The Potential of Local Community Compensation for Hosting Facilities

Public acceptance is a major challenge for the siting of facilities for hydraulic fracturing, carbon capture and storage, and wind farms. The offering of compensation to communities potentially helps to create the perception of a fairer distribution of local risks and nonlocal benefits. This may help to prevent or solve siting controversies. This paper will discuss insights obtained from an extensive empirical research program in The Netherlands on psychological factors that determine the effectiveness of compensation beyond showing that the project is safe from a technical perspective.

The studies show that, when specific nonself-evident criteria are met, the offering of host community compensation has the potential to ease the process of siting facilities. The type of compensation offered matters (e.g., contrary to what many local government authorities believe, citizens prefer compensation funds and measures to improve the local economy over monetary compensation). Also, responses to host community compensation are not a simple matter of balancing the cost/benefit aspects of the proposed developments.

Social aspects play an important role (e.g., the perceived corporate social responsibility and trustworthiness of the players involved). Consultation of members of an affected community in the process of deciding about compensation is perceived as fair and communicates that the company takes its social responsibility serious. Before this project, there was little empirical research on the effectiveness of host community compensation and very little was known about psychological factors and how compensation mechanisms work. The knowledge acquired allows project developers and governments to utilize more effective compensation strategies in complex siting projects.

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