Energy Consumption and the Durable Building Stock: The Capital Vintage Paradox

The durable building stock 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 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.This implies that there is an exacerbated externality associated with the rising quality of the durable building stock.