The next time you drive to a suburban mall or stare at an office building ask yourself the following question; how much electricity consumption do these buildings consume? Given the unpriced environmental externalities associated with such consumption, this is a mildly interesting question. In this new NBER Working Paper, Nils Kok, John Quigley and I provide some answers.
I hope this paper demonstrates the continuity in my Green Cities research agenda. I have studied the urban pollution created by urban cars, residential housing, and electric utilities. With Nils and John, I moved on to commercial real estate. With co-authors in China, I’m also re-examining similar questions there.
Here’s the abstract:
Commercial real estate plays a key role in determining the urban sustainability of a metropolitan area. While the residential sector has been the primary focus of energy policies, commercial buildings are now responsible for most of the durable building stock’s total electricity consumption. This paper exploits a unique panel of commercial buildings to investigate the impact of building vintage, contract incentives, and human capital on electricity consumption across commercial structures. We document that electricity consumption and building quality are complements, not substitutes. Technological progress may reduce the energy demand from heating, cooling and ventilation, but the behavioral response of building tenants and the large-scale adoption of appliances more than offset these savings, leading to increases in energy consumption in more recently constructed, more efficient structures.
Cross-posted with modifications from the Environmental and Urban Economics blog.