Uncovering renewable energy policy impact channels on land values, the local farm structure, and farmland heterogeneity

Abstract Germany's Renewable Energy Sources Act (REA), enacted in 2000 and subsequently amended, subsidized national renewable energy production with fixed feed‐in tariffs for renewable energy sources (RE) from wind, solar, and biogas. Empirical studies suggest that the policy was creating windfall effects for landowners and attribute farmland use homogenization to the policy. Empirical evidence, however, lacks a comprehensive and systemic analysis of the REA impact on farmland values, farm structures, and farmland heterogeneity. To understand the policy's impact channels, we propose five hypotheses, build a spatial price theory‐informed structural equation model (SEM) and test it on a rich dataset of land transactions and land uses for the Federal State of Brandenburg, 2005–2018. The SEM uncovers direct impact channels on farmland prices from an increased willingness to pay more in proximity to wind turbines and biogas plants, and on farmland heterogeneity by incentivizing maize‐based homogenous crop rotations. Indirect impact channels for biogas promotion on land prices via altering the farm structure reveal additional and larger impacts than previous studies suggested. Approximately 9% of the price increase could be attributed to the RE expansion over the study period. Future policy amendments should take such a systemic perspective and counteract adverse effects.