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  5. The Simpler the Better? Threshold Effects of Energy Labels on Property Prices and Energy-Efficiency Investments

American Economic Journal:
Applied Economics

ISSN 1945-7782 (Print) | ISSN 1945-7790 (Online)

The Simpler the Better? Threshold Effects of Energy Labels on Property Prices and Energy-Efficiency Investments

  • Rodolfo Sejas-Portillo
  • Mirko Moro
  • Till Stowasser
American Economic Journal: Applied Economics (Forthcoming)

Abstract

Using British data on over 7 million residential-property sales, we find that the provision of simplified energy-efficiency (EE) information leads to important market effects. UK legislation requires the use of an energy label that shows an EE rating score (1–100) mapped into arbitrary color-coded rating bands (A–G). Applying a regression-discontinuity design, we document significant price discontinuities at rating-band thresholds, providing evidence of heuristic thinking in the market. Importantly, these price discontinuities influence market behavior as sellers are more likely to make EE investments if their property is just below a threshold. We discuss policy considerations and avenues for future research.

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