Investments that Make our Homes Greener: The Role of Regulation

The operation of residential buildings (our homes) is responsible for roughly 22% of the global energy consumption and 17% of the CO2 emissions. We study the effects of a regulatory intervention aiming to reduce carbon emissions by requiring privately rented properties to satisfy minimum energy efficiency standards. The regulation triggered significant investments in the rental sector. However, the environmental gains were smaller, limited by the use of more polluting energy sources. Regulatory interventions that target carbon emissions directly may be more effective in tackling the climate challenge.