Protecting the environment is an investment just like any other, and a Binghamton University professor is investigating whether or not those investments pay off.
Environmentally friendly labels like ENERGY STAR use more stringent building codes for new home construction that require pricier materials. To receive an ENERGY STAR label, houses must meet specific guidelines set by the United States Environmental Protection Agency.
These measures include sealing and insulating a home properly and installing high efficiency windows. The ENERGY STAR label also sets guidelines for heating, cooling and water systems to make the home more energy efficient.
Economics professor Carmen Carrión-Flores began studying how having the ENERGY STAR-approved stamp added value to a home in 2010 and found that over time, when the houses were resold, the investment didn’t pay off.
“When the house is brand new and it is initially sold, there is a premium,” Carrión-Flores said. “When houses are resold a couple of times, the premium disappears. That person who paid that initial premium is not able to get it back from another home buyer.”
She discovered the discrepancy while working for the Florida Solar Energy Center. Studying a variety of green technologies at the time, she decided to look specifically at ENERGY STAR, which began in Gainesville, Florida, because of its rising popularity in the green energy market.
Working with Jaren Pope, an economics professor at Brigham Young University, and Chris Bruegge, a graduate student at Stanford University, she compared the sales transactions of ENERGY STAR homes with conventionally built ones in Gainesville and assessed house size, neighborhood and features like building materials and appliances.
In a region known for devastating hurricanes, Florida policy makers have updated building codes to make ordinary houses more durable and construction more energy efficient without necessarily being labeled ENERGY STAR. Pope said that as a result of these changes, the premium paid for ENERGY STAR-labeled homes did not transfer over time.
“If energy efficient homes do not resale at a premium, there is clearly less of an incentive to build residential buildings that are energy efficient,” Pope wrote in an email. “Coming to a better understanding of why the premium fades after initial construction will be an important determinant of the success of the ‘Energy Star’ program in the future.”
Carrión-Flores said that the local policy in Gainesville makes houses without the ENERGY STAR label equally as efficient as those with it at a lesser price.
“We’re not saying anything about whether or not it’s worth it to buy an ENERGY STAR home,” Carrión-Flores said. “What we’re doing is just analyzing the capitalization of the ENERGY STAR label into the housing market.”
Though Carrión-Flores did not make any conclusions about the ENERGY STAR label, her findings have inspired a second study that will measure how efficient the ENERGY STAR label really is by measuring the energy consumption. The new study is currently underway.
According to Carrión-Flores, whether it is the environmentalist buying an ENERGY STAR home or a prudent investor looking to save money down the line, both homeowners are still trying to protect the planet.
“The most rewarding part has been finding that consumers can make an investment in an asset, such as a house, while also investing in the environment and trying to protect it,” Carrión-Flores said.