Consumer willingness to pay price premiums for environmentally certified wood products in the US

Since its inception nearly 15 years ago, environmental certification has become an important issue in the wood products industry. One research question that has been examined is the potential willingness for supply chain participants to pay a premium for certified products or raw materials to offset certification costs. This study examines stated willingness to pay for four wood products from the perspective of U.S. consumers. Data was collected in 1995 and 2005 from the population of U.S. residential consumers to detect changes in willingness to pay for certified wood products along time and increase the statistical strength of the model. Results of an ordered probit model suggest that higher probabilities of paying a premium are associated to consumers who seek out certified products and who believe certification can lessen environmental impacts such as tropical deforestation. There is also a strong relationship between respondent income and willingness-to-pay. Despite the current industry structure in the U.S. that has adopted a mass-certification strategy that does not place price premiums on certified products, results suggest that such premiums may exist for imported certified tropical wood products. Analysis of marginal effects suggests consumers' willingness to pay a 10% premium for three of the four certified items studied. Niche markets may potentially be exploited in the U.S. and price premiums captured by wood products manufacturers in tropical regions and/or American importers. (C) 2006 Elsevier B.V. All rights reserved.