Abstract
The implementation of Energy Performance Certificates (EPCs) is expected to reduce energy consumption and carbon emissions by providing actors with information that can be used to make better-informed decisions. This paper is the first to investigate EPCs in the Norwegian residential rental market. Applying the hedonic multilevel approach using information from some 440,000 rental contracts over the period of 2011–2018, we find that labeled dwellings have a premium compared with non-labeled dwellings, and that the premium is increasing with a higher EPC-label. We further define two classes of lessors – professional (real estate agents) and nonprofessionals (homeowners) – to study potential heterogeneity in EPC valuation and find that professionals assign higher rents compared with nonprofessionals. Dwellings with high energy efficiency are associated with a higher premium if rented out by a professional, a significant part of which stemming from higher EPC valuation. The results are robust to a number of heterogeneity analyses and after controlling for sample selection bias and unobserved locational heterogeneity. The findings of this paper signify the necessity to increase awareness and public dissemination regarding the EPC policy.
Highlights
The adverse effects of climate change have created one of the most important and debated issues of recent decades
The EU initiated the Energy Performance of Buildings Directive (EPBD) in 2002, which in turn led to the implementation of Energy Performance Certificates (EPCs) across the European Union
The implementation of energy performance certificates in European housing markets is expected to reduce energy consumption and carbon emissions by creating incentives for the actors involved to invest in improvement of energy efficiency
Summary
The adverse effects of climate change have created one of the most important and debated issues of recent decades. The information from EPC should provide an incentive for stakeholders in this market to invest in energy efficiency because it is expected that improving the energy efficiency of a building may lead to higher transaction prices and rents on the market. In the rental market, there is still a substantial percentage of dwellings advertised without an EPC rating; more than 75 percent of ob servations in our data are non-labeled. One reason for this may be poor diffusion of information about EPC policy by the managing body. Imposing fines for failing to meet requirements regarding technical fa cilities and heating systems are prioritized over imposing fines for lack of certification (Ministry of Petroleum and Energy, 2010)
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