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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.

Suggested Citation

  • Eichholtz, Piet & Kok, Nils & Quigley, John M., 2010. "The Economics of Green Building," Berkeley Program on Housing and Urban Policy, Working Paper Series qt3k16p2rj, Berkeley Program on Housing and Urban Policy.
  • Handle: RePEc:cdl:bphupl:qt3k16p2rj
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    References listed on IDEAS

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    1. 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.
    2. 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.
    3. 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.
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    5. 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.
    6. 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.
    7. Matthew E. Kahn, 2009. "Urban Growth and Climate Change," Annual Review of Resource Economics, Annual Reviews, vol. 1(1), pages 333-350, September.
    8. Nicholas Stern, 2008. "The Economics of Climate Change," American Economic Review, American Economic Association, vol. 98(2), pages 1-37, May.
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    More about this item

    Keywords

    Social and Behavioral Sciences;

    JEL classification:

    • M14 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - Corporate Culture; Diversity; Social Responsibility
    • D92 - Microeconomics - - Micro-Based Behavioral Economics - - - Intertemporal Firm Choice, Investment, Capacity, and Financing

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