Institute Working Paper 20

The Environmental Cost of Land Use Restrictions

Mark Colas | Opportunity & Inclusive Growth Institute and University of Oregon
John M. Morehouse | University of Oregon

Published June 25, 2019

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.


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