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The Economics of Green Building

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  • Eichholtz, Piet
  • Kok, Nils
  • Quigley, John M.

Abstract

Research on climate change suggests that small improvements in the "sustainability" of buildings can have large effects on greenhouse gas emissions and on energy efficiency in the economy. This paper analyzes the economics of "green" building. First, we analyze a panel of office buildings "certified" by independent rating agencies, finding that large recent increases in the supply of green buildings and the unprecedented volatility in property markets have not significantly affected the relative returns to green buildings. Second, we analyze a large cross section of office buildings, demonstrating that economic premiums in rent and asset values are substantial. Third, we relate the economic premiums for green buildings to their sustainability, confirming that the attributes rated for both thermal efficiency and sustainability contribute to premiums in rents and asset values. Even among green buildings, increased energy efficiency is fully capitalized into rents and asset values.

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Bibliographic Info

Paper provided by Berkeley Program on Housing and Urban Policy in its series Berkeley Program on Housing and Urban Policy, Working Paper Series with number qt3k16p2rj.

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Date of creation: 15 Sep 2010
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Handle: RePEc:cdl:bphupl:qt3k16p2rj

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Keywords: Economics;

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References

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  1. Eichholtz, Piet & Kok, Nils & Quigley, John M., 2009. "Doing Well by Doing Good? Green Office Buildings," Berkeley Program on Housing and Urban Policy, Working Paper Series qt507394s4, Berkeley Program on Housing and Urban Policy.
  2. Glaeser, Edward L. & Kahn, Matthew E., 2010. "The greenness of cities: Carbon dioxide emissions and urban development," Journal of Urban Economics, Elsevier, vol. 67(3), pages 404-418, May.
  3. Matthew J. Kotchen, 2006. "Green Markets and Private Provision of Public Goods," Journal of Political Economy, University of Chicago Press, vol. 114(4), pages 816-845, August.
  4. Siqi Zheng & Rui Wang & Edward L. Glaeser & Matthew E. Kahn, 2011. "The greenness of China: household carbon dioxide emissions and urban development," Journal of Economic Geography, Oxford University Press, vol. 11(5), pages 761-792, September.
  5. Dan A. Black & Jeffrey Smith, 2003. "How Robust is the Evidence on the Effects of College Quality? Evidence From Matching," University of Western Ontario, CIBC Centre for Human Capital and Productivity Working Papers 20033, University of Western Ontario, CIBC Centre for Human Capital and Productivity.
  6. Nicholas Stern, 2008. "The Economics of Climate Change," American Economic Review, American Economic Association, vol. 98(2), pages 1-37, May.
  7. 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.
  8. Matthew E. Kahn, 2009. "Urban Growth and Climate Change," Annual Review of Resource Economics, Annual Reviews, vol. 1(1), pages 333-350, 09.
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Citations

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Cited by:
  1. Nils Kok & Marquise McGraw & John Quigley, 2012. "The diffusion over time and space of energy efficiency in building," The Annals of Regional Science, Springer, vol. 48(2), pages 541-564, April.
  2. 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.
  3. Dieckhoener, Caroline, 2012. "Does subsidizing investments in energy efficiency reduce energy consumption? Evidence from Germany," EWI Working Papers 2012-17, Energiewirtschaftliches Institut an der Universitaet zu Koeln.
  4. Timothy Simcoe & Michael W. Toffel, 2012. "Public Procurement and the Private Supply of Green Buildings," Harvard Business School Working Papers 13-030, Harvard Business School.
  5. Tessa Hebb & Ashley Hamilton & Heather Hachigian, 2010. "Responsible Property Investing in Canada: Factoring Both Environmental and Social Impacts in the Canadian Real Estate Market," Journal of Business Ethics, Springer, vol. 92(1), pages 99-115, April.

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