Ruhr Economic Papers

Ruhr Economic Papers #742

Does Financial Compensation Increase the Acceptance of Power Lines? Evidence from Germany

by Michael Simora, Manuel Frondel and Colin Vance

RGS, RUB, RWI, 01/2018, 30 S./p., 8 Euro, ISBN 978-3-86788-862-2 DOI: 10.4419/86788862



Although public support for renewable energy promotion in Germany is strong, the required power line construction has incited a groundswell of opposition from residents concerned about the impacts on their neighborhoods. This paper evaluates a large randomized one-shot binary-choice experiment to examine the effect of different compensation schemes on the acceptance of new power line construction. Results reveal that community compensations have no bearing on the acceptance level, whereas personal compensations have a negative effect. Two possible channels through which financial compensation reduces the willingness-to-accept are (1) crowding out of intrinsic motivation to support the construction project and (2) a signaling effect that alerts residents to potential negative impacts of the power lines. Both explanations call into question the efficacy of financial payments to decrease local opposition.

JEL-Classification: M52, C93, Q40

Keywords: Not-in-my-backyard; willingness to accept; motivation crowding out; randomized discrete choice experiment