through the

communication of local knowledge about the environment, helping to shape the environmental

preferences of residents and developers. Millard-Ball (2012) took a quantitative approach and

examined the relationship between people's preferences and policy effectiveness. EP is measured

using eight policy outputs or intermediate outcome variables (e.g., the presence of mandatory

green building standards or the number of waste diversion programs). Using probit models,

Millard-Ball finds that a citizen's environmental preference has a substantial influence on the

effectiveness of carbon emission reduction programs (Millard-Ball, 2012). The numbers of

climate plans do play a causal role in implementing greenhouse reduction, after the effect of EP

is controlled.

After reviewing the existing PEP literatures on pollution reduction, it becomes apparent

that the current study will be one of the first few studies to employ a multi-level unit of

   

29  

observation at both the national and international level. Unlike Marquart-Pyatt (2012), where the

environmental preference is compared across 27 countries, the current study will study PEP in

only four countries: Canada, China, India and USA. These four countries are some of the largest

air emission polluters across the globe. The focus on these four countries can address the

problem of global pollution more effectively because a more specific interpretation of the study

results can be concluded when a fewer numbers of countries is studied. In addition, the current

study will propose and include a larger numbers of independent variables in its model. The

particular combination of these influencing factors will be unique across all PEP literature.

Torgler and García-Valiñas (2007) used one indicator variable from the WVS to measure PEP,

but I will use multiple indicator variables to measure PEP. Furthermore, while the majority of

these studies on environmental preferences have focused on specific and limited environmental

goods or areas (Whitehead, 1991; Stevens et al., 1994; Danielson et al., 1995; Cameron & Englin,

1997; Blomquist & Whitehead, 1998; Carlsson & Johansson-Stenman, 2000; Bulte et al., 2005),

my study of PEP on pollution will look at general attitudes towards pollution initiatives, which

will encompass many specific pollutants, such as carbon.  

   

30  

CHAPTER 3

MODEL OF PRIVATE ENVIRONMENTAL PREFERENCES TOWARDS POLLUTION

REDUCTION

The main purpose of the model is to understand the relationship between one dependent

variable—Private Environmental Preference (PEP) towards pollution reduction—and its

influencing factors. PEP towards pollution reduction is defined as the willingness to make

personal financial sacrifices for general pollution reduction, and it is influenced by a wide range

of factors. The current model proposes 12 influencing factors, which are also referred to as the

independent factors. Some of these factors have been discussed in the existing PEP literature,

while others are novel factors that have not been previously investigated. However, the particular

combination of the influencing factors is unique in the existing PEP literature. The current model

will re-confirm (or disconfirm) the relationship between some of these common variables, as

well as establish relationships between novel factors and PEP.

The proposed independent factors can be organized into three categories, according to

their sources of influences. The three categories are: 1) the awareness of environmental problems,

2) personal financial capabilities, and 3) external and social attitudes.

3.1 Awareness of Environmental Problems

The awareness of environmental problems collectively refers to any factors that could

potentially affect an individual’s knowledge of the negative conditions of the environment.

Environmental awareness has been widely cited as a prominent factor influencing environmental

preferences (Chan, 1999; Amyx et al., 1996; Vining & Ebreo, 1990; Laroche et al., 1996,

Carlsson & Johansson-Stenman, 2000; and Hidano et al., 2005), and it is consistently measured

to be positively correlated with environmental preference—the more one knows about the

   

31  

environment, the more likely an individual will prefer the environment (Chan, 1999; Amyx et al.,

1996; Vining & Ebreo, 1990; Laroche et al., 1996). The awareness of an environmental problem

is a form of environmental awareness; therefore, it is expected to have a prominent impact on

PEP. In the current study, environmental awareness is represented by three factors: membership

in environmental organizations, acknowledgement of local environmental problems, and

acknowledgement of global environmental problems.

3.1.1 Acknowledgement of Global Environmental Problems

Environmental problems and deterioration have been documented across the globe. Some

global problems include, but are not limited to, climate change, carbon pollution and loss of

biodiversity. These problems can severely reduce the quality of life in some parts of the world.

According to the challenge-response model, current environmental problems can increase an

individual’s preference towards the environment. Global environmental deterioration is a serious

problem; this sense of global urgency can lead to a change in individual PEP. For example,

Viscusi & Zeckhauser (2006) described a positive relationship between a participant’s

acknowledgement about the negative impact of climate change, and their WTP to mitigate

climate change: a higher level of acknowledgement about the negative impact of global climate

change is associated with a higher WTP for mitigating climate change. Therefore, the level of

individual acknowledgement of global environmental problems has a direct effect on PEP.

3.1.2 Acknowledgement of Local Environmental Problems

Environmental problems occur on different scales. They can be global or local problems.

The impact of global problems is experienced by everyone living on the same planet, whereas

the impact of local problems is only experienced by a sub-portion of the human population. For

example, the pollution of a local lake, such as the Lake Ontario, will impact the residents living

   

32  

in close proximity, such as Torontonians, very differently than people living in India. Therefore,

the effect of local problems is unique to the individual. The difference in the specificity of the

impact has influences on the environmental preferences of the individual; while the

acknowledgement of local environmental problems has its own effect on PEP that is different

from the effect acknowledgement of global environmental problems on PEP. Therefore, the

acknowledgement of local environmental problems has direct effect on PEP.

3.1.3 Environmental Organization Membership

Environmental organizations are ‘hotspots’ for the exchange of environmental

information. The various social groups that individuals belong to serve as information channels

that can transport the group’s associated beliefs and knowledge onto the individuals in the group

(Dearden, 1984). The members of the same organizations have direct access to environmental

updates and environmental problems as well as engaging in information exchange. Subsequently,

the organization membership has direct influence on one’s knowledge on the existing local and

global environmental problems. In addition, the types of acknowledgment that an individual has

towards the environment can group like-minded individuals together. The information

availability and frequent exposure further helps foster a similar preference towards the

environment. Therefore, an individual’s membership in an environmental group also has a direct

influence on PEP. Membership in an environmental organization has been found to have an

influence on PEP in the literature. In general, organizational involvements tend to help foster

higher levels of PEP in individuals (Whitehead, 1991; Blomquist and Whitehead, 1998; Carlsson

and Johansson-Stenman, 2000).

   

33  

3.2 Personal capabilities

The Expectancy Theory outlines three different motivational elements that influence the

individual decision and preference making process: the effort needed to perform the action, the

relevant reward, and the desirability of the outcome (Feather, 1982). The first motivational

element — the effort needed to perform the action — suggests that individual preference is

dependent upon how capable that individual is at performing the action necessary to achieve a

particular goal. Applying the theory in the context of PEP, the willingness to pay for pollution

reduction is influenced by the financial situation of the individual. The prevention and mitigation

of environmental pollution can be a financially demanding commitment; therefore, the

individual’s willingness to spend on the environment depends heavily on his or her financial

availability and capacity.

However, the financial capacities of the individuals do not directly depend on the income

level of the individuals. The actions that individuals can perform with their finances depend on

the financial habits of those individuals. For example, Coleman (1983) long ago pointed out that

the effect of income on financial habits is, in fact, moderated by other factors such as social class

and lifestyle. Different groups of the population have different spending tendencies. To reflect

his findings, the effect of income on PEP is moderated by two additional factors in the current

study: occupational characteristics and work ethic.

3.2.1 Income

Personal financial resources are often finite. Individuals often have to allocate limited

resources among competing needs. If an individual chooses to spend extra resources on one

option, he or she will have less to spend on other options. Income level is one indicator for

personal financial capacity. The higher the income level, the more an individual can afford to

   

34  

spend on different goals, such as pollution reduction. It has been shown that high-income

households have a higher PEP (Franzen & Meyer, 2010), whereas unemployed individuals have

a lower PEP (Veisten et al., 2004). The affordability of the environmental preference (as a result

of a higher income level) encourages a preference towards the environment and the individual’s

income level is expected to have a positive relationship with PEP. However, the income level is

often a product of other factors, such as the individual’s work ethics and occupations. Therefore,

the effect of income on PEP is channeled through these other factors, rather than directly. Two

of the most important channeling factors are: occupational characteristics and work ethics.

3.2.2 Occupational Characteristics

Different income levels require different types of work input. For example, high-paying

positions often require a higher level of intellectual creativity compared to lower-paying

positions (Granovetter, 1981). In the current model, occupational characteristics refer to white-

collar and blue-collar occupational characteristics, respectively. White-collar characteristics are

creative, cognitive, and independent, as opposed to routine, manual, and dependent, which are

characteristics of blue-collar worker. The white-collar workers participate in creative and

cognitive work functions where they are being exposed to a large amount of information. The

high level of information flow makes these individuals global thinkers, possessing better abilities

to grasp the complexities, nuances and connections between different objects and events. For

example, See et al. (2009) found that individuals with a higher need for cognition prefer

problems with increased complexity. Environmental pollution prevention and reduction are

issues with complex socio-political and economic implications. Therefore, there are differences

in the ability of white-collar workers and blue-collar workers to understand the need to

participate in the protection of public environmental goods. The occupational characteristics

   

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have a direct effect on PEP due the difference in their ability to understand the implication of

these problems.

3.2.3 Work Ethics

Work ethics refer to the value that individuals place on their work, as well as how an

individual values work. Environmental integrity is a global responsibility for all individuals.

Depending on how an individual values responsibilities and commitments, he or she may or may

not include global environmental integrity as part of his or her personal responsibility. Therefore,

one’s work ethics has a direct influence on one’s PEP. An individual with a strong work ethics is

more likely to see global responsibilities as his or her personal responsibility, which will

translate to a higher PEP. The relationship between work ethic and environmental preference is

not studied as extensively as is the relationship between general income levels. However, some

results revealed that a higher level of PEP is associated with a higher level of organizational

commitment, which in turn contributes to having a strong work ethics (Chun, 2009).

3.3 External and Social Attitudes

The third source of influence for PEP comes from an individual’s attitude towards the

external and social atmospheres. Multi-attribute utility theory states that people make

environmental decisions that satisfy different axioms, specifically based on whether or not these

choices are congruent with other attitudes in the individual’s personal situation and contexts

(Gregory et al., 1993). For example, if an individual adopts a selfish attitude towards life and the

world, the responsibility for public goods and services will not be congruent with this world view.

The incongruence between the different attitudes will have an influence on his or her

environmental preference. In the current model, the external and social attitudes include five

   

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factors: a Machiavellian attitude toward money, educational level, marital status, democratic

attitudes, and interpersonal trust.

3.3.1 Machiavellianism Attitudes towards Money

Machiavellianism refers to an attitude that accepts dishonest and deceitful acts for

personal gain (Machiavelli, 1770). An individual high in Machiavellianism often engages in self-

serving acts at the expenses of others, and will have little hesitation accepting money that they do

not deserve (Geis & Moon, 1981). The willingness to spend private income on environmental

pollution reduction reflects an opposite mental process — it requires a personal sacrifice for a

return that is not strictly personal. One of the most important reasons w