Are Green Buildings Really 'Greener'? Energy Efficiency of Green Mark Certified Buildings in Singapore

There is no conclusive evidence in the existing literature to show that green buildings save more energy than conventional buildings. Why do buyers pay premiums for green buildings? This study empirically examines whether the “Green Mark” (GM) certification is either a signal for energy efficiency in buildings or a reputational signal segregating developers in the pooling equilibrium. Using a unique panel of electricity consumption data for a large sample of residential buildings in Singapore, we do not find significant differences in energy consumptions between GM-certified buildings and non-GM-certified buildings, on the days when the sky is shrouded by strong haze and the energy consumption in the buildings is relatively high. However, we find that the average transaction price of GM-certified dwellings is 1.61% higher than that of the comparable not GM-certified dwellings. With a difference-in-difference approach, we show significant and positive GM labeling announcement effects on housing prices and energy consumption. An instrumental variable approach is employed to deal with potential omitted variable bias and reverse causality issues between energy consumption and housing prices and to determine whether green housing is a sound investment that leads to intangible returns. The 2SLS estimates indicate that electricity consumption has no effect on housing prices implying that green housing premiums may not be as valuable without providing the expected energy savings