NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Are Building Codes Effective at Saving Energy?

The average new Gainesville home built after the new code took effect used 48 kWh [4 percent] less electricity and 1.5 fewer therms [6 percent less natural gas] per month than a home built right before the code took effect.

Since the oil embargo of 1973, most states have tried to improve energy efficiency by making their residential building codes more stringent. Now U.S. legislators are looking to implement national energy-efficiency codes as part of energy and climate bills. But little is known about whether the new codes will save energy.

In a recent NBER Working Paper, Are Building Codes Effective at Saving Energy? Evidence from Residential Billing Data in Florida (NBER Working Paper No. 16194), co-authors Grant Jacobsen and Matthew Kotchen look at how a change in Florida's code worked in Gainesville. The researchers conclude that these changes decreased electric consumption by 4 percent and natural gas consumption by 6 percent.

In March 2002, Florida implemented changes in its building code that effectively called for newly constructed homes to be more energy efficient. Especially important for northern Florida, where Gainesville is located, the code encouraged builders to use low-emissive or "low-E" windows, which reduce the amount of solar heat that comes into a home. In this study, the first to evaluate changes in an energy code by looking at monthly electric and natural gas bills, the authors consider 1,293 homes in Gainesville built in the three years before the energy-code change and another 946 homes built within three years after the change. By comparing the electricity and natural gas bills of each group, and controlling for observable characteristics of each residence, they find that the newer homes did consume less energy. The average new Gainesville home built after the new code took effect used 48 kWh less electricity and 1.5 fewer therms per month than a home built right before the code took effect. That works out to $106 a year in energy savings. However, it cost an estimated $675 to $1,012 to install the low-E windows to achieve that savings. Thus, "under the very best-case scenario – a 10 percent premium for low-E windows and a zero discount rate – the private payback period is roughly 6.4 years," the authors conclude.

Overall, the decreased consumption of electricity and natural gas allowed the Gainesville area to avoid environmental damages of between $14 and $85 per household per year. Under the best-case scenario, that means a social payback of 3.5 years, the authors find. Much of those avoided damages involve carbon-dioxide emissions, which affect a far broader area than Gainesville. If those benefits are excluded from the analysis, the best-case social payback stretches out to 5.3 years.

The results are consistent with other studies, which have shown a decline of anywhere from 3 percent to 13.7 percent in electricity consumption as a result of higher building standards. And, the results were better than the 2 percent improvement that engineers' simulations predicted. "[E]nergy codes can in fact reduce energy consumption with magnitudes relatively close to simulation estimates," the authors conclude.

"Gainesville, Florida might be considered an opportune place to study the impact of energy codes for several reasons," they explain. "Florida ... is known to have generally strict enforcement of building codes, due to the risks of major hurricane events. [In addition], 22 percent of all U.S. residences are in the same national climate region as Gainesville (EIA 2009), meaning that energy-code effects in Gainesville might be somewhat representative of how energy codes affect more general regions of the country."

-- Laurent Belsie

The Digest is not copyrighted and may be reproduced freely with appropriate attribution of source.
 
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