Does the Literature Support a High Willingness to Pay for Green Label Buildings? An Answer with Treatment of Publication Bias

Abstract

Increasing attention is being paid to the building sector due to its importance in the climate change debate. In recent years, a growing literature on the price premium paid by consumers to access more energy efficient and sustainable buildings has emerged as a common topic in hedonic model estimations. In this paper, we aim to provide a summary of this literature by conducting a metaanalysis of more than 50 studies from around the world. In this way, based on a random effects models and weighted OLS robust clustering estimations, we offer an average estimation of the price premium accepted by economic agents (in terms of sale prices) in order to enjoy energy efficient and sustainable buildings. This supports the argument that investing in building refurbishment is worthwhile and economically relevant. However, our data seem to show a major publication bias. Correcting for this bias leads us to halve the original estimation (from 8% to 4%). In addition, we analyze the sources of result dispersion by performing a meta-regression using different moderators (type of publication, bibliometric variables, sample analysis period, econometric method, etc.). We also carry out different statistical tests and use alternative selection criteria in order to check whether our estimations are robust. Finally, we make recommendations for future hedonic studies as well as for upcoming metaanalyses of the green building premium.

Meta-Analysis of Price Premiums in Housing with Energy Performance Certificates (EPC)

“…If comparing the overall combined effect (4.20%) obtained in this document with similar studies, it is found that the first meta-analysis in 2014 obtained a premium of 7.6% [19], and the second in 2016 obtained 4.3% [20], while the third in 2018 had a range of values from 3.5-4.5% [22]. It is observed that the premium obtained in this study is coherent with other studies and the mean effect of the premium has stabilized.…”

“…Another problem found in this research is the lack of data in the existing studies, which complicates and restricts the use of the meta-analysis, as indicated by authors such as [22] and [115].…”

“…The last document, Fizaine et al [22], conducted a systematic review with meta-analysis and meta-regression, to determine the economic premium in the sales price of the housing, using 54 documents which include 79 registers. The authors found that the economic premium varied between 3.5% and 4.5%, once correcting for publication bias.…”

“…The lowest values are those of [32,67,87], while the highest are [38,55,62,69]. To avoid this variability, it is recommended that mandatory labels be used in both America and Asia, as suggested by Fizaine et al [22]. Ankamah-Yeboah and Rehdanz [19] believe that greater premiums are obtained in the voluntary labels, since they consider that these are more highly valued than the mandatory ones, but they advocate policies that implement mandatory labeling, since it is understood that voluntary labeling tends to lose value over time.…”

“…Therefore, it is recommended that in future studies, qualification letter groupings should not be used and the reference qualification should always be the same (recommending the letter D), as suggested by Fizaine et al [22].…”