Energy Codes and the Landlord-Tenant Problem

I estimate the energy efficiency premium in unlabeled office buildings by exploiting variation in mandatory building energy standard implementations, as a result of the U.S. 1992 Energy Policy Act. A more stringent energy code leads to rent and price premiums of approximately 4% and 9%, respectively. Significant heterogeneity in the rent premium is observed based on who pays the utility bills, as would be expected absent asymmetric information about energy conservation characteristics among real estate market participants. The rent and price premiums are larger in hotter, more humid climates, and are consistent with full capitalization of the energy savings from a more stringent standard.