Public Subsidies For Green Buildings: Empirical Outcomes From Australia’S Natural Experiment

Governments are using mandatory disclosure and public grants to promote the production and consumption of impure public goods, such as eco- labeled buildings, that provide both public and private benefits. Between 2008 and 2011, the federal government in Australia implemented both policies in the commercial real estate sector. Using this natural experiment as a case study, an empirical model is used to describe the association between measured greenhouse gas emission mitigation and three strategies: (a) participation in repetitive greenhouse gas emission audits, (b) receipt of public subsidies for investment in energy- efficient building technology, and (c) purely private environmental management strategies. Repetitive audit participation has the strongest association with measured greenhouse gas mitigation while public subsidies have the weakest association. This research also affirms that firms receiving subsidies tend to be institutional investors that use subsidies as additional (free) leverage, likely making investments that would have been made otherwise; this observation provides a potential explanation for the marginal effect of the subsidy conclude with advice for emerging markets interested in implementing energy-efficient building practices.