Public Opposition to Energy Infrastructures Development: An Economic Perspective
The infrastructural developments such as power grid, waste disposal facilities, wind farms, landfill, hydraulic fracturing, nuclear power plants etc. have an overall social benefit, distributed across the country, yet their deployment and operation incur a cost to the local communities living in the developments’ proximity. This problem which is traditionally termed NIMBY (Not-In-My-Back-Yard) is becoming increasingly problematic in democratic societies and often leads to social opposition and projects standstill. The economic aspect of the NIMBY problem is, therefore, an example of market failure, caused by externalities, in the sense that private actions no longer coincide with society’s best interests. Thus, it calls for regulation and intervention to restore social efficiency. This paper aims to analyse the economic aspect of NIMBY problem in order to shed light on the nature of economic solution using the established economic theories. This is achieved by applying the concept of property right and negotiation (Coase theorem), in a game theoretic setting, to explore the challenges of formulating a compensatory-based approach that foster social acceptance of energy projects.