Internalizing negative environmental impacts from wind power production: Coasian bargaining, offsetting schemes and environmental taxes
Working paper
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https://hdl.handle.net/11250/3038880Utgivelsesdato
2022-12Metadata
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- Discussion Papers [1002]
Sammendrag
On the one hand, wind power production is necessary for decarbonizing the electricity sector.
On the other hand, we risk replacing one environmental problem with other environmental
problems, that is, stopping climate change in exchange with increased loss of pristine land and
biodiversity. The present paper provides a novel contribution to the literature on how to
regulate the development of wind power plants (WPPs). Current regulation is largely based on a
concession system, where both environmental taxes and offset schemes are left unexplored.
We develop a theoretical model of WPP development with offsets and environmental taxes. We
show that if additional loss of pristine nature and biodiversity is acceptable at some monetary
price, establishing an offset market for WPP development and combining it with an
environmental tax will be socially desirable. In fact, this solution is preferable to both only
having an environmental tax or only having a compulsory offset market. However, if no more
loss of pristine land and biodiversity can be tolerated, compulsory and complete offsetting
should be the norm. We look at two restoration projects in Norway and evaluate to what extent
they could have been used as offsets for a recent WPP development in Norway. We conclude
that they can, but an offset scheme demands good measurement methods and regulations to
ensure equivalence in the values of ecosystem services lost and gained