Offsetting schemes and ecological taxes for wind power production

Mads Greaker, Cathrine Hagem and Andreas Skulstad

Ecological Economics, 2024, vol. 224, issue C

Abstract: On the one hand, wind power production on land seems necessary for decarbonizing the electricity sector. On the other hand, we risk replacing one environmental problem with other environmental problems. The present paper provides a novel contribution to the literature on how to regulate the development of wind power plants on land (WPPs). Current regulation is largely based on a concession system, where both ecological taxes and offset schemes are left unexplored. We develop a theoretical model of WPP development with offsets and ecological 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 ecological tax will be socially desirable. In fact, this solution is preferable to both only having an ecological tax or only having a compulsory offset market. Compared to only an ecological tax, it leads to lower environmental costs and more electricity from wind power production. By looking at a WPP project and two restoration cases, we demonstrate how an offset scheme could be conducted and conclude that offsetting WPPs could be possible. However, since wind power, to our knowledge, never have been exposed to an offsetting scheme, high quality measurement methods and thorough regulations must first be in place to ensure equivalence in the values of ecosystem services lost and gained.

Keywords: Wind power; Offsetting schemes; Ecological taxes; Resource equivalency analysis; Habitat equivalency analysis (search for similar items in EconPapers)
JEL-codes: D62 Q24 Q26 Q42 Q48 Q51 Q56 Q57 Q58 (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecolec:v:224:y:2024:i:c:s0921800924001897

DOI: 10.1016/j.ecolecon.2024.108292

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