Siting locally-unwanted facilities: What can be learnt from the location of Italian power plants

The reaction of communities to the development of energy facilities is based on the environmental impact of the investment, but it also reflects the ex-ante propensity of residents to engage in collective actions. In this work we have examined the requests of authorization of Italian power producers for new thermal plants with the purpose of testing the efficiency of market-based siting policies. The classical location factors, e.g., infrastructure availability, have been confirmed to play a role, and there is a weak evidence that authorization demands have targeted communities that suffer less environmental damage. However our findings have also revealed that power producers are likely to avoid potentially suitable sites if they host a highly activistic community. The paper also discusses some modifications concerning siting policies that could improve the alignment between community responses and the environmental costs of new energy facilities. - Highlights: ► We model location choices for polluting power plants by Italian producers in 1999–2006. ► The efficiency of market-based siting policies is tested (i.e., plants located where environmental damage is lower). ► More than environmental costs, voice factors prevailed on the location choices. ► We conclude that market-based siting policies does not ensure an efficient outcome. ► Developers and communities relationship may suffer from relevant transaction costs