Consumers’ preferences and willingness-to-pay for improved environmental standards: Insights from sugar and the Great Barrier Reef region

Reducing nutrient emissions into the Great Barrier Reef (GBR) from sugar cane production has become a major policy focus for the Queensland and Australian Governments. This study explores consumer willingness to pay for more universal environmental standards for sugar originating from the Reef catchments. For commodities like sugar, universal standards may be a more practical option to represent consumer wishes than trying to label a subset of products. Two main research questions are addressed in this report. The first is to identify the importance of improving water quality into the GBR for Australian consumers, while the second is to identify whether consumers are willing to pay a universal price premium on sugar to support improved environmental standards. A Best-Worst Scaling (BWS) and a Contingent Valuation (CV) experiment were included in a survey conducted on a random selection of 1,100 Australian residents to test these questions. Health, Sustainability and Environment, Quality and Price, and Information and Trust were the key groups of attributes explored in the study. Among all attributes, health considerations appeared to be by far the most important. In relation to processed food, consumers preferred to have food labels that indicated sugar content. Sustainability and environmental factors had some influence, with a strong preference for natural production systems. Participants placed limited importance on impacts on the Great Barrier Reef. Respondents to the survey were asked to identify the most that they would be prepared to pay extra for all sugar consumed that was produced at higher standards. The CV probit model showed that respondents were more likely to pay a premium to support Reef-friendly sugar if they were living in urban areas, planned to visit in the future, thought that the condition of the GBR had declined over the past decade, and were generally concerned about keeping a healthy diet. The CV linear regression model showed that respondents’ willingness-to-pay (WTP) for the proposed environmental standard was influenced by their socio-demographic and consumption profile. Respondents who were younger, from households with higher incomes, and consuming sugar more frequently, were those who supported higher payment levels. We estimate that the average WTP is $24.5/year per household, with a 95% confidence interval ranging between $18.7 and $31.4. This is only 0.34% of the average weekly grocery bill of Australian households. If a premium of that kind were imposed to all 9.4M family and single Australian households in 2021, and 23.5% of protest responses were removed, this could potentially raise $176M/year. We estimate that a subset of 26.27% of those households support better protection of the GBR, which represents an annual WTP of $46.22M. Based on these results, we recommend considering instruments that would further involve sugar consumers. Our experiments showed that there was majority support from consumers for higher environmental standards, coupled with estimates of annual payment amounts that appear realistic. However we do caution that impacts on the GBR did not emerge as a priority issue in the BWS experiment, so there is some potential that the support is partially underpinned by personal health concerns rather than solely environmental issues.