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The Environmental Cost of Land Use Restrictions

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  • Mark Colas
  • John M. Morehouse

Abstract

Cities with cleaner power plants and lower energy demand have stricter land use restrictions; these restrictions increase housing prices and disincentivize living in these lower polluting cities. We use a spatial equilibrium model to quantify the effect of land use restrictions on household carbon emissions. Our model features heterogeneous households, cities that vary by power plant technology and the benefits of energy usage, as well as endogenous wages and rents. Relaxing restrictions in California to the national median leads to a 2.3% drop in national carbon emissions. The burden of a carbon tax differs substantially across locations.

Suggested Citation

  • Mark Colas & John M. Morehouse, 2019. "The Environmental Cost of Land Use Restrictions," Opportunity and Inclusive Growth Institute Working Papers 20, Federal Reserve Bank of Minneapolis.
    • Handle: RePEc:fip:fedmoi:0020
    DOI: 10.21034/iwp.20
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    References listed on IDEAS

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    Cited by:

    1. Ranie Lin & Lala Ma & Toan Phan, 2021. "Race and Environmental Worries," Working Paper 21-15, Federal Reserve Bank of Richmond.

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    More about this item

    Keywords

    greenhouse gases; Local labor markets; Spatial equilibrium;
    All these keywords.

    JEL classification:

    • Q4 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy
    • R13 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - General Equilibrium and Welfare Economic Analysis of Regional Economies
    • 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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