Public-Sector “Green” Buildings Spur Private Sector Ones

Municipalities sometimes try to demonstrate their commitment to sustainability by creating “green” structures for their public-sector buildings. Does this really achieve much of anything beyond symbolism? Timothy Simcoe and Michael Toffel find that it does, specifically that public-sector investment in green buildings seems to stimulate greenness in the private sector:

We measure the impact of municipal policies requiring governments to construct green buildings on private-sector adoption of the U.S. Green Building Council’s Leadership in Energy and Environmental Design (LEED) standard. Using matching methods, panel data, and instrumental variables, we find that government procurement rules produce spillover effects that stimulate both private-sector adoption of the LEED standard and supplier investments in green building expertise. Our findings suggest that government procurement policies can accelerate the diffusion of new environmental standards that require coordinated complementary investments by various types of private adopter.

Here’s an ungated version.