LAUSR

Abstract A viable green alternative to petroleum-based jet fuel is urgently needed in order for the aviation industry to meet its environmental targets. This study elicited Swedish business organisations’ willingness to pay (WTP) a price premium for flights using bio-fuel blends using a contingent valuation approach. It also examined whether certain company characteristics had an effect on the stated WTP. It was found that the overall mean price premium amounted to 11.9 percent of the base price of flights, which is not high enough to cover the actual costs to airlines of using a 50/50 fuel blend. Only one-third of the respondents reported sufficiently high WTP to cover the associated costs of using bio jet fuel at current price levels. Furthermore, organisations that encouraged employees to choose the least expensive ticket at all times had lower WTP than organisations with no explicit travel policy. Accordingly, use of least-cost travel policies would prevent commercialisation of bio jet fuel. Moreover, voluntary actions by organisations in the form of price premiums on green flights could not create Swedish market demand for bio jet fuel. Development of other policy instruments is therefore vital to establish long-term market predictability and demand.