Valuation of energy performance certificates in the rental market - Professionals vs. nonprofessionals

The implementation of Energy Performance Certificates (EPCs) is expected to reduce energy consumption and carbon emissions by providing actors with information that can be used to make better-informed decisions. This paper is the first to investigate EPCs in the Norwegian residential rental market. Applying the hedonic multilevel approach using information from some 440,000 rental contracts over the period of 2011-2018, we find that labeled dwellings have a premium compared with non-labeled dwellings, and that the premium is increasing with a higher EPC-label. We further define two classes of lessors - professional (real estate agents) and nonprofessionals (homeowners) - to study potential heterogeneity in EPC valuation and find that professionals assign higher rents compared with nonprofessionals. Dwellings with high energy efficiency are associated with a higher premium if rented out by a professional, a significant part of which stemming from higher EPC valuation. The results are robust to a number of heterogeneity analyses and after controlling for sample selection bias and unobserved locational heterogeneity. The findings of this paper signify the necessity to increase awareness and public dissemination regarding the EPC policy.