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On the economics of energy labels in the housing market

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  • Brounen, Dirk
  • Kok, Nils
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Abstract

Energy efficiency in the residential housing market can play an important role in the reduction of global carbon emissions. This paper reports the first evidence on the market adoption and economic implications of energy performance certificates implemented by the European Union. The results show that adoption rates are low and declining over time, coinciding with a negative sentiment regarding the label in the popular media. Labels are clustered among smaller, post-war homes in neighborhoods with more difficult selling conditions. We also document that geographic variation in the adoption rate of energy labels is positively related to the fraction of "green" voters during the 2006 national elections. Within the sample of labeled homes, the energy label creates transparency in the energy efficiency of dwellings. Our analysis shows that consumers capitalize this information into the price of their prospective homes.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Environmental Economics and Management.

Volume (Year): 62 (2011)
Issue (Month): 2 (September)
Pages: 166-179

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Handle: RePEc:eee:jeeman:v:62:y:2011:i:2:p:166-179

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Web page: http://www.elsevier.com/locate/inca/622870

Related research

Keywords: Energy efficiency Housing market Energy labels Environmentalism;

References

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  1. Laquatra, Joseph, 1986. "Housing market capitalization of thermal integrity," Energy Economics, Elsevier, vol. 8(3), pages 134-138, July.
  2. Franz Fuerst & Patrick McAllister, 2011. "Green Noise or Green Value? Measuring the Effects of Environmental Certification on Office Values," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 39(1), pages 45-69, 03.
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  4. White, Halbert, 1980. "A Heteroskedasticity-Consistent Covariance Matrix Estimator and a Direct Test for Heteroskedasticity," Econometrica, Econometric Society, vol. 48(4), pages 817-38, May.
  5. Heckman, James, 2013. "Sample selection bias as a specification error," Applied Econometrics, Publishing House "SINERGIA PRESS", vol. 31(3), pages 129-137.
  6. Nicholas Stern, 2008. "The Economics of Climate Change," American Economic Review, American Economic Association, vol. 98(2), pages 1-37, May.
  7. Edward L. Glaeser & Matthew E. Kahn, 2008. "The Greenness of Cities: Carbon Dioxide Emissions and Urban Development," NBER Working Papers 14238, National Bureau of Economic Research, Inc.
  8. Abelson, Peter W., 1979. "Property prices and the value of amenities," Journal of Environmental Economics and Management, Elsevier, vol. 6(1), pages 11-28, March.
  9. Kempton, Willett & Layne, Linda L., 1994. "The consumer's energy analysis environment," Energy Policy, Elsevier, vol. 22(10), pages 857-866, October.
  10. Hanna, Brid Gleeson, 2007. "House values, incomes, and industrial pollution," Journal of Environmental Economics and Management, Elsevier, vol. 54(1), pages 100-112, July.
  11. Steven D. Levitt & Chad Syverson, 2008. "Market Distortions When Agents Are Better Informed: The Value of Information in Real Estate Transactions," The Review of Economics and Statistics, MIT Press, vol. 90(4), pages 599-611, November.
  12. Ryghaug, Marianne & Sørensen, Knut H., 2009. "How energy efficiency fails in the building industry," Energy Policy, Elsevier, vol. 37(3), pages 984-991, March.
  13. Kahn, Matthew E., 2007. "Do greens drive Hummers or hybrids? Environmental ideology as a determinant of consumer choice," Journal of Environmental Economics and Management, Elsevier, vol. 54(2), pages 129-145, September.
  14. Schipper, Lee, 1991. "Improved energy efficiency in the industrialized countries Past achievements, CO2 emission prospects," Energy Policy, Elsevier, vol. 19(2), pages 127-137, March.
  15. Piet Eichholtz & Nils Kok & John M. Quigley, 2010. "Doing Well by Doing Good? Green Office Buildings," American Economic Review, American Economic Association, vol. 100(5), pages 2492-2509, December.
  16. Werner Antweiler & Murray Z. Frank, 2004. "Is All That Talk Just Noise? The Information Content of Internet Stock Message Boards," Journal of Finance, American Finance Association, vol. 59(3), pages 1259-1294, 06.
  17. Nelson, Jon P., 1979. "Airport noise, location rent, and the market for residential amenities," Journal of Environmental Economics and Management, Elsevier, vol. 6(4), pages 320-331, December.
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Citations

RePEc Biblio mentions

As found on the RePEc Biblio, the curated bibliography for Economics:
  1. > Real Estate and Housing Economics
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Cited by:
  1. Alberto Gago & Michael Hanemann & Xavier Labandeira & Ana Ramos, 2012. "Climate Change, Buildings and Energy Prices," Working Papers fa04-2012, Economics for Energy.
  2. Brounen, Dirk & Kok, Nils & Quigley, John M., 2013. "Energy literacy, awareness, and conservation behavior of residential households," Energy Economics, Elsevier, vol. 38(C), pages 42-50.
  3. Ronan C. Lyons & Marie Hyland, 2012. "The value of domestic building energy efficiency - evidence from Ireland," Economics Series Working Papers 614, University of Oxford, Department of Economics.
  4. Caroline Dieckhöner, 2012. "Does Subsidizing Investments in Energy Efficiency Reduce Energy Consumption?: Evidence from Germany," SOEPpapers on Multidisciplinary Panel Data Research 527, DIW Berlin, The German Socio-Economic Panel (SOEP).
  5. Kathrine Lausted Veie & Toke Emil Panduro, 2013. "An alternative to the standard spatial econometric approaches in hedonic house price models," IFRO Working Paper 2013/18, University of Copenhagen, Department of Food and Resource Economics.
  6. Walls, Margaret & Palmer, Karen & Gerarden, Todd, 2013. "Is Energy Efficiency Capitalized into Home Prices? Evidence from Three US Cities," Discussion Papers dp-13-18, Resources For the Future.
  7. Thorsnes, Paul & Bishop, Tim, 2013. "The value of basic building code insulation," Energy Economics, Elsevier, vol. 37(C), pages 68-81.
  8. Claus Michelsen & Sebastian Rosenschon, 2012. "The Effects of Building Energy Codes in Rental Housing: The German Experience," Economics Bulletin, AccessEcon, vol. 32(4), pages 3488-3502.

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