The effectiveness of climate change regulations in the commercial real estate market

Yana Akhtyrska and Franz Fuerst

Energy Policy, 2024, vol. 185, issue C

Abstract: Legislation to increase building energy efficiency is a key climate change policy instrument in many countries. Although most of these regulations concern the housing stock, office buildings are also a considerable source of greenhouse gas emissions. Office markets face fewer pricing regulations than the residential market and may thus provide a clearer pricing signal of any policy impacts. This paper focusses on the introduction of Minimum Energy Efficiency Standards (MEES) in England and Wales. Applying machine-learning methods, Difference in Differences (DiD) and Fixed Effects (FE) panel data estimation to a comprehensive database of the London office market, our results suggest that the MEES policy has had a measurable and significant impact and lowered the rents of the combined group of affected office units by 6–8% following the announcement of MEES and in the run-up to implementation. A weakly significant 4.4% rental discount is detected for the bordering but unaffected class of EPC E-rated office buildings relative to the A–C EPC group, perhaps due to market expectations of a further expansion of MEES.

Keywords: Minimum energy efficiency standards (MEES); Commercial real estate; Policy evaluation; Real estate pricing (search for similar items in EconPapers)
Date: 2024
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:enepol:v:185:y:2024:i:c:s0301421523005013

DOI: 10.1016/j.enpol.2023.113916

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