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Climate Economics Seminar: Limited Attention in Housing Markets: The Case of Energy Efficiency
October 23, 2014, 11 am - 12:30 pm
Room 4128, William Jefferson Clinton West Building, 1301 Constitution Ave., NW, Washington, DC
Ian Lange (Division of Economics & Business, Colorado School of Mines)
EPA Contact: Carl Pasurka, 202-566-2275
Abstract: From 2007, residential homes in the UK were required to publish an energy performance certificate (EPC) when sold or rented. The EPC reports energy efficiency as a color-coded letter grade (from A-G), and also as a score on a linear 0-100 scale (SAP score). The color-coded letter grades increases the saliency of energy efficiency improvements, especially at certain points of the distribution, relative to a numerical scale. Crucially, at certain thresholds, a one point improvement in SAP score moves the home into a higher letter grade. This paper tests whether these thresholds incentivized sellers and existing home owners to invest in the energy efficiency of their homes. Using data from the English Housing Survey, over 20,000 homes both before (2002-2004) and after (2007-2009) the introduction of EPCs we test whether there is an effect of EPCs on home energy efficiency by testing whether the distribution of homes changes on either side of each letter grade threshold after the EPCs were required. Results find a statistically larger number of households just above the D, C, and B grade threshold. However, it seems that only homes around the D threshold made small improvements to move from just below to just above a D. Homes just above the C and B threshold came from other parts of the distribution.