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

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  • Luisa Dressler
  • Elisabetta Cornago

Abstract

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.

Suggested Citation

  • Luisa Dressler & Elisabetta Cornago, 2017. "The Rent Impact of Disclosing Energy Performance Certificates: Energy Efficiency and Information Effects," Working Papers ECARES ECARES 2017-16, ULB -- Universite Libre de Bruxelles.
    • Handle: RePEc:eca:wpaper:2013/249921
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    Cited by:

    1. Heffernan, Troy William & Daly, Matthew & Heffernan, Emma Elizabeth & Reynolds, Nina, 2021. "The carrot and the stick: Policy pathways to an environmentally sustainable rental housing sector," Energy Policy, Elsevier, vol. 148(PA).
    2. Taruttis, Lisa & Weber, Christoph, 2022. "Inefficient Markets for Energy Efficiency - Empirical Evidence from the German Rental Housing Market," VfS Annual Conference 2022 (Basel): Big Data in Economics 264056, Verein für Socialpolitik / German Economic Association.
    3. Louis-Gaëtan Giraudet, 2018. "Energy efficiency as a credence good: A review of informational barriers to building energy savings," Policy Papers 2018.04, FAERE - French Association of Environmental and Resource Economists.
    4. Maria-Francisca Cespedes-Lopez & Raul-Tomas Mora-Garcia & V. Raul Perez-Sanchez & Juan-Carlos Perez-Sanchez, 2019. "Meta-Analysis of Price Premiums in Housing with Energy Performance Certificates (EPC)," Sustainability, MDPI, vol. 11(22), pages 1-59, November.
    5. Khazal, Aras & Sønstebø, Ole Jakob, 2020. "Valuation of energy performance certificates in the rental market – Professionals vs. nonprofessionals," Energy Policy, Elsevier, vol. 147(C).
    6. Bian, Xueying & Fabra, Natalia, 2020. "Incentives for information provision: Energy efficiency in the Spanish rental market," Energy Economics, Elsevier, vol. 90(C).

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    More about this item

    Keywords

    asymmetric information; voluntary information disclosure; energy performance certificates; energy efficiency;
    All these keywords.

    JEL classification:

    • C21 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • Q48 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Government Policy
    • R31 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Housing Supply and Markets

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