Report on the Economic Effects of Mandatory Energy Labeling for Buildings

Principal Todd Schatzki, Vice President Jonathan Borck, and Harvard University professor and Analysis Group affiliate Robert Stavins authored a report, "An Economic Perspective on Building Labeling Policies" (March 28, 2013), that examined the extent to which mandatory energy labeling for commercial properties results in reduced energy use. The research, sponsored by the Building Owners and Managers Association International and the Greater Boston Real Estate Board, assessed the impact of new laws throughout the United States mandating that property owners measure and publicly report buildings' energy efficiency performance through benchmarking indices.

The assessment of mandatory building labeling policies identified many limitations to these policies that merit full consideration before proceeding with new programs. Among the report's findings:

• Building energy labels differ greatly from the energy labels currently placed on consumer products such as refrigerators and automobiles. The labels provide no information on energy costs or savings, for instance, nor any information on ways that building owners can improve a property's energy use.
• Building labels could affect property values -- those receiving a "green" score could see an appreciation in market value while those receiving a "brown" score could experience depreciation.
• The premium associated with building energy labels may "overvalue" the underlying energy savings, suggesting that other factors could be affecting market decisions.
• Measuring program impacts is challenging, and mandatory requirements in US cities have only recently gone into effect. Best practices, therefore, have been difficult to establish.

The research has been cited in several media outlets, including Banker & Tradesman and The Boston Globe.