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Hilber, Palmer, Pinchbeck - Does Historic Designation Induce Higher Energy Costs?

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From: Christian Hilber, Charles Palmer and Ted Pinchbeck

To: Heritage preservation policymakers

Date: May 23, 2018

Re: Does Historic Designation Induce Higher Energy Costs?

Policies to preserve buildings, including privately-owned homes, for historical, cultural or architectural reasons are widespread across Europe and North America. In Canada, a designation under the Ontario Heritage Act, for instance, confers legal status on properties, which gives Toronto City Council the legal authority to refuse any application that would adversely affect the property’s heritage attributes.

With an economic rationale centred on the external value of heritage, historic preservation policies typically put limits on the alterations to designated buildings. One potential implication is to reduce the uptake of energy-efficiency measures. These, in turn, could increase the private costs of energy consumption to homeowners, along with the associated social costs such as greenhouse gas emissions, thus contributing to climate change.

In our recent study published by the Grantham Research Institute on Climate Change and the Environment at the London School of Economics, we quantify the foregone energy efficiency savings and the social cost of carbon from historic preservation policies in England. There, approximately one in 10 homes is preserved, either individually as a ‘Listed Building’, similar to ‘Part IV’ designation in Toronto, or as one within a ‘Conservation Area’, akin to Toronto’s Heritage Conservation District designation (‘Part V’). Conservation areas protect whole neighbourhoods rather than just individual homes. There are around 400,000 Listed Buildings in England, and about two million buildings are located within 8,000 conservation areas.

In many conservation areas, planning consents are required for external improvement projects, e.g., making changes to windows. For listed buildings, the requirements are stricter and also cover internal upgrades, e.g. cavity wall insulation. Some restrictions may not prevent energy efficiency improvements altogether, but could drive up homeowners’ costs. For instance, a homeowner wishing to install new, energy-efficient windows may be obliged to install expensive timber windows of a particular make, rather than less costly and more energy-efficient aluminium or uPVC windows.

We empirically estimate the impact of historic preservation policies on domestic energy consumption between 2006 and 2013—a period with rising energy prices. Controlling for income and a number of other factors, such as the age and type of the housing stock and the geographical location of the neighbourhood, we demonstrate that energy price increases lead to a very significant reduction in energy consumption but that this response was much more muted in neighbourhoods with a high degree of historic preservation.

We estimate that historic preservation policies—conservation areas and listed buildings—added about £3.8 billion to energy bills between 2006 and 2013 – approximately £240 per year for each home designated as a listed building or located in a conservation area. These lost energy savings as a consequence of historic preservation policies during the sample period were equivalent to the emission of 20.1 million tonnes of carbon dioxide. Using UK government assumptions about abatement costs, this amounts to an additional social cost of £1.23 billion. (Of course, Canada has far fewer heritage designations, so the potential per capita costs would be lower.)

In conclusion, our study points to important—and so far unquantified—internal and external costs of historic preservation policies. Policy makers ought to consider these costs when deciding on designations, determining the stringency of preservation rules, or setting energy-efficiency targets. Put differently, solely focusing on the benefits of preservation policies and ignoring the adverse impacts of the policies on energy consumption may lead to undue levels of preservation and energy-efficiency targets that are excessively costly or unfeasible to achieve altogether.

 

Christian Hilber is professor of economic geography at the LSE and an associate at the Centre for Economic Performance (CEP) and the Spatial Economics Research Centre (SERC), Charles Palmer is associate professor of environment and development at the LSE, and associate of the Grantham Research Institute on Climate Change and the Environment and Ted Pinchbeck is a research officer at the CEP and SERC.

 

To send a comment or leave feedback, email us at blog@cdhowe.org.

The views expressed here are those of the authors. The C.D. Howe Institute does not take corporate positions on policy matters.

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