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Energy Efficiency Premium Issues and Revealing the Pure Label Effect

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  • Aras Khazal
  • Ole Jakob Sønstebø

Abstract

Following the European Union’s implementation of Energy Performance Certificates (EPCs) for buildings, the capitalization of energy efficiency in transaction prices and rents has been subject to much research. This paper uses different identification strategies for the Norwegian residential sales (N = 750,000) and rental (N = 670,000) markets to highlight the endogeneity and methodological limitations associated with assessing the price effects of energy efficiency and the signaling effect of label adoption. We find that the valuation of energy efficiency is subject to unobserved location and quality bias, that labeling has immediate, short-run, and long-run price effects and that different effects are observed in different submarkets. We provide evidence that sample selection issues related to location and time, with methodological and data limitations, are essential factors that must be considered when assessing the effects of the EPC implementation.

Suggested Citation

  • Aras Khazal & Ole Jakob Sønstebø, 2023. "Energy Efficiency Premium Issues and Revealing the Pure Label Effect," The Energy Journal, , vol. 44(1), pages 33-54, January.
    • Handle: RePEc:sae:enejou:v:44:y:2023:i:1:p:33-54
    DOI: 10.5547/01956574.44.1.akha
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    References listed on IDEAS

    as
    1. Mats Wilhelmsson, 2019. "Energy Performance Certificates and Its Capitalization in Housing Values in Sweden," Sustainability, MDPI, vol. 11(21), pages 1-16, November.
    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, March.
    3. Lyons, Ronan C., 2019. "Can list prices accurately capture housing price trends? Insights from extreme markets conditions," Finance Research Letters, Elsevier, vol. 30(C), pages 228-232.
    4. Marie Hyland & Anna Alberini & Se n Lyons, 2016. "The Effect of Energy Efficiency Labeling: Bunching and Prices in the Irish Residential Property Market," Trinity Economics Papers tep0516, Trinity College Dublin, Department of Economics, revised Aug 2016.
    Full references (including those not matched with items on IDEAS)

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