Residential Energy Use and Conservation: Economics, Demographics, and Standards

Posted: 1 Dec 2010  

John M. Quigley

University of California, Berkeley, College of Letters & Science, Department of Economics (Deceased); University of California, Berkeley, Haas School of Business, Real Estate Group (Deceased)

Dirk Brounen

Erasmus University Rotterdam (EUR) - Department of Financial Management; Erasmus Research Institute of Management (ERIM); Tinbergen Institute

Nils Kok

University of Maastricht - Limburg Institute of Financial Economics (LIFE)

Date Written: November 29, 2010

Abstract

The 2003 European Performance of Buildings Directive mandated all EU member states to enforce disclosure on the energy performance of residential and commercial properties. This is the first paper to analyse the introduction, adoption and market implications of energy labels (EPCs) in the housing market. We use a unique dataset on housing transactions in the Netherlands, including 194,000 transactions since the introduction of energy labels in January 2008. The results show that when energy performance certification is not mandatory, adoption rates are low and declining over time. Labels are clustered among post-war, single-family homes in more expensive, low-density neighbourhoods, where competition among buyers is low. This provides an indication that energy labels are adopted as a strategic tool in the transaction process. We also document that adoption rates of energy labels are highest in areas that have a high propensity of green voters during national elections, which implies that idealistic motives may also play a role in the decision to adopt an energy label. The energy label seems to carry a moderately powerful market signal. We analyse the impact of energy labels on the transaction process of homes and find that the label does not affect time on the market. However, within the sample of certified homes, we document a significant price premium for homes with an energy label that reflects high standards of energy efficiency. The size of the green increment is positively related to the underlying energy efficiency of a dwelling and this result holds while controlling for various detailed hedonic features, such as quality of insulation and the maintenance of the exterior. Even though the label adoption rate is declining over time, the label premium is relatively constant. The energy label seems to create transparency in energy consumption of dwellings and our analysis shows that consumers capitalize this information in the price of their prospective home.

JEL Classification: Q5

Suggested Citation

Quigley, John M. and Brounen, Dirk and Kok, Nils, Residential Energy Use and Conservation: Economics, Demographics, and Standards (November 29, 2010). 46th Annual AREUEA Conference Paper. Available at SSRN: https://ssrn.com/abstract=1717089

John M. Quigley

University of California, Berkeley, College of Letters & Science, Department of Economics (Deceased) ( email )

Berkeley, CA 94720-3880
United States
510-643-7411 (Phone)
510-643-7357 (Fax)

University of California, Berkeley, Haas School of Business, Real Estate Group (Deceased) ( email )

Berkeley, CA 94720-1900
United States

Dirk Brounen (Contact Author)

Erasmus University Rotterdam (EUR) - Department of Financial Management ( email )

P.O. Box 1738
Room T09-53
3000 DR Rotterdam
Netherlands

Erasmus Research Institute of Management (ERIM) ( email )

P.O. Box 1738
3000 DR Rotterdam
Netherlands
+31 1 0408 2371 (Phone)
+31 1 0408 9017 (Fax)

HOME PAGE: http://web.eur.nl/fbk/dep/dep5/faculty/dbrounen

Tinbergen Institute ( email )

Burg. Oudlaan 50
Rotterdam, 3062 PA
Netherlands
120-551-3535 (Phone)

Nils Kok

University of Maastricht - Limburg Institute of Financial Economics (LIFE) ( email )

P.O. Box 616
Maastricht, 6200 MD
Netherlands

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