The next time you drive to a suburban mall or stare at an office building ask yourself the following question; how much electricity consumption do these buildings consume? Given the unpriced environmental externalities associated with such consumption, this is a mildly interesting question. In this new NBER Working Paper, Nils Kok, John Quigley and I provide some answers. This paper took us 3 years to write. There is always a silver lining and in this case --- we eventually figured out how we wanted to tell our story.

So, I hope you see the continuity to my research agenda. I have studied the urban pollution created by urban cars, residential housing, electric utilities, and now I've moved on to commercial real estate. With my co-authors in China, we are re-examining similar questions there. There is a certain continuity to my Green Cities research agenda.

Commercial Building Electricity Consumption Dynamics: The Role of Structure Quality, Human Capital, and Contract Incentives

Matthew E. Kahn, Nils Kok, John M. Quigley

NBER Working Paper No. 18781
Issued in February 2013
NBER Program(s): EEE

Commercial real estate plays a key role in determining the urban sustainability of a metropolitan area. While the residential sector has been the primary focus of energy policies, commercial buildings are now responsible for most of the durable building stock’s total electricity consumption. This paper exploits a unique panel of commercial buildings to investigate the impact of building vintage, contract incentives, and human capital on electricity consumption across commercial structures. We document that electricity consumption and building quality are complements, not substitutes. Technological progress may reduce the energy demand from heating, cooling and ventilation, but the behavioral response of building tenants and the large-scale adoption of appliances more than offset these savings, leading to increases in energy consumption in more recently constructed, more efficient structures.