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The Capitalization of Coal Phase-Outs into Residential Property Values

Author

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  • Bruns, Daniel

    (Leibniz University of Hannover)

  • Thomsen, Stephan

    (Leibniz University of Hannover)

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.

Suggested Citation

  • Bruns, Daniel & Thomsen, Stephan, 2026. "The Capitalization of Coal Phase-Outs into Residential Property Values," IZA Discussion Papers 18865, IZA Network @ LISER.
    • Handle: RePEc:iza:izadps:dp18865
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    References listed on IDEAS

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    1. Mei, Yingdan & Gao, Li & Zhang, Wendong & Yang, Feng-An, 2021. "Do homeowners benefit when coal-fired power plants switch to natural gas? Evidence from Beijing, China," Journal of Environmental Economics and Management, Elsevier, vol. 110(C).
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    Keywords

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    JEL classification:

    • Q40 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - General
    • Q48 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Government Policy
    • R12 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)
    • R31 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Housing Supply and Markets

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