OverviewAlready today we notice the negative effects of climate change due to an enduring, substantial production of CO_2emissions. The increasing awareness of this development initiated a rethinking process to mitigate CO_2 emissionsand decarbonize the electricity sector. As part of the solution, the ongoing expansion of renewable energytechnologies is fostered to avoid CO_2 emissions granted in connection with conventional electricity generation.Besides wind and solar photovoltaics, biomass plants contribute a substantial share to world-wide renewableelectricity generation (IAE, 2017). Biomass technology is an important piece of the puzzle to successfully implementthe transformation of the electricity sector: It is an almost CO_2 neutral technology that provides flexible productioncapacities, facilitating the integration of other fluctuating renewables into the system, and contributes to sectorcoupling by utilizing the waste heat of the electricity generation process.Even the biomass technology comes along with various benefits, it still has negative external effects. Energy cropcultivation and biomass plants themselves lead to a change of land use. Further negative externalities can be causedby an increasing transportation volume of biomass as well as occasional odor emissions, which may not beappreciated by residents (e.g. Bavarian State Office for Environment, 2011; Dockerty et al., 2012; Kortsch et al.2015). In this paper, we study whether biomass plants have a significant effect on the people living in their closeproximity. We quantify these local negative externalities using the life satisfaction approach. Our empirical strategyrests on a difference-in-differences approach using a comprehensive, newly constructed data set of Germany, whichexploits geographical coordinates of both households and biomass plants. It contributes to a developing body ofliterature of environmental valuation. The impact of wind turbines (Krekel and Zerrahn, 2017), air pollution(Ambrey et al., 2014), or climate change (Maddison and Rehdanz, 2011) on individuals’ subjective well-being hasbeen assessed already. Preliminary results show weak evidence that subjective well-being is affected by neighboringbiomass plants.MethodsWe use the life satisfaction approach integrated in a difference-in-differences framework. Applying differenttreatment radii, we assign individuals to the treatment group if a biomass plant was newly constructed within thisspecified radius. If no biomass plant was built nearby an individual, it becomes part of the control group. A furtherbuffer radius leads to a greater distinction between the treated and the control group. By regressing self-reportedsubjective well-being on the treatment variable which indicates whether a biomass plant is nearby (and otherestablished covariates), we determine the causal effect of a biomass plant on people’s life satisfaction. Furthermore,a comparison between the estimated causal impact and the estimated influence of income on personal life satisfactionprovides an estimation of caused external costs.For a credible identification, we ensure exogeneity of treatment with respect to subjective well-being as thedependent variable. Therefore, we include proven socio-economic control variables on micro and macro level in themodel. Fixed effects account for secular time trends and unobserved individual heterogeneity. We control for selfselectionby excluding all people who moved and all people who might gain from a newly constructed biomassplants such as farmers. Moreover, the common trend assumption between both groups is secured by state-of-the-artmatching approaches, i.e. propensity-score matching and spatial matching. Both techniques ensure that individuals inthe control and treatment group are comparable concerning their living conditions. In order to disentangle theexternality of odor emission from other externalities, such as a negatively perceived change in land use, we assigntreated individuals into two subcategories: the windward and leeward group. Comparing the effect on these groupsoffers further information whether wind and hence also odor emissions affects the result.We come up with a new and comprehensive panel data set covering the years 2000 to 2012. It combines threedifferent data sets: While the German Socio-Economic Panel Study (SOEP) provides representative information onprivate households, the Anlagenregister of the German Federal Network Agency and the publicly available data of EnergyMap contain characteristics of German biomass plants. Since we use two different data sources of biomassplants, we can perform different plausibility checks and ensure a high level of data quality. The hourly wind speedsand directions in our data set are provided by the MERRA-2 dataset by NASA (Bosilovich et al., 2016).ResultsFirst results indicate that biomass plants have a negative impact on individuals’ life satisfaction. The identified effectis statistically significant but rather small in monetary terms. The analysis shows that the negative externalitiesdecrease with distance, smaller plant size and are only detectable for a limited time.A more detailed analysis of the odor emissions as a transmission channel of negative external effects suggests thatresults are mainly driven by other externalities such as land use change and increasing traffic volume. In this context,the odor emissions seem to play a minor role. Further sensitivity checks validate the robustness of our results. Wealso test different treatment intensity measures.ConclusionsIn this paper we investigate whether externalities from a newly constructed neighboring biomass plant influencepeople’s life satisfaction. The analysis rests on a comprehensive panel data set which covers the years 2000 to 2012.It combines German private household information from the SOEP with data of biomass plants. We apply a state-ofthe-art microeconometric difference-in-differences design. Our preliminary results indicate that negative externalitiesaffect self-reported subjective well-being. The effect is temporarily and spatially very limited. Our preliminaryresults point out that some individuals notice the presence of a novel biomass plant. The effect might be ratherlimited because residents value the advantages of the biomass technology in the context of a successfulimplementation of the German Energiewende and hence evaluate a biomass plant less negatively.
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