Conference Agenda

Building energy codes are a central tool for reducing residential greenhouse gas emissions, yet most evaluations focus only on energy savings in newly constructed homes. This paper shows that such policies induce important housing- and land-market adjustments with first-order welfare implications. Using a monocentric city model with durable housing, we demonstrate that policies increasing non-land construction costs reduce both construction and demolition, extending the lifetime of existing housing. We test these predictions using quasi-experimental variation from the staggered implementation of the EU Energy Performance of Buildings Directive in Belgium. Difference-in-differences estimates reveal large declines in construction and demolition, alongside increased sales of existing homes and a contraction in land markets. While energy use in the new housing stock falls substantially these gains are partly offset by consumer surplus losses, energy leakage to the existing stock, and windfall losses for landowners. Accounting for these general-equilibrium effects is crucial for assessing the cost-effectiveness of building energy codes.