The Capitalization of Coal Phase-Outs into Residential Property Values

Daniel Bruns () and Stephan Thomsen
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Daniel Bruns: Leibniz University of Hannover

No 18865, IZA Discussion Papers from IZA Network @ LISER

Abstract: How do residential real estate markets value large-scale climate policies? We study how Germany’s coal phase-out affects residential property values near decommissioned power plants. Combining detailed residential property listing data from 2007 to 2023 with the staggered timing of plant closures, we estimate dynamic spatial DiD models. Nearby residential property values decline by 8.2%, implying aggregate homeowner wealth losses of approximately €1.9 billion. To distinguish economic from environmental adjustment, we examine changes in employment, population, purchasing power, and air pollution. Declines in population, employment and purchasing power coincide with falling residential property values, whereas improvements in air quality do not seem to offset these losses. Our findings show that residential real estate markets primarily capitalize the deterioration of local economic fundamentals rather than improvements in environmental quality, implying that climate policy generates substantial localized household wealth effects through residential real estate markets – a distributional channel that complements conventional evaluations focused on aggregate environmental benefits and macroeconomic adjustment.

Keywords: asset pricing; housing prices; climate policy; wealth effects; real estate (search for similar items in EconPapers)
JEL-codes: Q40 Q48 R12 R31 (search for similar items in EconPapers)
Date: 2026-08
New Economics Papers: this item is included in nep-eur and nep-hre
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