Externalities of Geothermal Power Plants: A Hedonic Analysis of Land Prices in Japan

Shigeharu Okajima, Hiroko Okajima and Yoshito Nakayama
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Shigeharu Okajima: Department of Economics, Osaka University of Economics. 2-2-8, Osumi, Higashiyodogawa-ku, Osaka, 533-8533, Japan.
Hiroko Okajima: School of Economics, Nagoya University. Furo-cho, Chikusa-ku, Nagoya, 464-8601, Japan.
Yoshito Nakayama: Department of Economics, Osaka University of Economics. 2-2-8, Osumi, Higashiyodogawa-ku, Osaka, 533-8533, Japan.

RIEEM Discussion Paper Series from Research Institute for Environmental Economics and Management, Waseda University

Abstract: This study quantitatively assesses the negative externalities of geothermal power plants by analyzing their impact on local land values in Japan. Using a hedonic pricing approach and a difference-in- differences framework, the analysis finds that land prices within a 2 km radius of a geothermal power plant declined by approximately 7% to 12% after their installation, even after accounting for various fixed effects and robustness checks. The study utilizes data on all 28 large-scale geothermal power plants with a capacity of at least 1,000 kilowatts that were operational in Japan as of 2018, covering a 42-year period from 1983 to 2024. The findings highlight the complex interplay between renewable energy expansion and local economic conditions, emphasizing the need to balance the benefits of clean energy with local stakeholders' concerns to ensure a sustainable energy transition in Japan.

Keywords: renewable energy; geothermal power; hedonic analysis; negative externality (search for similar items in EconPapers)
JEL-codes: Q24 Q42 Q51 (search for similar items in EconPapers)
Pages: 17 pages
Date: 2026-01
New Economics Papers: this item is included in nep-sea
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