Investments that Make our Homes Greener: The Role of Regulation

Abstract

The operation of residential buildings is responsible for roughly 22% of the global energy consumption and 17% of the CO2 emissions. We study the investments triggered by a regulatory intervention requiring rented properties to satisfy minimum energy efficiency standards. The analysis shows significant investments in low capital expenditure retrofits. We estimate a 1-1.5% rent increase for the average property around the regulatory approval, which is not sufficient to compensate most landlords for the capital expenditures required to comply with the regulations. Moreover, the environmental gains were smaller than the energy ones, limited by the use of more polluting energy sources.