The seminar is based on a paper co-authored by Anna Cretì – Paris Dauphine and Ecole Polytechnique, Marc Joëts – Ipag Business School and EconomiX Cnrs and Federico Pontoni – IEFE, Università Bocconi.

In the coming years, France will renew hydroelectric concessions through beauty contests. Bidders will present offers for technical and environmental improvements, as well as a revenue sharing percentage for local authorities. This framework generates a potential trade-off between revenue sharing and environmental improvement, which we have investigated in this paper using a discrete choice experiment (DCE).

The experiment has been conducted on a representative sample living in the Aspe valley, one catchment where concessions are active for a total of almost 100 MW. Our DCE is innovative because we package the revenue sharing as an immediate rebate on electricity bills while maintaining a willingness to pay (WTP) approach. Respondents could choose between higher rebates with lower ecosystem improvements or lower (or no) rebate with higher ecosystem improvements. From a methodological standpoint, we use (i) the standard approach to preference space, in which distributions of the coefficients are estimated and WTP is derived from the ratio of two coefficients; and (ii) the WTP space approach, in which we specify the distribution of WTP directly at the estimation stage.

According to the experiment results, the highest compensating surplus is above € 1,225 per household per year. Individual marginal WTP for a satisfactory fish stock reaches 277 €/year, which is three times the maximum rebate offered. Finally, all environmental attributes are significant and worth a monetary effort. We then argue that hydroelectric concession bidders should give clear priority to environmental factors.

This seminar has been jointly organized by FEEM and IEFE, Bocconi University.