Consumers’ Willingness to Pay for Deconstructed Recovered and Recycled Materials for Reuse
By: Joe Garmondyu Greaves, MSU Humphrey Fellow* from Liberia doing a field internship with the CCED and Domicology Team
*The Humphrey Fellowship Program provides ten months of non-degree academic study and related professional experiences in the United States. Humphrey Fellows are selected based on their potential for leadership and their commitment to public service in either the public or the private sector
1. Introduction
1.1 Background of the Problem Statement
Municipal officials and economic development practitioners often want to encourage the expansion of deconstruction in their communities but do not know where to start. Deconstruction has so many direct and indirect benefits to buyers, households, homeowners, sellers, suppliers, or construction industries which could directly or indirectly affect communities that come with social, economic and environmental issues and benefits (see Delta Institute, 2018). Despite these benefits, the question that needs investigating is are buyers/homeowners willing to pay to reuse recyclable and recovered building materials from deconstruction? An examination of buyers' perspectives on material reuse choices based on the sorts of building designs (i.e., 1,600 sq. ft., conventional design, and revised tiny home) through deconstruction appears to be a viable approach to reduce carbon emissions in the United States because it demonstrates that it can be solved by taking into account the human utility component as well as socioeconomic and environmental factors. Carbon emissions are widely acknowledged as the primary driver of global warming; carbon emissions from the construction industry are a significant contributor to climate change, vastly outnumbering those from the transportation and industrial sectors (International Mass Timber Report, 2021).
Carbon emission reduction focuses solely on source reduction while ignoring subsequent household behavior, such as reactions and the willingness to pay for material reusability as a carbon reduction effort, including reparability and recyclability, as well as value chain addition decisions. Policy taking into account carbon emissions reduction needs to exploit a satisfactory analysis of household willingness to pay for materials reuse in order to reduce carbon emissions and support a sustainable policy that can provide a comprehensive framework that includes the choice to consume old buildings materials to be reused from residential houses directed at production, construction, and end of life in carbon emission reduction.
The importance of finding sustainable best practices of carbon emission reduction potentially has long been a matter of concern to find possible solutions that will evaluate it holistically and systematically. However, the practices and the decision through the willingness to pay mechanism in considering material reuse have not been investigated over the years, especially in settings where the types of structures that are used are concrete, mixed, steel, or others accounting for a vast majority of the carbon emission. First, when humans who are the primary target in policy formation are not at the epic of the decision-making process in the deconstruction activities, it is difficult to fully understand the carbon benefits derived from material reuse or salvaged. Today’s research methods and approaches are becoming much more critical, technical, and logical. Challenges, when ignored, could potentially render policymaking unjustifiable, especially when there is a miss-match process. Second, the one-sided methods, such as the purely used environmental approaches of Process-Based Life-Cycle Assessment (LCA), could greatly limit the understanding of carbon emission reduction effectiveness in the context of social science and related fields.
The question of how a society should deal with carbon emission reduction has become a major policy issue. A study in New Zealand successfully engages local communities and designers to produce 400 new products, using recovered materials, and exhibit them locally to harvest materials from a residential house. This study concluded that there is a huge prospect regarding resource recovery, emission reduction, employment, and small business opportunities using deconstruction of the old house. Under a favorable market condition and with appropriate support from local communities and authorities, however, deconstruction could contribute significantly to resource conservation and environmental protection despite its requirement of labor-intensive efforts (Zaman et al., 2018).
2. Objectives
The overarching objective of this study is to understand whether consumers/buyers are willing to pay for recyclable/recovered building materials from deconstruction in their homes. Further, this study will examine the implications of policies that encourage buyers' decisions to use recyclable/recovered building materials through the deconstruction processes in support of carbon emission reductions. To achieve this, we will employ micro-level surveys, interviews, and desk reviews designed to collect the responses of targeted participants of how the willingness to pay for recovered materials as opposed to virgin raw materials can be a genuine approach in support of carbon emission reduction, considering household perspectives. That is, we will quantify the buyers’ willingness to pay to reuse materials by looking at potential economic, social, and environmental benefits.
2.1.1 Specific objectives
Specific goals of the study will be to
i. Exmamine the buyers’ choice-making behavior function when considering the consumption decision surrounding recovered and recycled materials.
ii. Estimate the price/cost effects of reused materials on the willingness responses of participants and compute the average partial effects.
iii. Examine if homeowners demographic characteristics have a signinficant impact on their willingness to pay responses, and compute the average partial effects.
Assuming that the pure economic behavior of consumers demand and choice to consume recovered and recycled building materials through the means of deconstruction to support public and environmental policies on carbon emission reduction, we can write the mathematica function supporting this research hypothesis to be in the form as,
𝐁𝐮𝐲𝐞𝐫𝐬’ 𝐛𝐞𝐡𝐚𝐯𝐢𝐨𝐫= 𝐟(𝐘, 𝐓, 𝐓𝐱, 𝐏, 𝐏𝐫, 𝐌𝐂, 𝐂, 𝐌𝐔, 𝐌𝐒𝐂, 𝐏𝐃, 𝐌𝐐𝐋, 𝐋, 𝐒, 𝐎𝐏𝐏, 𝐆𝐏, 𝐞𝐭𝐜)
(1)
where
Y = income, T = the taste or preference of the buyer, Tx = tax levied on materials, P = price of materials recovered, Pr = price of related goods or materials, MC = monetary cost, C = other costs, MU = marginal utility, MSC = marginal social cost, PD = population density, MQL = material qualities and longevity, L = location of buyers from the prodcucers, S = shortage of recovered materials supplied, OPP = optimization problem, and GP = government policy or regulations.
3. Conceptual and Theoretical Framework
3.1 Deconstruction, Recovered Materials for Communities and Households Reuse, and the Carbon Emissions Reduction Outlook
(Zaman et al., 2018) concludes that characterization of recovered materials by the deconstruction of embodied energy savings and greenhouse gas emissions abatement may save roughly 502,158 MJ of embodied energy and reduce carbon emissions of around 27,029 kg (CO2e). Despite its labor-intensive requirements, the deconstruction method appears to be a valuable approach in terms of resource recovery, emission reduction, and other economic and social factors benefits under favorable market conditions when appropriate support from local communities and authorities is provided. This provides that household decisions could contribute significantly to resource conservation and environmental protection when their views are considered in deconstruction and recovered materials for reuse.
The researcher adopted the theoretical microeconomic concept of (Choe & Fraser, 1999) and (Delta Institute, 2018). (Choe & Fraser, 1999) developed the conceptual model as a suitable design for this research paper. The researcher, however, injected some key variables unique to his researcher that are not inscribed in the adopted framework. The pure environmental policy targeting carbon emissions reduction is the pillar of this framework. The conceptual theory that the researcher develops herein relies on human behavior and rationality when faced with constraints.
The constraints are not always only monetary, however, individuals are faced with preferences that are inclusive of taste and many other factors. In other words, in human society, people are more likely to be subjectively happy when the provisions of goods and services match their requirements, especially if these provisions improve their capacities or feeling of a better existence. In the case of this research, the household serves as a nucleus connecting non-profit corporations, government, politicians, funding organizations, energy regulators, and the rest of the world exerting all efforts to mitigate the rise in carbon emissions.
3.2 Theoretical Framework
Based on the argument of this paper, buyers or homeowners face several alternative construction materials, and the optimal selection is dependent on a set of factors that were presented in equation (1). The approach of this paper is to consider the binary factor as an outcome variable in the estimating equation to be considered. We want to test if a buyer is willing to pay for materials recovered from deconstruction is a yes (1) or no (0) and the extent to which it influences or impacts carbon emissions reduction as the endogenous variable. For instance, we could present it this way,
𝑾𝑻𝑷𝑹𝑹𝑴i,{1, "yes" 𝒊𝒇 𝒊𝒏𝒅𝒊𝒗𝒊𝒅𝒖𝒂𝒍 𝒄𝒉𝒐𝒐𝒔𝒆𝒔 𝒂𝒍𝒕𝒆𝒓𝒏𝒕𝒊𝒗𝒆 𝒊} {𝟎,"no" 𝒊𝒇 𝒊𝒏𝒅𝒊𝒗𝒊𝒅𝒖𝒂𝒍 𝒄𝒉𝒐𝒐𝒔𝒆𝒔 𝒂𝒍𝒕𝒆𝒓𝒏𝒂𝒕𝒊𝒗𝒆 𝒋}
(2)
WTPRRMi is the willingness to pay for recovered and recycled materials for reuse, but individually a cost, ci is presented. The outlook here is to focus on whether WTPRRMi > ci. This is a Bernoulli distribution representation. More discussion about the estimating model(s) will be discussed in the appropriate section under methods and materials. Henceforth, according to (Ben-Akiva et. Al, 1985, as cited in, Bungi, 1998), before anyone arrives at a unit choice, there are decision-making stages to contemplate which includes:
i. the decision-maker,
ii. alternatives,
iii. attributes of the alternatives; and
iv. choice.
Here, we attempt to balance between two decision-makers, that is, the buyers and the sellers/suppliers. This is what our study is relevant over the previous ones because we are considering both supply and demand. The literature on decision making, alternatives procedures, attributes of the alternatives, and decision rule can be found in the empirical work of (McFadden, 1975, as cited in, Bungi, 1998).
Now, in the context of a concise utility assuming a rational buyer is rational and therefore maximizes utility following the selection approach in equation (2), we now have equation (3) microeconomic function to be given as,
𝑼ik>𝑼jk
(3)
where U is the utility derived, and k is the decision-maker. Presenting the utility of an individual as a function of attributes of the alternatives, we have,
𝑼ik > 𝑽i (𝑸ik,𝑾k)
(4)
Individual derived utility k is a function of a set of a vector of attributes (Q)based on the choice made i as linked with the vector of attributes (W). Rewriting equation (4) gives,
𝑼ik > 𝑽i (𝑾k).
(5)
Our decision or recommendation surrounds the equation(5). The study does hope to minimize the errors but does not eliminate all other unobservables, however, the stochastic error term will mimic some of the flaws in the underlying models. This can be presented in a random framework below.
𝑼ik=𝑽j(𝑸ik,𝑾k)+𝜺ik
(6)
4. Methods and Materials
Considering that the carbon benefits model after controlling for the decision-making process of buyers alongside all the other variables (i.e., economic, social, and environmental) to measure the impact of carbon emissions reduction using data from participants in Michigan counties, the estimating specification follow the use of binary response models to see whether or not a buyer is willing to pay for materials recovered or recycled from deconstruction is a yes (1) or no (0) and the extent to which it influences or impacts carbon emissions reduction as the a predictor variable of interest.
Recent advances in binary response models have facilitated the investigation of several useful research. Following closely the methodological approach of (Wooldridge, 2002), we safely begin with a linear probability model (LPM) which states
p(y=1|X) = β1+β2x2+…+βKxK ≡ X𝛃
(7)
Then we know that
E(y|X) = X𝛃
(7.1)
According to (Cameron et al., 2005), the discreteness of the dependent variable is ignored in an OLS regression of yi on xi and predicted probabilities are not restricted to be between zero and one, as a result, they believe the logit model is a more appropriate model, as it specifies
References
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Choe, C., & Fraser, I. (1999). An economic analysis of household waste management. Journal of Environmental Economics and Management, 38(2), 234–246.
Delta Institute. (2018, May). Deconstruction & Building Material Reuse: A Tool For Local Governments & Economic Development Practitioners.
International Mass Timber Report. (2021). Forest Business Network.
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Zaman, A. U., Arnott, J., Mclntyre, K., & Hannon, J. (2018). Resource harvesting through a systematic deconstruction of the residential house: A case study of the ‘Whole House Reuse’project in Christchurch, New Zealand. Sustainability, 10(10), 3430.