Working Paper

The Environmental Cost of Land Use Restrictions


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.

Keywords: Greenhouse gasses; Local labor markets; Spatial equilibrium;

JEL Classification: Q4; R13; R31;

https://doi.org/10.21034/iwp.20

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Bibliographic Information

Provider: Federal Reserve Bank of Minneapolis

Part of Series: Opportunity and Inclusive Growth Institute Working Papers

Publication Date: 2019-06-25

Number: 20

Pages: 55 pages