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LEED vs. ENERGY STAR: A Cost/Benefit Analysis of Sustainability Labels for Commercial Buildings
Abstract
Existing commercial buildings are at the forefront of efforts to address climate change
through the implementation of energy efficiency upgrades and other sustainability
measures. These efforts have been supported by both public and private organizations,
and appear to be gaining momentum as the United States continues to search for ways
to make its existing and future infrastructure more sustainable. As a result of the
push for more green buildings, many real estate investors have elected to pursue sustainability
labels for their existing building portfolios, including the ENERGY STAR rating and
Leadership in Energy and Environmental Design - Existing Buildings: Operations & Maintenance
(LEED-EBOM) certification. These labels are designed to certify and verify a commercial
building’s operating efficiency with respect to sustainability and environmental impact.
There is much industry speculation over whether these labels contribute to overall
building value for the investor, and if other intangible benefits exist for owners/operators
and/or building occupants.
This project attempts to provide institutional real estate investors, such as real
estate investment trusts (REITs), with general guidelines for selecting one of the
aforementioned sustainability labels based on its potential contribution to building
value and possible reductions in carbon dioxide emissions attributable to building
operations. Analyses were conducted using fundamental real estate valuation models
and industry data to evaluate financial and environmental costs and benefits associated
with the ENERGY STAR and LEED-EBOM building labels. Financial costs and benefits
were analyzed using the direct capitalization valuation model, as well as simple and
discounted payback models. Other materials and resources associated with the ENERGY
STAR and/or LEED-EBOM labels contributing to other possible benefits were analyzed
qualitatively.
The results of these analyses indicate that both the ENERGY STAR and LEED-EBOM labels
may increase overall building value, while reducing operations-based carbon dioxide
emissions. In addition, the results reveal that one label cannot be deemed absolutely
superior to the other, and that selection depends upon other factors specific to the
investor and/or building project. Based on these findings, a set of general guidelines
has been provided to assist real estate investors evaluate the merits and drawbacks
associated with the ENERGY STAR and LEED-EBOM sustainability labels for existing commercial
buildings. It is my hope that these guidelines will enable real estate investors
to make sound financial and environmental decisions when implementing strategies to
make existing commercial building operations more sustainable.
Type
Master's projectPermalink
https://hdl.handle.net/10161/3571Citation
Hiser, Stephen (2011). LEED vs. ENERGY STAR: A Cost/Benefit Analysis of Sustainability Labels for Commercial
Buildings. Master's project, Duke University. Retrieved from https://hdl.handle.net/10161/3571.Collections
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