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Energy Efficiency in New Office Buildings:
An Investigation of Market Failures and Corrective Policies

Jonathan G. Koomey
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Engineering analyses typically conclude that current practice for new office buildings is significantly more energy intensive than is technically feasible and economically optimal. Economists respond that the marketplace will choose that level of energy efficiency that is justified based on an assessment of transaction costs, information costs, and risk. Both views may be correct, and there still may be justification for policies to increase energy efficiency beyond the levels that the market would otherwise choose.

This research examines the justifications for policies to promote energy efficiency in new office buildings. It investigates the technical evidence for market failures and other sources of divergence of observed from optimal energy efficiency, and explores design, construction, and leasing processes to determine key leverage points for policies. It uses a financial model to examine the effectiveness of different structures for incentive policies.

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 Last Updated On: 8/19/04