The Role of Liability, Regulation and Economic Incentives in Brownfield Remediation and Redevelopment: Evidence from Surveys of Developers

Abstract

We examine different market-based mechanisms and other incentives intended to promote the environmental remediation and reuse of brownfields. Policies that encourage cleanup and re-use of brownfields offer real estate developers reductions in regulatory burden, relief from liability for future cleanups once certain mitigation standards are met, and/or financial support for regeneration of brownfields.

We use conjoint choice experiments - a stated preference approach - to assess the responses of real estate developers to different mixes of these incentives. Our survey instrument was administered in person to a sample of developers and real estate professionals randomly intercepted at the Marche International des Professionnels de l'Immobilier (MIPIM) in Cannes, France, in March 2002.

Conditional and random-coefficient logit models of the responses to the choice questions indicate that developers find sites with contamination problems less attractive than others, and that they value liability relief. This confirms our expectation that contaminated sites are less desirable because of the associated cleanup costs, but refutes earlier claims that liability does not matter. Our developers are not deterred by prior contamination, once it has been cleaned up, suggesting that "contamination stigma" is not very important, and appreciate fast-track review of development and remediation plans, direct financial incentives, and flexible (negotiable) cleanup standards. Developers with prior experience with contaminated sites are more responsive to the policies than are inexperienced developers, especially for subsidies. Inexperienced developers are more responsive to liability relief and regulatory relief than they are to subsidies. Similar considerations hold true for larger developers.

Keywords: Brownfields, Contaminated Sites, Real Estate Developers, Stated Preferences, Conjoint Analysis, Liability Relief, Regulatory Relief, Subsidies

JEL Classification: Q28, R38