What are the implications of the use of discrete energy efficiency labels in the housing market? Using public administrative data from France, where properties are evaluated on a scale from A to G, we show that house prices drop---but time on the market jumps---discontinuously when energy consumption crosses the boundary to a lower rating. These results suggest that, when searching for a home, households form consideration sets excluding properties with energy labels that are considered too unfavorable. We also document substantial bunching of energy performance estimates just below the relevant cut-off values. This pattern appears to be driven by intentional misreporting of properties' energy efficiency by certified technicians. However, we estimate that the average underreporting by marginal bunching technicians is relatively small in economic terms, namely 0.7--1.9% of the relevant energy consumption threshold value.

Reducing the carbon emissions from housing needs to be a key part of government strategies to reach Net Zero carbon emissions by 2050. We assess how strong the existing market incentives are for owners to increase the energy efficiency of their properties by calculating the capitalisation rate of energy efficiency improvements (CREEI). Residential sales records for England and Wales are linked with their Energy Performance Certificates (EPCs) to provide detailed characteristics on each property, including its energy performance, recommended energy efficiency improvements, and associated costs. A proxy for plot size is added. This proxy is constructed using the exact geographic location of each property. We then estimate a hedonic model to predict the increase in property prices if all EPC recommendations were implemented. As a robustness check, the hedonic results are shown to be similar to those obtained from a repeat-sales sample of properties that increased energy efficiency between sales. The CREEI results show that prices for most property types and regions over the period 2014-2022 rise by less than the costs of the energy efficiency improvements. Hence, the UK Government may need to provide incentives to property owners if it is to meet its Net Zero carbon emissions target.

This paper investigates the implications of a recently introduced minimum energy performance standard, a supply-side regulation aimed to reduce the energy consumption of the office stock. The regulation announced in 2018 requires all office buildings larger than 100 m2 to have an energy label C (on a scale from G to A) from 2023 onwards. We use both sale and rent transaction data gathered from the the Dutch Realtor Association, in combination with data from the energy label database from the Netherlands Enterprise Agency. Employing a difference-in-differences (DiD) model, results indicate a 19.9% higher selling price for offices with an energy label above C, after the announcement of the regulation in 2018. Meanwhile, we find a 5% rent discount for commercial buildings with label D or lower, but no significant effect of the regulation for offices specifically. This finding suggests that the effect of the regulation largely affects investors rather than tenants. We also observe improvements in the energy performance of office buildings, as measured by changes in the energy label. After the announcement of the label-C obligation, office buildings, on average, increase 0.30 of an energy label, relative to other property types.

Mandatory energy efficiency disclosure policies are increasingly being used by governments around the world to reduce information-driven market failures. We exploit two policy changes in Flanders to study the causal effect of mandatory energy efficiency disclosure policies on house prices. We find that the introduction of mandatory energy performance certificates with an energy efficiency score in 2008 did not affect the association between energy efficiency and sales prices, indicating that the policy change did not reduce information frictions. However, the introduction of EPC labels in 2019 affected the willingness to pay for energy efficiency.