Does Energy Star Certification Reduce Energy Use in Commercial Buildings?
A new paper finds evidence that the Energy Star program is likely identifying buildings that are already energy-efficient, rather than persuading building owners to make efficiency upgrades.
A number of policies and programs are aimed at reducing energy use in buildings—building energy codes, disclosure laws, energy-use benchmarking, and mandated or subsidized energy audits. In the United States, many of these initiatives are enacted at the state or local level. At the federal level, one of the main programs is Energy Star certification, which provides a label to top energy-performing buildings. In this paper, we evaluate changes in rents and utility expenditures following Energy Star certification using a national sample of over 4,400 office buildings combined with Energy Star data from the US Environmental Protection Agency (EPA). We find that building rents increase by 3.7 percent following certification, but that utility expenditures remain unchanged. We provide novel evidence that buildings do not make upgrades or capital investments to obtain a certification, suggesting that the Energy Star program primarily certifies buildings that are already energy-efficient.
- Rents per square foot in Energy Star certified office buildings in the United States are 3.7 percent higher, on average, than rents in similar uncertified buildings.
- Energy Star certification does not cause a change in building utility expenditures.
- We find no evidence that the Energy Star program causes building owners to invest in building upgrades.
- Taken together, our results suggest that Energy Star serves an information provision function, allowing building owners to communicate to prospective tenants the energy efficiency of their buildings relative to other, similar buildings.
Karen Palmer is a senior fellow at Resources for the Future and an expert on the economics of environmental, climate and public utility regulation of the electric power sector.
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