Empirics on the Long-Run Effects of Building Energy Codes in the Housing Market

Abstract

We study the effectiveness of building energy codes, taking a long-run perspective. The focus is on regulation’s impact on energy demand in both high- and low-quality residences, in other words, the diffusion and the entry of “green” buildings in the housing market. We develop a measure for regulation intensity and apply this to a panel-error-correction regression model for energy requirements of a large sample of German apartment houses built between 1950 and 2005. We showthat regulation is effective in saving energy. In particular, regulation pushes investors in the low-quality housing market segment toward the technological frontier. Indirectly, it also affects the high-quality segment.