The simpler the better? Threshold effects of energy labels on property prices and energy efficiency investments

Sejas-Portillo, Rodolfo, Moro, Mirko and Stowasser, Till (2025) The simpler the better? Threshold effects of energy labels on property prices and energy efficiency investments. American Economic Journal: Applied Economics, 17 (1). 41 - 89. ISSN 1945-7782

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Abstract

Using British data on over 7 million residential property sales, we find that the 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, indicating heuristic thinking in the market. 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. (JEL D91, K32, Q48, R31)

Item Type:	Article
Divisions:	Geography & Environment
Subjects:	H Social Sciences > HC Economic History and Conditions H Social Sciences > HD Industries. Land use. Labor
JEL classification:	D - Microeconomics > D9 - Intertemporal Choice and Growth > D91 - Intertemporal Consumer Choice; Life Cycle Models and Saving K - Law and Economics > K3 - Other Substantive Areas of Law > K32 - Environmental, Health, and Safety Law Q - Agricultural and Natural Resource Economics; Environmental and Ecological Economics > Q4 - Energy > Q48 - Government Policy R - Urban, Rural, and Regional Economics > R3 - Production Analysis and Firm Location > R31 - Housing Supply and Markets
Date Deposited:	24 Jan 2025 08:54
Last Modified:	24 Jan 2025 08:54
URI:	http://eprints.lse.ac.uk/id/eprint/127048

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