Stranded houses? The price effect of a minimum energy efficiency standard

Climate policies aimed at reducing greenhouse gas emissions can lead to decreases in the values of assets, risking them to become stranded. We study the price effects of the introduction of a specific climate policy, a minimum energy efficiency standard, in the housing market. Leveraging a unique data set of the population of all residential house transactions in England and Wales, we show that prices of energy-inefficient properties affected by this policy decreased on average by about 5k pound to 9k pound relative to efficient ones. We interpret this evidence as being consistent with semi-strong market efficiency in the housing market.

Automated summary

Climate policies aimed at reducing greenhouse gas emissions can lead to decreased asset values, risking them to become stranded. In this study, we examine the price effects of a specific climate policy, a minimum energy efficiency standard, in the housing market. Using a unique dataset of all residential house transactions in England and Wales, we find that energy-inefficient properties affected by this policy experienced an average decrease in prices by about £5,000 to £9,000 relative to efficient ones. We interpret this evidence as consistent with semi-strong market efficiency in the housing market.