Smells like Green Energy: The Impact of Bioenergy Production on Residential Property Values in Germany

Christin Hoffmann, Shanmukha Srinivas Byrukuri Gangadhar and Felix Müsgens

Energy Economics, 2025, vol. 145, issue C

Abstract: One requirement for the fast and efficient development of bioenergy is a clear understanding of the negative externalities bioenergy facilities cause. At this point, discussions in practice and research as to which externalities have an impact and how strong this potential impact actually is remain inconclusive. We utilize bioenergy plant construction data from Germany between 2007 and 2022 and match it with information about real estate in the plants’ vicinity. Applying improved difference-in-difference estimation procedures to analyze heterogeneous treatment effects, we interpret a causal impact of bioenergy plant commissioning on housing prices in the vicinity in terms of the average net external effects affecting the vicinity. Overall, we find a minor negative impact of −0.5% on home prices within 1 km of bioenergy plants but no statistically significant effect beyond this distance. This suggests that visual pollution has a limited role as an externality of bioenergy plants. However, if we restrict the sample to homes downwind of bioenergy plants, we find a significant yet small negative impact on home prices, ranging from −1.0% to −1.3%. Additionally, homes near bioenergy plants that use gaseous inputs – which emit stronger odors – experience price reductions between −0.4% to −0.7%. This lets us conclude that, besides visual pollution, odor emission may play a more significant role in affecting nearby home prices.

Keywords: Bioenergy; Odor emission; Difference-in-differences; Hedonic pricing (search for similar items in EconPapers)
JEL-codes: L95 Q42 R32 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:eneeco:v:145:y:2025:i:c:s0140988325002282

DOI: 10.1016/j.eneco.2025.108404

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