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The Rent Impact of Disclosing Energy Performance Certificates: Energy Efficiency and Information Effects

Listed author(s):
  • Luisa Dressler
  • Elisabetta Cornago

Energy performance certificates (EPC) can help solve information asymmetries between landlords and tenants about dwellings’ energy performance. EPCs may enable rent premiums for energy efficient dwellings, incentivizing energy efficiency investment in rental property. However, low EPC disclosure rates may undermine their potential to promote investment. Using a cross-sectional dataset of residential rental advertisements from Brussels, we estimate rent premiums from EPCs under de facto voluntary EPC disclosure. We use the Heckman correction and an instrumental variable approach to tackle potential selection bias and endogeneity. First, we find that highly energy-efficient compared to inefficient dwellings earn a rent premium, provided that EPCs are disclosed (energy efficiency effect). This premium may incentivize investment in energy efficiency of rental property. Second, dwellings with average energy performance are penalized from disclosing an EPC (information effect). This may provide a strategic motivation to hide EPCs that indicate mediocre energy performance.

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Paper provided by ULB -- Universite Libre de Bruxelles in its series Working Papers ECARES with number ECARES 2017-16.

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Length: 42 p.
Date of creation: Apr 2017
Publication status: Published by:
Handle: RePEc:eca:wpaper:2013/249921
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  1. David Dranove & Ginger Zhe Jin, 2010. "Quality Disclosure and Certification: Theory and Practice," Journal of Economic Literature, American Economic Association, vol. 48(4), pages 935-963, December.
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