Impact of proximity to thermal power plants on housing prices: Capitalizing the hidden costs of air pollution

Abstract

This study explores the impact of the Taichung Thermal Power Plant in Central Taiwan on the housing prices of surrounding houses and employs empirical data to capitalize the hidden costs of air pollution. This power plant is the fourth largest in the world and operates mainly through coal burning, in addition, the power plant is still under expansion. The operation of such a large-scale power plant influences the surrounding environment. To reasonably evaluate the cost of thermal power generation, this study capitalizes the impact of proximity to thermal power plants on housing prices and proposes evidence indicating that proximity to thermal power plants has a significant effect on decreases in housing prices, and the closer the distance to the thermal power plant, the more housing prices fall. Additionally, the impact of proximity to the thermal power plant on housing prices is greater in areas with high housing prices. The presence of the thermal power plant within 15 km resulted in housing prices dropping by approximately 25%. This study proposes including negative externalities in the costs of thermal power generation to accurately reflect in the power generation costs and energy prices. This would incentivize power plant operators to invest in more environmentally friendly power generation methods and relieve the burden shared by residents living in proximity to the power plant.