How can you estimate consumer demand and willingness-to-pay for low-carbon alternatives?
The livestock industry is a significant contributor to anthropocentric greenhouse gas emissions (GHG) driven in large part by methane gas (CH4) emissions from cattle and other ruminants. An array of feed additives, including lemongrass, citrus extracts, and certain seaweeds, can reduce methane emissions over a cow’s lifetime. In 2020, h2\ worked alongside a U.S.-based start-up to estimate the end-consumer Willingness to Pay (WTP) for methane-reduced beef in the United States and found that, contrary to common perception in industry, demand is sufficient for an economically viable transition towards a more environmentally friendly rearing of cattle.
We performed a clustering model that allowed us to identify a distinct group of American beef consumers that represent approximately 27.6 million U.S. households that are interested in low-carbon beef alternatives. By leveraging the power of conjoint analysis, we estimated their annual marginal willingness to pay for ground beef with 25% lower carbon emissions at approximately $290. Willingness to pay for an even greater carbon emissions reduction is also identified. Given the cost structure of producing some of the leading methane-reducing cattle feed additives, we concluded that demand is sufficient for an economically viable transition towards a more environmentally friendly rearing of cattle in the U.S. This holds true across different methane-reduction thresholds (from 25% to 90% reduction), which means that several different approaches could have market viability, including more novel and higher-efficacy, methane-reducing practices such as incorporating a particular genus of seaweed (Asparagopsis Armata or Asparagopsis Taxiformis) into the cattle’s diet