Are Building Codes Effective at Saving Energy? Evidence from Residential Billing Data in Florida Grant D. Jacobsen UC Santa Barbara Matthew J. Kotchen Yale University and NBER

Energy Building Codes in the United States The vast majority of states have energy building codes –Response to the 1973 oil embargo –Resource scarcity and national security Heightened concern about energy and climate change All buildings account for –72% of electricity consumption –39% of all energy use –38% of all CO2 emissions Efforts underway to legislate federal building energy codes –Waxman-Markey in the House –Boxer-Kerry in the Senate

Are Energy Codes Effective at Saving Energy? Engineering simulations provide the foundation Challenges in practice –Enforcement and compliance –Behavioral responses: rebound effects –Model calibration Surprisingly little empirical evidence based on field data

Primary Objectives and Conclusions 1.Use residential billing data for an ex post evaluation of an energy-code change in Florida –4% decrease in electricity consumption –6% decrease in natural-gas consumption 2.Estimate costs and benefits of energy-code change –Private payback period 7.5 – 35 years –Social payback period 4 – 27 years

Florida’s 2001 Residential Energy Code Performance-based code relative to a baseline home Goal to bring state into alignment with the International Energy Conservation Code Two major changes in state’s northern climate region –Baseline air-distribution system from “leak-free” to “leaky” –Solar Heat Gain Coefficient reduced from 0.61 to 0.4 Simulations predict 4% savings in space heating/cooling and water heating

Study Area in City of Gainesville Single parcel, residential billing data for customers of Gainesville Regional Utilities with service in 2006 –Electricity (kWh) –Natural gas (therms) Downloaded from Gainesville-Green.com Data on observable characteristics of residences Key variable is Effective Year Built (EYB) –Pre-code change (3 years before) –Post-code change (3 years after) Use billing data for years after code-change (‘04 – ‘06) Monthly weather data (NOAA station)

Summary Statistics Based (64,471 Observations)

Characteristics of Before- vs. After-residences

Empirical Strategies Comparisons of pre- and post-code-change residences –Overall annual average for electricity and natural gas –Differences by month of the year Electricity: summer months Natural gas: winter months Different responses to weather –Focus on how pre- and post-code-change residences respond differently to weather variation –Expect most impact when demand for heating/cooling is greatest

Pre- and Post-Code-Change Comparisons 48 kWh/mo  4%1.5 therms/mo  6.4%

Difference in Electricity Consumption by Month Between Pre- and Post-Code-Change Residences

Difference in Natural Gas Consumption by Month Between Pre- and Post-Code-Change Residences

Conditional Differences in Mean Electricity Consumption by Year of Construction

Conditional Differences in Mean Natural Gas Consumption by Year of Construction

Different Responses to Weather Variability

Private Payback Period Costs Low-emissivity (Low-E) windows cost 10% - 15% more Additional cost to Florida residence $650 - $1,012 Private Benefits Lower utility bills $29 - $89 per year Payback (zero discounting) Best-case: 7.5 years Worst-case: 35 years

Benefits of Avoided Emissions Per Residence Social Payback Period (zero discounting) 4 – 23 years, with all avoided emission benefits 6 – 27 years, excluding CO2 benefits

Conclusions Empirical evidence on impact of Florida’s code change –4% decrease in electricity consumption –6% decrease in natural-gas consumption Comparable engineering prediction of 2% Possible explanations for difference –Regional spillovers (stronger code change in rest of FL) –Confusion about extent of requirement –New appliance efficiency standards (1% electricity) Payback periods: –Private payback period of 7.5 – 35 years –Social payback period of 4 – 27 years

Final Thoughts: Generalizability FL opportune for evaluating potential of energy codes because of strict enforcement 22% of all residences in US are in the same EIA climate region as Gainesville More research needed to understand how energy codes impact other climate regions This study provides a template