IDEAS home Printed from https://ideas.repec.org/p/cdl/bphupl/qt3k16p2rj.html
   My bibliography  Save this paper

The Economics of Green Building

Author

Listed:
  • 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
    as

    Download full text from publisher

    File URL: https://www.escholarship.org/uc/item/3k16p2rj.pdf;origin=repeccitec
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    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.
    4. Black, Dan A. & Smith, J.A.Jeffrey A., 2004. "How robust is the evidence on the effects of college quality? Evidence from matching," Journal of Econometrics, Elsevier, vol. 121(1-2), pages 99-124.
    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.
    9. -, 2009. "The economics of climate change," Sede Subregional de la CEPAL para el Caribe (Estudios e Investigaciones) 38679, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL).
    10. Wheaton William C. & Torto Raymond G., 1994. "Office Rent Indices and Their Behavior over Time," Journal of Urban Economics, Elsevier, vol. 35(2), pages 121-139, March.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Kahn, Matthew E. & Walsh, Randall, 2015. "Cities and the Environment," Handbook of Regional and Urban Economics, in: Gilles Duranton & J. V. Henderson & William C. Strange (ed.), Handbook of Regional and Urban Economics, edition 1, volume 5, chapter 0, pages 405-465, Elsevier.
    2. Deng, Yongheng & Li, Zhiliang & Quigley, John M., 2012. "Economic returns to energy-efficient investments in the housing market: Evidence from Singapore," Regional Science and Urban Economics, Elsevier, vol. 42(3), pages 506-515.
    3. Chegut, Andrea & Eichholtz, Piet & Kok, Nils, 2019. "The price of innovation: An analysis of the marginal cost of green buildings," Journal of Environmental Economics and Management, Elsevier, vol. 98(C).
    4. Bienert, Sven & Geiger, Peter & Spanner, Maximilian, . "Naturgefahren und Immobilienwerte in Deutschland : Studie," Beiträge zur Immobilienwirtschaft, University of Regensburg, Department of Economics, number 25, August.
    5. Hasan, Syed M. & Zhang, Wendong, 2020. "Will Urbanization in Developing Countries Reduce Carbon Emissions? Panel Data Evidence from Pakistani Household Surveys," ISU General Staff Papers 202005040700001117, Iowa State University, Department of Economics.
    6. Brounen, Dirk & Kok, Nils, 2011. "On the economics of energy labels in the housing market," Journal of Environmental Economics and Management, Elsevier, vol. 62(2), pages 166-179, September.
    7. Ma, Chunbo & Polyakov, Maksym & Pandit, Ram, 2015. "Solar Capitalization in Western Australian Property Market," Working Papers 199230, University of Western Australia, School of Agricultural and Resource Economics.
    8. Fuerst, Franz & Shimizu, Chihiro, 2016. "Green luxury goods? The economics of eco-labels in the Japanese housing market," Journal of the Japanese and International Economies, Elsevier, vol. 39(C), pages 108-122.
    9. Kok, Nils & Jennen, Maarten, 2012. "The impact of energy labels and accessibility on office rents," Energy Policy, Elsevier, vol. 46(C), pages 489-497.
    10. Dwight Jaffee & Richard Stanton & Nancy Wallace, 2019. "Energy Factors, Leasing Structure and the Market Price of Office Buildings in the U.S," The Journal of Real Estate Finance and Economics, Springer, vol. 59(3), pages 329-371, October.
    11. Deng, Yongheng & Wu, Jing, 2014. "Economic returns to residential green building investment: The developers' perspective," Regional Science and Urban Economics, Elsevier, vol. 47(C), pages 35-44.
    12. Marie Wahlström, 2013. "The Residential Value of Energy Efficient Housing," ERES eres2013_331, European Real Estate Society (ERES).
    13. Kahn, Matthew E. & Kok, Nils & Quigley, John M., 2014. "Carbon emissions from the commercial building sector: The role of climate, quality, and incentives," Journal of Public Economics, Elsevier, vol. 113(C), pages 1-12.
    14. Rainald Borck & Jan K. Brueckner, 2018. "Optimal Energy Taxation in Cities," Journal of the Association of Environmental and Resource Economists, University of Chicago Press, vol. 5(2), pages 481-516.
    15. Nils Kok & Marquise McGraw & John Quigley, 2012. "The diffusion over time and space of energy efficiency in building," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 48(2), pages 541-564, April.
    16. Fuerst, Franz & McAllister, Pat, 2011. "Eco-labeling in commercial office markets: Do LEED and Energy Star offices obtain multiple premiums?," Ecological Economics, Elsevier, vol. 70(6), pages 1220-1230, April.
    17. Kahn, Matthew E. & Kok, Nils, 2014. "The capitalization of green labels in the California housing market," Regional Science and Urban Economics, Elsevier, vol. 47(C), pages 25-34.
    18. Fuerst, Franz & Gabrieli, Tommaso & McAllister, Patrick, 2017. "A green winner's curse? Investor behavior in the market for eco-certified office buildings," Economic Modelling, Elsevier, vol. 61(C), pages 137-146.
    19. van den Bergh, J.C.J.M. & Botzen, W.J.W., 2015. "Monetary valuation of the social cost of CO2 emissions: A critical survey," Ecological Economics, Elsevier, vol. 114(C), pages 33-46.
    20. Matthew J. Holian & Matthew E. Kahn, 2014. "Household Demand for Low Carbon Public Policies: Evidence from California," NBER Working Papers 19965, National Bureau of Economic Research, Inc.

    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

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:cdl:bphupl:qt3k16p2rj. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Lisa Schiff (email available below). General contact details of provider: https://edirc.repec.org/data/ibbrkus.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.