DP19992 Certification, Manipulation and Competition: Evidence from Energy Performance Certificates
In this paper, we investigate the relationship between competition and certification quality in the Energy Performance Certificates (EPCs) market, which provides mandatory information on the energy performance of dwellings in European countries. Using French administrative data, we present evidence that the distribution of EPCs exhibits bunching at the cut-off points between energy performance classes, suggesting that some certificates are manipulated to secure a more favorable label. Our empirical analysis shows that the likelihood of manipulation increases when certifiers face heightened competition. This effect can be explained by the fact that certifiers, who are paid by potential sellers, are incentivized to issue more lenient certifications to attract clients. Additionally, we demonstrate that labels indicating higher energy efficiency are associated with significant house price premiums. As a result, manipulation has distributional effects, increasing sellers’ gains at buyers’ expense.
