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Regulation, Innovation and Technology Diffusion: Evidence from Building Energy Efficiency Standards in Germany

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  • Makram El-Shagi
  • Claus Michelsen
  • Sebastian Rosenschon

Abstract

The impact of environmental regulation on technology diffusion and innovations is studied using a unique data set of German residential buildings. We analyze how energy efficiency regulations, in terms of minimum standards, affects energy-use in newly constructed buildings and how it induces innovation in the residential-building industry. The data used consists of a large sample of German apartment houses built between 1950 and 2005. Based on this information, we determine their real energy requirements from energy performance certificates and energy billing information. We develop a new measure for regulation intensity and apply a panel-error-correction regression model to energy requirements of low and high quality housing. Our findings suggest that regulation significantly impacts technology adoption in low quality housing. This, in turn, induces improvements in the high quality segment where innovators respond to market signals.

Suggested Citation

  • Makram El-Shagi & Claus Michelsen & Sebastian Rosenschon, 2014. "Regulation, Innovation and Technology Diffusion: Evidence from Building Energy Efficiency Standards in Germany," Discussion Papers of DIW Berlin 1371, DIW Berlin, German Institute for Economic Research.
    • Handle: RePEc:diw:diwwpp:dp1371
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    Cited by:

    1. Jacques Pelkmans & Andrea Renda, "undated". "Does EU Regulation Hinder or Stimulate Innovation?," IRMO Occasional Papers 5, Institute for Development and International Relations, Zagreb.
    2. Konstantin A. Kholodilin, 2015. "Fifty Shades of State: Quantifying Housing Market Regulations in Germany," Discussion Papers of DIW Berlin 1530, DIW Berlin, German Institute for Economic Research.
    3. Chandel, S.S. & Sharma, Aniket & Marwaha, Bhanu M., 2016. "Review of energy efficiency initiatives and regulations for residential buildings in India," Renewable and Sustainable Energy Reviews, Elsevier, vol. 54(C), pages 1443-1458.
    4. Marius Claudy and Claus Michelsen, 2016. "Housing Market Fundamentals, Housing Quality and Energy Consumption: Evidence from Germany," The Energy Journal, International Association for Energy Economics, vol. 0(Number 4).
    5. Pelkmans, Jacques & Renda, Andrea, 2014. "Does EU regulation hinder or stimulate innovation?," CEPS Papers 9822, Centre for European Policy Studies.
    6. Jesús Rosales-Carreón & César García-Díaz, 2015. "Exploring Transitions Towards Sustainable Construction: The Case of Near-Zero Energy Buildings in the Netherlands," Journal of Artificial Societies and Social Simulation, Journal of Artificial Societies and Social Simulation, vol. 18(1), pages 1-10.

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    More about this item

    Keywords

    Environmental regulation; innovation; technology diffusion; residential real estate; energy efficiency;
    All these keywords.

    JEL classification:

    • D2 - Microeconomics - - Production and Organizations
    • Q4 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy
    • R5 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Regional Government Analysis

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