The Rise of Green Regions: Do Leaders Matter?

The paper studies the emergence of environmental policies and green places, where regional governments are strategic actors in the green transition. We build a tractable quantitative spatial general equilibrium model in which regions with heterogeneous sizes, income, and environmental awareness compete to attract users of sustainable transport modes through environmental subsidies. We show that environmental awareness interacts with regional size to generate asymmetric policy adoption. Early adopters reshape the diffusion process: regions with large populations or high awareness emerge as green leaders that stimulate subsequent adoption through interregional competition. Once fully green, however, these leaders slow the transition of follower regions. An empirical application to French regions shows that completing the green transition requires a large increase in environmental expenditure, from negligible observed levels to about 13% of existing local tax revenues. It also reveals asymmetric leadership spillovers: early entrants not only accelerate adoption but also raise environmental policy in other regions, while early green transitions mainly delay convergence with limited effects on policy intensity.