01/02 Anca Voia (CIRED)

Abstract

We examine an increasingly discussed explanation for the performance gap in building energy efficiency: quality defects. We specifically ask whether they result from hidden actions or skills shortage. The question has important implications for striking the right balance between monitoring & verification (M&V) and training policies. Using data from 1,340 ex-post building audits, we find suggestive evidence that defects are more frequent, and of a higher severity, for those energy efficiency measures that cannot easily be verified by a non-expert than for those that can. The problem is equally affecting new construction projects and renovation projects. While bottom-line defects are substantial enough to motivate training policies, our results call for additional M&V policies aimed at reducing information asymmetries between building owners and retrofit contractors. While the existing literature has focused on how the performance gap varies with the informational context, implicitly assuming quality defects in between, our analysis documents the missing link between the informational context and quality defects.