Mandatory vs Voluntary Approaches

State & Local Government

• Relatively low implementation costs for state governments.
• Can be passed at the local and/or state levels.
• Helps states and energy efficiency programs identify high energy users, and suggest ways to improve their energy use through efficiency and other measures.
• Can help states meeting clean-energy goals.
• Lessons learned from European Union mandatory disclosure policies that started in 2009 are available online.

• Mandates may be perceived as intrusive or too forceful in the market.
• Transitioning from voluntary to mandatory disclosure programs can be challenging.

Utilities

• Creates a new data resource for states and utilities in identifying efficiency needs.

• Utilities may need to disclose customer data if required by the mandate. This could necessitate changes in how utilities typically capture, store, and distribute such data, as well as raise privacy concerns.

Lenders

• Helps lenders acquire accurate information on energy use when writing mortgages.
• Reduces lenders’ risk of borrower default if buyers’ cash flow is not put at risk from unexpectedly high energy bills.

• Perception of slowing down transaction processes.

Efficiency Programs

• Encourages investments in energy efficiency by building owners.
• Offers utilities a ready residential market for energy efficiency, which can enable the capture of low-cost energy efficiency in their portfolios.

• Perception of command/control policymaking could reduce support for efficiency programs from otherwise allies.

Consumer Market

• Offers new, consistently reported high-value information for owners and purchasers.
• Reduces information imbalance between homebuyers / renters and building owners.
• Reduces the landlord-tenant split incentive; can help rental market value efficiency appropriately.
• Reduces the builder-buyer split incentive, by imposing a disincentive on builders to avoid construction practices that result in poor ratings.

• If mandatory disclosure policies vary from jurisdiction to jurisdiction, it might create confusion in the marketplace.
• Consumers subject to disclosure requirements may view them as burdensome or expensive.

Real Estate Industry

• Standardizes and clarifies market of efficiency information.
• Allows sellers who have already made efficiency improvements to recover a substantial portion of their investment through higher sales prices.

• Perceived burden of providing more information that might be costly and time-consuming to acquire, report and interpret.
• Transition process may add costs to regular operations, particularly in the short-term.

State & Local Government

• When piggy-backed onto existing energy efficiency programs, states can “seed” the market with energy scores, so that consumers, real estate professionals, lenders, and utilities can assess their effects without feeling coerced into adopting a new status quo.
• Strategy is less likely to meet resistance from market players, particularly the real estate industry.

• Creates no certain path for helping states meet clean-energy and other sustainability goals.
• If voluntary disclosure policies vary from jurisdiction to jurisdiction, it might inhibit or delay subsequent timely adoption of mandatory disclosure policies.
• Modeling tools for generating a score based on a dwelling’s assets (energy features) differ, as do jurisdiction goals for home labeling.

Utilities

• Fosters relationship with ratepayers that participation in programs is voluntary, not perceived as coerced energy program.

• Data collection is biased to market, so until large market penetration it remains difficult to focus programs on key market segments.

Lenders

• Works with market to support efficiency programs.
• Allows lenders to differentiate themselves as leaders in this field.

• Home energy data is not standardized and is more difficult to compare, compile, and value.
• Current mortgage products that support energy efficiency valuation are not provided by many lenders, and may be more complicated to sell than conventional mortgage products.

Efficiency Programs

• Mitigates resistance from industries that may oppose mandatory policies.

• In regions that resist energy efficiency programs, uptake for a voluntary program is likely to be low, perpetuating the status quo.
• Voluntary programs may add cost or complexity to program delivery.
• Program administrators may be reluctant to prioritize labeling activities that do not directly lead to increased energy savings or impact.

Consumer Market

• Homebuyers and renters can send a strong signal to the market that they prefer efficient buildings.
• Builds support to show policy makers that the market is ready for mandatory disclosure.

• Unless coupled with statewide labeling guidance, voluntary disclosure policies may prevent states from adopting a single standard for home energy scoring, which makes it difficult for relocating homebuyers to compare energy performance.
• It is difficult to convince consumers to pay for labels on a voluntary basis, in the absence of widespread market adoption and understanding.
• Consumers may be disappointed to receive lower-than-expected scores.

Real Estate Industry

• Allows market to drive efficiency programs, and allows real estate professionals to differentiate themselves as leaders in this field.

• May contribute to a lack of standardization and market confusion surrounding efficiency information.
• May be difficult to get high levels of participation by the real estate industry in a voluntary labeling program.