Valuing energy performance certificates in the Portuguese residential

Informational instruments such as energy performance certificates have been widely adopted by many governments during the last decade to promote energy efficiency in the residential sector. The objective of these instruments is to reduce the informational and behavioural failures that avoid consumers from taking efficient decisions regarding dwelling energy efficiency. The European Commission approved in 2012 the Energy Performance of Buildings Directive, which states that a certificate must be made available to buyers or tenants in the moment the dwelling is sold or rented out. Despite the rapid diffusion and interest this type of instruments have raised, little is known about its effectiveness. We provide the first analysis on consumers’ willingness to pay for energy performance certificates in a Southern European Country: Portugal. Portugal is an interesting case study because this Directive is fully and properly implemented, and the level of consumer’s awareness is high. We construct a database that contains a large number of dwelling attributes, including energy efficiency characteristics, such as heating or air conditioning systems, gas or solar energy sources. These characteristics allow us to isolate the effect of the certificate on the price. We use the two-step Heckman procedure to estimate a hedonic price function for dwellings. Our results show that Portuguese consumers have a high valuation for high rated dwellings.