Energy benchmarking

has been picking up the pace across the U.S., with the Midwest recently getting in on the action when Minneapolis instituted energy disclosure laws earlier this year and Boston now weighing legislation.

But not everyone is convinced that the rules are worth the cost. A new paper by Robert Stavins, an environmental economist at Harvard University, which was funded by opponents of the rule, asks whether mandatory benchmarking and auditing rules can achieve what they’re meant to do, which for Boston, is cutting carbon dioxide emissions from buildings.

“One would be somewhat pessimistic about these approaches,” said Stavins. “When we look at it empirically, there hasn’t been very much time, and there is no single study that offers a rigorous approach that shows a positive effect.”

The analysis breaks down the energy efficiency paradox: businesses and homeowners don’t necessarily invest in cost-effective energy-efficient technologies. Stavins focuses on the market and behavioral failures that create the paradox.

He notes that issues such as the tenant-owner problem (who pays vs. who gets the benefit) and capital constraints aren’t necessarily addressed by benchmarking disclosure laws.

While he is correct that benchmarking rules don’t necessarily come with a pile of money to help inefficient buildings, the data coming from the disclosure could help utilities or other market players design more effective energy-efficiency programs to target the lowest-performing buildings. Stavins would like to see benchmarking rules as part of more comprehensive approach to building efficiency.

As for the problem of split incentives between owners and renters, it is also true that disclosure laws do not address the problem, but the laws are not meant to operate in a vacuum. Studies have already shown that buildings with better energy performance can charge more, and more large companies are looking for LEED-certified or other green buildings to call home. But Stavins noted that in many studies that have found higher price correlation, causality was not necessarily clear.

In the paper, Stavins says individuals might not have the desired reaction to an energy score and won’t necessarily cut use. But then he notes, “While behavioral failures may affect individual consumer decisions, firms that are subject to competitive market forces are much less likely to suffer from these problems.”

All of the benchmarking scores, however, are aimed at large commercial or multifamily buildings, and not individual residents. And while businesses are more likely than an individual to make decisions based on the bottom line rather than a whim, repeated studies have found that there is still a lot of operating inefficiencies and low-hanging fruit in commercial facilities.

Stavins does not go so far as to discredit benchmarking rules, but he does question how much they can accomplish. “Relatively simple 'energy intensity' scores may be relatively low-cost, but are likely to create only limited benefits,” he writes, while adding that more comprehensive requirements could cost too much money.

One of the problems with benchmarking is that it is still early days in the U.S., and even worldwide, data is lacking. Stavins found only one empirical study looking at benchmarking, but it looked at residential programs in Denmark and found little benefit. However, residential programs are known to be very difficult to run successfully. Some reports, which are not as rigorous as academics like Stavins would like to see, found that benchmarking could cut 5 percent to 7 percent of energy use in buildings.

The upside of new benchmarking rules is that, while the benefits might be limited, a small gain in efficiency over a large swath of buildings could be substantial. Also, the data coming from these programs, much of which is public, can help build better policy and more effective energy-efficiency programs.

For cities that are leading by example, such as New York and Washington, D.C., benchmarking has already allowed them to identify problematic sections of the municipal building stock and take actions -- whether that’s a full-fledged energy audit or simply changing the rules for how building managers monitor equipment. 

Although many supports of such measures say that awareness drives action, Stavins is waiting for empirical data to prove him right. “For building label policies to generate economic benefits,” he wrote, “they need to foster changes in occupant energy use or energy-efficiency investment decisions.”

For others, however, the data coming from the benchmarking rules, even if it’s an imperfect Energy Star score, is exactly what will drive market and behavioral shifts that will put energy efficiency front and center.