Can green labels become the new normal?

Abstract

This study sought to review the effectiveness of green labels on the residential real estate market. As past studies revealed, green labels increased property prices, which motivated developers to build more green certified buildings. However, contradictory studies revealed that many developers did not use green labels due to a lack of consumer demand. Therefore, what impact do green labels have on the residential housing market? A meta-analysis of 36 articles presenting 52 different studies, published between 2008-2018, suggests that the price premium charged for green labels may have been systematically overestimated. Consumers’ willingness-to-pay (derived from correlating green labels with purchase price) does not necessarily represent the average consumer but green consumers. The conclusion that follows from this analysis is that full market transformation via green labels is unlikely to take place because only a fraction of the population is willing to pay the premium. Therefore, full adoption is unlikely without other market “interventions”.