What Drives ‘Green Housing’ Construction?

Evidence from Switzerland

Marco Salvi♣ and Juerg Syz♠
October 15, 2010

Abstract
Switzerland boasts the arguably highest density of green properties in the world. In 2008, more
than 15% of total new construction received the Swiss energy building label Minergie. The
spatial distribution of these green buildings, however, is highly heterogeneous. In some regions
more than half of the new dwellings are built according to the Swiss green building standard. In
others, this share is still negligible. The purpose of this paper is to identify the determinants of
the distribution of green housing.
For 2'571 Swiss municipalities we compute the green building share of new residential
buildings. We collect data for several variables measuring demographic, geographic, social,
cultural, and political aspects that – according to our hypothesis – may influence green building
activity. We use count regression to estimate the impact of these variables on the demand for
green buildings.
We find that differences in income levels and cultural affiliation between Swiss municipalities
account for the largest part of the variation in green building activity. The impact of
homeowners’ stance on environmentalism is highly significant but less important., Government
subsidies do not seem to trigger additional green housing activity.

Keywords Green buildings, Residential Housing, Minergie, Switzerland.

♣
Zürcher Kantonalbank and Eidgenössische Technische Hochschule, Department of Architecture, Zürich.
salvi@arch.ethz.ch
♠
Diener Syz Real Estate, Zollikon and Shangai, and Universität Zürich, Zürich. juerg.syz@dienersyz.com

* We are indebted for helpful comments and research assistance with Andrea Horehájová, Julie Neeser
and Andreas Bröhl. We thank Erika Meins and Philippe Thalmann for their precious help and
encouragements. The views expressed in this paper, as well as its errors, are those of the authors.

1
1. Introduction
The Swiss property market is an ideal playground to examine the determinants of the
demand for green properties. Indeed, Switzerland has one of the highest densities of
energy-efficient buildings in the world (Salvi et al., 2010). By mid 2010 more than
16’000 new and retrofitted buildings had received the Swiss green building label
“Minergie”. In 2008, roughly 15% of newly constructed buildings successfully
completed the Minergie certification process. This paper draws on data collected from
the Swiss market to investigate the question of ‘who builds green houses and why’.
Previous research has shown that homeowners do value the expected future cost
savings generated by investments in energy-efficient buildings. Several authors have
documented the incentive effects of higher energy prices on the demand for energy-
efficient technologies, see, e.g., Hausman, (1979), Beresteanu and Li (2008), and Linn
and Klier (2008). However, this paper argues that more moderate utility bills alone do
not explain the demand for green properties.
We observe that the spatial distribution of green buildings in Switzerland is highly
heterogeneous. In some cities more than half of the new constructions are built
according to the Swiss green building standard. In other regions this share is negligible,
suggesting that there are more subtle drivers of the demand for green buildings than
energy cost savings. To detect these drivers, we investigate the determinants of green
housing activity that lead to regional clusters in Switzerland. Our approach is closely
related to Kahn and Vaughn (2009) who study clusters of LEED (Leadership in Energy
and Environmental Design) registered buildings and hybrid cars in the United States.
However, in their paper, these authors analyze just 10’000 registered LEED buildings
(765 of them certified) scattered across the United States. In this paper we explore a
market where the density of certified green buildings is by two orders of magnitude
higher. Moreover, thanks to its decentralized political structures and to the intensive
use of direct democratic instruments at the federal, cantonal and municipal level,
Switzerland offers an ideal situation for studying the impact of environmentalism and
government subsidies on green building activity. We use a unique data set, including
all newly built, Minergie labeled residential buildings in Switzerland. We relate the
green housing density in Swiss municipalities to corresponding demographic,
geographic, social, cultural, and political attributes. We include a measure of

2
environmentalism based on voting data as well as government subsidies offered at the
level of the 26 Swiss cantons. We find that – among all investigated variables –
differences in income across municipalities account for the largest part of the
explained variation in green building activity. Linguistic affiliation, as a proxy for
cultural norms, turns out to have a strong impact on the regional distribution of
Minergie residential buildings as well. The influence of political affiliation, as measured
by voting data, is statistically significant but less important. Government subsidies for
green buildings do not appear to have any positive impact on the clustering of green
properties.
The paper is organized as follows. In the next section, we describe the characteristics
of the Swiss green building standard Minergie and its rapid propagation. We also
document the large regional differences of green building activity. In Section 3, we
develop six hypotheses for potential drivers leading to the observed regional clusters
of green housing activity. We present the regression results with regard to the
correlates of green housing adoption in Section 4. We draw our conclusions in Section
5.

2. Green Buildings in Switzerland

2.1 The Swiss green building standard “Minergie”
Minergie is the leading eco-label for energy-efficient buildings in Switzerland [1]. A
non-profit private association, Minergie is supported by its members, which include
the federal government, the cantons, schools, companies, individuals, and various
associations. Minergie offers both eco-labeling and eco-certification. Third parties,
usually a cantonal authority, certify Minergie buildings. There are three levels of
Minergie building certifications. The basic Minergie certification is used broadly for
new and retrofitted buildings. To attain the standard, the building must achieve a
reduction of at least 25% in general energy consumption in comparison to the average
conventional building. In addition to this requirement, fossil-fuel consumption has to
be less than half of that of the average conventional building. Minergie-P is a stricter
certification that requires very low energy consumption and is especially demanding
with regard to heating energy demand. This standard broadly corresponds to the
German Passivhaus standard. Finally, Minergie-ECO involves an additional certification

3
that verifies the use of environmental-friendly building materials. In this paper we do
not differentiate between the sub-labels as the basic Minergie label covers 95% of the
certified buildings [2]. The list of the certified buildings is publicly available on the
Minergie website. Real estate agents routinely advertise the presence of the label as a
part of the sale process.
As with other green building labels, the implicit assumption of Minergie is that the
energy consumption of a dwelling is a function of its building standard. Energy
consumption estimates are based on the characteristics of the materials applied and
used to assess whether a new or retrofitted building qualifies for the Minergie label. As
of today (2010), the requirements of the basic Minergie standard described above set
a limit of 38 kWh per square meter of floor area and year. This corresponds roughly to
the lower bound of the energy rating “B” of the European Energy Performance of
Buildings Directive (EPBD) [3]. The use of active ventilation is mandatory to obtain
certification.
Since its launch in 1998, the Minergie label has been quite successful. In principle,
properties of all types – be it office buildings or residential housing – can be certified if
they meet the label's criteria. In practice, however, private homeowners are at the
forefront of green building activity in Switzerland, as most green properties belong to
residential owner-occupiers and private owners of residential multi-family buildings.
As of August 2009, 11’555 or 91% of all certified buildings are residential buildings,
whereof 68% are single-family and 32% multi-family homes. Of the 9% of non-
residential units, about 70% are owned by the public sector. Schools, sports facilities or
office buildings make up the larger part of this category. Because of the predominant
share of residential buildings, we focus our analysis on this segment [4]. Table 1
summarizes the distribution of certified buildings by property type.

Table 1. Minergie certified buildings in Switzerland as of Mid 2009

Number of Minergie certified Percentage of total
buildings
Single-family homes 7’810 62%
Multi-family homes 3’745 29%
Others, whereof 1’101 9%
Administration offices 432
Schools 308
Sport facilities 73
Total 12’656 100%
Source: see Data Appendix

4
The number of new Minergie buildings tripled between 2004 and 2009. While at the
beginning of this period only 5% of the new buildings received the label, this
proportion increased to 15% in 2008. Figure 1 shows the number of Minergie certified
new residential buildings and their share of total new residential buildings since 1998.
However, new construction represents only a small part of the total built stock. Hence,
only about 1% of the existing Swiss buildings have been certified so far. Nevertheless,
to the best of our knowledge, the rate of green buildings is higher in Switzerland than
in comparable countries. Indeed, Minergie’s penetration rate in Switzerland is roughly
280 times higher than LEED’s rate in the United States, where it represents the most
widely used green building label [5]. In England, the number of residential buildings in
the energy efficiency rating bands “A” and “B” represented only 0.3% of the housing
stock in 2008 (UK Department for Communities and Local Government, 2010).

Insert Figure 1 about here [Figure 1. Number of Minergie certified new residential
buildings and their share of total new residential buildings, 1998 to 2008]

2.2 The spatial distribution of green housing

The geographical distribution of Minergie buildings in Switzerland is highly clustered.
Most Minergie houses are located in the northern and northeastern part of the
country, as well as in the cities of Bern and Geneva. To compare green building activity
between municipalities, we divide the number of Minergie certified new buildings by
the number of total residential buildings constructed between 1998 and 2008. Figure 2
presents a map of the spatial distribution of this share. The city of Zurich stands out
with a share of approximately 20%, followed by regions in the agglomeration of Zurich.
Alpine touristic resorts such as Davos and Zermatt also stand out for their high share of
energy-efficient buildings. In these resorts roughly one new building in ten has
received the Minergie label. At the other end of the scale, the cantons of Ticino and
Jura and the area around the lake of Geneva exhibit very low green housing activity.
There, the share of new green buildings accounted for less than 2%.

5
Insert Figure 2 about here [Figure 2. Minergie’s share of new residential buildings in
Swiss regions, 1998 to 2008]

On first inspection, the share of Minergie certified houses seems to mirror the
linguistic regions in Switzerland. In the German-speaking part, every fifth new
residential building completed in 2008 obtained the Minergie certification, while in
French-speaking Romandy and in the Italian-speaking region only one in 12,
respectively one in 14 did. On the other hand, French-speaking Geneva tops the list of
green building activity among Swiss cities, as shown in Table 2. The heterogeneous
distribution of green building activity raises the question of the drivers of the demand
for green buildings. We address this question in the remainder of the paper.

Table 2: Recent green construction activity in Switzerland’s largest cities (2004-2008)

Rank City Percentage of all new Number of Minergie certified new
buildings buildings
1 Geneva 34.5% 39
2 Zurich 33.2% 249
3 Bern 19.8% 26
4 Winterthur 15.1% 97
5 Lucerne 14.7% 22
6 Basel 8.5% 9
7 St. Gall 8.4% 18
8 Lugano 3.1% 10
9 Lausanne 1.2% 4
Source: see Data Appendix

3. The drivers of green building activity

3.1 Hypothesis development
Even though at least one Minergie building is present in more than half of the Swiss
municipalities, the share of green buildings varies widely across the municipalities. We
develop six hypotheses to explain this heterogeneity. Our list of likely correlates of
green housing activity includes demographic, geographic, social, cultural, and political
aspects [6].

3.1.1 Income: If green buildings are superior goods, their demand will be strongly
positively related to income [7]. We test the hypothesis that Minergie buildings are
more likely in richer municipalities.

6
 H1. Green building demand increases with income.

3.1.2 Age: Some researchers have argued that the willingness to pay for
environmentally friendly goods declines with age (Hersch and Viscusi, 2005). We test
this hypothesis by including the municipalities’ age distribution in our regressions.
H2. Green building demand is negatively related to age.

3.1.3 Cultural norms: At a more general level, cultural differences may be important in
addressing environmental problems (Milton, 1996). This may also influence green
building activity. As a multilingual country, Switzerland has natural cultural boundaries
within its national borders. We investigate whether the different linguistic regions vary
in their affinity towards green housing.
H3. Green building demand varies with linguistic affiliation.

3.1.4 Geography: The energy consumption of a building depends crucially on heating

demand, which is a function of the difference between internal and external
temperature (MacKay, 2008). Outside temperature may thus affect the demand for
energy-efficient buildings. Unfortunately, average local temperature and heating
degrees data is only available for the limited number of communities in which a
meteorological station is located. In Switzerland, however, differences in temperature
are strongly correlated with altitude, which can be easily obtained for every
community [8]. We thus include the average height above sea level as a proxy for this
demand driver.
H4. Green building demand is positively related to altitude.

3.1.5 Government subsides: We are interested in measuring the impact played by

governmental subsides on regional green building activity. The Swiss cantons have a
wide discretion when fixing the amount of the subsidies to be granted to energy
efficient buildings. As a result, payments for Minergie certified new buildings vary
considerably from canton to canton. In 2008, the canton of Bern paid subsidies totaling
CHF 2.2 million while 11 out of the 26 Swiss cantons, including the canton of Zurich,
did not make any subsidy payments. Among those cantons which supported Minergie

7
new buildings, payments ranged from CHF 3'700 per building in canton Ticino to CHF
31'340 in the canton of Valais. We use the average subsidy payment per new Minergie
building in each canton to investigate the effectiveness of governmental programs.

H5. Green building demand is positively related to government subsidies.

3.1.6 Environmental activity: Environmentalists tend to be more likely to purchase

green products and may be willing to pay more for environmentally friendly products
(Kotchen and Moore, 2007 and 2008, Kahn and Vaughn, 2009). We suppose that
municipalities with a large share of the population supportive of green ideas are more
likely to have a higher share of green buildings. We measure environmentalism based
on revealed preference political data.
H6. Green building demand is positively related to the degree of
environmentalism in the municipality.

3.2 Measuring Environmentalism

Following Kahn (2007) and Kahn and Vaughn (2009), we construct two indicators of
environmentalism at the municipal level. The basic rationale is that people “vote with
their feet” to find the community that provides their optimal bundle of environmental
public goods and taxes (Banzaf and Walsh, 2008). In Switzerland, voters have the
additional opportunity to decide directly on the bundle of environmental public goods.
Through ballot initiatives and referenda at the federal, cantonal, and municipal level,
they can propose or refuse particular changes in the legislation. At the municipal level,
voters are routinely asked to vote on the financing of local infrastructure projects such
as schools or new office buildings for the administration. The outcome of the voting on
these initiatives can be informative about the voters’ stance on environmental issues.
We base our first indicator, the ‘green index’, on the results of five federal initiatives
on environmental issues, listed in Table 3. All five federal initiatives were rejected,
most of them by a wide margin [9]. To construct our first aggregate measure of
environmentalism, we run a factor analysis on the voting results of the federal
initiatives. The correlation of the pro-environmental vote across the five initiatives is
high. The bivariate correlation coefficients range between 0.25 and 0.75. The 2008

8
federal initiative “Right of appeal of NGOs” (Verbandsbeschwerdeinitiative) has the
lowest correlation with other initiatives. In the factor analysis it receives the lowest
factor loading (0.177) [10]. The factor loadings of the other initiatives range between
0.23 and 0.32.

Table 3: Federal initiatives on general environmental issues in the period 2000-2008

Ballot title Year Main aim Yes votes, % Participation
rate, %
"Cut traffic by half" 2000 Reduction of road traffic by half 21.3 42.3
over a 10-year period
"Solar cent" 2000 Introduction of a tax of CHF 0.005 31.3 44.7
per kWh on non-renewable energy
sources. Half of the tax ear-
marked for solar power uses
"Steering tax on non- 2000 Introduction of a Pigou-tax of CHF 44.5 44.9
renewable energy" 0.02/kWh on non-renewable
energy sources
"Electricity without 2003 Gradual abandonment of nuclear 32.7 49.7
nuclear power" energy
"Right of appeal for 2008 Curtailing of the rights of 33.0 47.4
NGOs" environmental organizations to
appeal construction projects
Source: see Data Appendix

By this account, the list of the “greenest” communities in Switzerland closely matches
the list of the main cities with Zurich, Geneva and Basel among the 5% of the Swiss
municipalities with the highest green index values. Of the ten largest Swiss cities, only
Lugano, situated in the Italian-speaking canton Ticino, does not appear in the 10% of
municipalities with the highest green index score.
The second measure of local environmentalism is based on the results of the 2007
election for the Swiss National Council, Switzerland's lower house of parliament [11].
We count the percentage of votes cast at the municipal level for the Green Party (GPS)
and the 2004 founded Green Liberal Party (GLP). Environmental issues and the
promotion of renewable energies are at the core of both parties’ platforms.
Accordingly, the GPS endorsed all pro-environment initiatives listed in Table 3. Both

9
the GPS and the GLP recommended the rejection of the “Right of appeal of NGOs”-
Initiative. On social issues the GPS is in general allied with left wing parties, whereas
the GLP is positioned at the center of the political spectrum. In the 2007 elections, the
GLP won 1.4% of the popular vote nationwide and 3 out of 200 seats. The GPS won 9.6
% of the votes and 20 seats. Unsurprisingly, green parties are strongest in the main
urban areas. Six out of the ten largest Swiss cities belong to the 5% communities with
the highest share of green parties votes. Again, Lugano stands out among this group
with a share of only 4.6% of green votes, lower than the median at 8.5%. The
Spearman rank-order correlation between the two measures of environmentalism is
0.36.
The green parties did not run for election in the smaller, mostly rural constituencies.
Hence, this direct measure of environmentalism is not available for nine out of 26
cantons. Data on federal initiatives, however, is available for all municipalities. We test
both measures of environmentalism in the following regression analysis.

4. Empirical results
4.1 Model selection
We test the six hypotheses stated in section 3 with data available at the municipal
level. We run count regressions on the number of Minergie-labeled properties built
between 1998 and 2008 in each municipality. We take into account the nonnegative
integer-valued aspect of the dependent variable. Specifically, we assume that the
conditional expectation of yi, the number of Minergie buildings in municipality i, is
E (y i | x i ,τ i ) = μiτ i = exp(x i′β + ε i ) , (1)

where xi is the vector of covariates and τ i = exp(ε i ) is an heterogeneity factor

independent of xi. Taking the exponential ensures that the mean parameter is
nonnegative; adding τ i allows for unobserved heterogeneity between municipalities

that is not fully accounted for by the covariates [12]. It can be shown (Winkelmann,
2000) that the distribution of yi conditional on xi and τ i is Poisson distributed with

e μ i μi y i
g(y i ) = P (Yi = y i | x i ,τ i )) = , i = 0, 1, 2, ... . (2)
y i!
The heterogeneity factor, τ i , can be integrated out of this conditional distribution

under the assumption that it is gamma distributed. This solution is called the negative

10
binomial model. It is more general than the Poisson regression. Its use is widespread
because, unlike the standard Poisson model, the conditional variance can exceed the
conditional mean. As such, it can accommodate over-dispersion resulting from
neglected unobserved heterogeneity.
In contrast to standard logit regression, the use of count regression allows us the take
directly into account the fact that in 40.5% of all municipalities no Minergie house has
been built between 1998 and 2008. Zero-inflated count models provide a simple way
of modeling so-called excess zeros (Winkelmann, 2000, p. 109). We thus explicitly
model the production of zero counts by specifying a Bernoulli trial that has g(yi) as
outcome with probability ϕi, or zero otherwise. This gives rise to a zero-inflated
negative binomial model (ZINB), where the probability of a non-zero event depends on
the characteristics of a municipality zi, specified as

ϕi = Fi = F (z′iγ ), (3)

where the link function F is a logistic function. The standard estimator for the negative
binomial model is the maximum likelihood estimator. Estimates of the coefficient
vectors β and γ are found by minimization of the corresponding log-likelihood

function (Winkelmann, 2000). We next present estimates for various specification of

the ZINB model. In Section 4.3 we discuss the estimation results for simpler models,
such as the Poisson model, the negative binomial model and the zero-inflated Poisson
model.

4.2 Regression results

In the base model, the number of Minergie houses is regressed on several covariates
related to the hypotheses developed in Section 3. The covariates include the share of
residents in four age classes, the average altitude in the municipality, the majority
language spoken in the municipality, two indicators of environmentalism, the share of
residents in each of three income brackets, the amount of subsidies for Minergie
buildings and the total number of new buildings in the municipality. Again, we refer to
the Data Appendix for the data sources and the exact definition of the variables.
Table 4 presents summary statistics. Between 1998 and 2008 an average of 3.7
Minergie buildings and about 70 new buildings were completed in each municipality
[13]. We notice that there is not much variation in the population distribution by age.

11
The median Swiss municipality is situated at an altitude of 613 meters above sea level.
In the 25% richest communities, at least 42% of the tax income payers are in the
highest income bracket.

Table 4: Descriptive statistics for the 2’571 Swiss municipalities

Variable Description Mean Std P25 Median P75
AGE_0_19 Share of population less 0.252 0.042 0.227 0.254 0.280
than 20
AGE_20_39 Share of population aged 0.271 0.038 0.250 0.273 0.294
20 to 40
AGE_40_59 Share of population aged 0.281 0.033 0.261 0.280 0.301
40 to 60
AGE_60_99 Share of population over 0.196 0.052 0.161 0.190 0.222
60
ALTITUDE Altitude above sea level 0.804 0.481 0.484 0.613 0.930
[km]
DGERMAN German speaking 0.607 0.488 - 1.000 1.000
municipality [yes=1]
GREEN_IND1 Share of green parties’ 0.088 0.094 0.057 0.127 0.161
votes (*)
GREEN_IND2 Green index 0.000 1.000 -0.686 -0.069 0.576
INCOME_LOW Share of taxpayers in low
income class 0.290 0.100 0.222 0.270 0.330
INCOME_MID Share of taxpayers in mid
income class 0.410 0.060 0.385 0.420 0.450
INCOME_HIGH Share of taxpayers in high
income class 0.300 0.100 0.232 0.290 0.360
MIN_BUILD Number of Minergie 3.718 10.322 - 1.000 3.000
buildings in municipality
MIN_GRANT Cantonal subsidy per 8.687 10.497 - 4.416 10.936
Minergie building
[1000 CHF]
NEW_BUILD Number of new buildings 68.963 97.551 13.000 38.000 89.000
in municipality
(*) Only available for 2’219 municipalities. Source: see Data Appendix

The first column of Table 5 presents our base case estimation results for the vector of
parameters β in equation (1). In this specification, we use the ZINB model and the
green index as indicator for environmentalism [14]. The coefficients for the green
index, the income variables, and the language affiliation are highly significant. To
illustrate the economic effect of the estimated coefficients, we report the change in
the expected number of Minergie buildings per municipality that is associated with a
given change of a covariate. Thus, for each of the covariates in xi, we compute

exp( x i′βˆ) at the median and at the third quartile of the distribution of the covariate
and report the relative change in the expected number of Minergie buildings in the

12
second column. The table further displays the estimation results using the green
parties’ share of votes instead of the green index as indicator for environmentalism, as
well as estimation results based on cantonal fixed effects (columns 3 and 4). As a
robustness exercise we also report the results of a regression with cantonal fixed
effects (column 5).

Table 5: Main Estimation Results, ZINB Model

Estimation results using the Estimation results using Estimation results
green index green parties’ share of using cantonal fixed
votes effects
Parameter Estimate Effectsg Estimate Effectsg Estimate

Intercept -4.011 - -5.043 - -4.021

(0.789) (0.815) (0.861)
Number of new 0.664 0.403 0.630 0.414 0.611
buildings in (0.034)*** (0.035)*** (0.034)***
municipality
Green index 0.179 0.122 n/a n/a 0.205
(0.032)*** (0.036)***
Green parties’ share n/a n/a 3.608 0.155 n/a
of votes [%] (0.688)***
Share of taxpayers in 3.960 0.120 4.458 0.134 4.195
mid income class (0.783)*** (0.891)*** (0.793)***
Share of taxpayers in 4.251 0.324 4.103 0.320 3.136
high income class (0.495)*** (0.552)*** (0.524)***
Share of population 2.619 0.058 3.418 0.075 3.112
aged 20 to 40 (1.168)* (1.265)** (1.203)**
Share of population 0.277 0.006 0.451 0.009 1.343
aged 40 to 60 (1.259) (1.335) (1.342)
Share of population 1.835 0.061 2.956 0.091 3.074
over 60 (0.860)* (0.860)*** (0.893)***
Altitude above sea 0.142 0.046 0.414 0.191 0.045
level [km] (0.079) (0.091)*** (0.097)
German speaking 0.566 0.762 0.529 0.697 0.656
municipality [yes=1] (0.085)*** (0.093)*** (0.136)***
Subsidy per Minergie -0.008 -0.053 -0.015 0.125 n/a
building (cantonal (0.004)* (0.004)***
level)
Observations 2516 2219 2516

Notes: * significant at 5%; ** significant at 1%; *** significant at 0.1%.

g Percentage difference in the value of the expected count of Minergie buildings computed at the median
and at the third quartile of the given covariate. All other covariates are held constant at their median
value.

Per capita taxable income has a decisive impact on the number of Minergie buildings in
a municipality. Other things being equal, an increase in the proportion of taxpayers in

13
the highest income bracket from 29.0% (the median) to 36.0% (third quartile) is
associated with a 32.4% increase in the number of Minergie buildings. A share of
42.9% of taxpayers in the highest income bracket – corresponding to the 90th
percentile, not shown in Table 4 – is associated with an increase of 74% of Minergie
constructions.
High levels of environmentalism – as measured by the green index – are associated
with somewhat higher Minergie residential building densities. A move from the
median to the third quartile of the index is followed by an increase of the green
building density by 12.2%. A further move to the 90th percentile is associated with an
increase of 27.5% in Minergie constructions. Substituting this measure of
environmentalism with the green parties' voting share does not substantially alter the
results (Column 3 of Table 5). Raising the green voting share from 12.7% to 16.1% –
which again corresponds to a move from the median vote to the third quartile – leads
to an increase in the expected number of green buildings by 15.5%. A move to the 90th
percentile raises this effect to 24.4%.
Although the demographic structure of a municipality does affect the demand for
Minergie buildings, its impact is relatively small. It is further difficult to interpret. The
density of Minergie buildings increases with the share of 20- to 40-years-old residents
and with the share of residents over 60 but is insensitive to the share of 40- to 60-
years-old [15].
The altitude, as a proxy for heating degree days, has a positive impact on the number
of green buildings, but its statistical significance is quite sensitive to the model
specification. It is highly significant in the model of Column 3, Table 5, which is based
on a smaller sample. This is due to the fact that the cantons where the GPS did not run
in the 2007 election are in majority located in the Swiss Alps and do not have a large
share of green buildings.
In both the base and the alternative specification, we find a weakly negative
correlation between the size of subsidy payments and the number of new Minergie
buildings This correlation is even lower when we exclude from the base case
regression those cantons which do not grant any subsidies (coefficient of -0.013,
standard error 0.0054). Hence, we do not think that subsidy payments triggered a
significant number of Minergie certifications. We conjecture that the payments were

14
too small in relation to the extra cost associated with the Minergie certification. The
extra cost is estimated at 5% to 10% of conventional construction cost, i.e. CHF 25’000
to CHF 50’000 for a typical CHF 500’000 construction, while the median subsidy
payment was CHF 4’416.
The language affiliation strongly correlates with the number of Minergie buildings.
Minergie building density for German-speaking municipalities is 76.2% higher than for
comparable French-, Italian-, or Romansh-speaking municipalities. These results
suggest that cultural norms may exert influence on environmental choice that is
different from the choices expressed by political affiliation. Alternatively this difference
may simply reflects more extensive marketing activities of the Minergie association in
the German-speaking region. However, the case of the bilingual (German and French)
Canton of Valais further hints at a different sensitivity towards green building issues
across the language border. The share of green buildings in the German-speaking part
of the Canton is roughly ten percentage points higher than in the southern, French-
speaking part, although they share a similar economic environment and the same
cantonal laws.
We thus perform a robustness exercise and limit the estimation of the fixed effects
model (Column 5, Table 5) to the cantons of Bern, Fribourg, Valais and Graubünden,
the only multilingual cantons. These cantons belong to the largest in terms of the
number of municipalities. They make up 1'063 of the 2'561 observations in the
national sample. In this setting, which includes cantonal fixed effects, the estimated
parameter for the linguistic region is determined solely by intra-cantonal variation in
green housing construction. We obtain a parameter for the German-speaking indicator
variable of 0.781 (standard error 0.142). This is even larger than the national estimate
of 0.566. As a further test, we then split the national sample in two, the first sub-
sample containing all 1'561 German-speaking, the second containing only the French,
Italian- and Romansh speaking municipalities (N=1'110). We then run the ZINB count
regression with the base case specification (Column 1, Table 5). The results of the
estimation are listed in Table 6.
While many of the variables lose statistical significance, the coefficients of the most
significant ones do not change very much, when compared to the pooled results of
Table 5. Indeed, they are similar across the two distinct regional samples. Finally, we

15
note that neither income, demographic nor a lower share of votes for green parties
can possibly explain the large differences in the Minergie density between Western
Switzerland and the German-speaking part of the country [16].

16
Table 6: Count Regression Estimates for the Linguistic Regions
Estimation results in non- Estimation results in
German-speaking German-speaking
municipalities municipalities
Parameter Estimate Estimate

Intercept -3.086 -3.954***

(1.759) (0.922)
Number of new 0.732 0.649
buildings in (0.084)*** (0.038)***
municipality
Green index 0.137 0.187
(0.072)* (0.038)***
Share of taxpayers in 2.155 5.150
mid income class (1.281) (0.037)***
Share of taxpayers in 3.679 4.989
high income class (0.873)*** (0.663)***
Share of population 3.699 2.317
aged 20 to 40 (2.490) (1.354)
Share of population -0.539 -0.017
aged 40 to 60 (2.665) (1.495)
Share of population 1.091* 1.399
over 60 (1.976) (0.972)
Altitude above sea 0.147 0.138
level [km] (0.176) (0.094)
Subsidy per Minergie -0.014* -0.005
building (cantonal (0.006) (0.094)
level)
Observations 1110 1561

Log Likelihood -1186 -3490

g See notes in Table 5.

4.3 Sensitivity analysis

In Table 7 we compare fit statistics for different count regression models. The base
case is the ZINB model, as applied for the results in Table 5. We compare these results
with the ones of less specific models, i.e. the zero-inflated Poisson model (ZIP), the
negative binomial model (NegBin) and the standard Poisson model.

17
Table 7: General Fit Statistics of Alternative Model Specifications
ZINB ZIP Neg Bin Poisson

Log-likelihood -4687 -6844 -4838 -8277

AIC 9405 13715 9699 16575
Alpha 0.781 - 1.120 -
Standard Error 0.042 - 0.052 -
Observations 2571 2571 2571 2571

With regard to the overall fit, the ZINB model, closely followed by the negative
binomial regression model, achieves the lowest absolute value of the log-likelihood
function. In both models, there is evidence of over-dispersion as indicated by the
rejection of the test that the conditional mean is equal to the variance. If this were the
case, the coefficient would be zero and the negative binomial model would reduce to
the standard Poisson. Figure 3 plots the difference between the actual and the
expected probabilities for the different statistical models and reveals that both the ZIP
model and the Poisson model do not fit the data well. This is most evident in the range
between zero and ten Minergie buildings per municipality, which covers 87% of the
observations. Notice however that all models do well at larger numbers of Minergie
buildings per municipality. For brevity, we do not report the estimated coefficients of
the alternative model as they do not display significant variations from the results in
Table 5.

Insert Figure 3 about here [Figure 3. Difference between observed and predicted
frequencies of Minergie building counts for Poisson, negative binomial, ZINB, and ZIP
models]

5. Policy implications and conclusion

In recent years, there has been a global surge in interest in energy-efficient buildings.
In Switzerland, green building construction has been largely left to the initiative of
private property investors and owner-occupiers. Their willingness to incur both the
certification costs and the significantly larger costs associated with higher energy-
efficiency standards has supported the Minergie label.

18
As Switzerland boasts one of the highest densities of green buildings, it offers a
congenial environment to examine the determinants of green building activity. This
paper presents one of the first empirical analyses of ‘what drives the demand for green
housing’. The heterogeneous spatial distribution of green buildings in Switzerland
allows us to examine the impact of a comprehensive series of municipality level
attributes on green housing density. We develop and test six hypotheses to explain
this heterogeneity, including demographic, geographic, social, cultural, and political
aspects. We find that differences in income levels and linguistic affiliation account for
the largest part of the systematic variation in green building activity across the
municipalities. The impact of environmentalism, as measured by voting data, is
statistically significant but less important.
We pay particular attention to the effectiveness of government subsidies granted by
15 of the 26 Swiss cantons. Our empirical results show that higher subsidy payments
for new Minergie buildings are not associated with a larger number of certifications.
As the median subsidy payment accounts for just about a tenth of the extra building
cost associated with the Minergie certification, we conjecture that the subsidies are
too small to trigger green construction. Accordingly, other factors must drive the
decision to build ‘green’, the most obvious being the private benefits of a Minergie
certification. These benefits likely include the improved building quality and comfort,
as well as a hedge against rising energy prices. Ideology, while not decisive, does
contribute somewhat to green building activity.
One possible conclusion of our work is that that policy makers should consider giving
up subsidies to new Minergie dwellings, as most of these buildings would probably
have been built anyway. Alternatively, the efficiency of the policies could be improved
by focusing on the marginal projects, for example retrofits, which are much less likely
to fulfill the Minergie standard.
In contrast to Kahn and Vaughn (2009), our results suggest that the willingness to incur
the extra cost is predominately related to income levels rather than to environmental
ideology. As such, they are amenable to an interpretation related to the environmental
Kuznets curve, the observation that environmental quality often appears to improve as
income grows beyond a certain level. Indeed, the claim that pollutants involving very
dispersed externalities – such as carbon emissions related to energy-inefficient

19
buildings – could have no turning point is still actively discussed (Galeotti et al., 2006).
Our results would argue against this claim.
We conjecture that the strong correlation of green buildings with linguistic affiliation is
a result of the higher awareness of the Minergie label in the German-speaking part of
Switzerland and of the varying affinity towards green technology among different
cultural groups.
The demand for green housing is likely to be the result of complex attitudes and
actions involving public good aspects (a better environment) and private benefits
(higher building quality). As shown by Delmas and Grant (2008) for the case of organic
wine, the decision to eco-certify and label a product additionally involves subtle
informational issues, both on the producers’ and the consumers’ side. For the case of
green buildings, it would be interesting to follow this lead to address the issue of price
discrimination against the renters and buyers of green property. This is left to further
research.

20
Notes
1. See Salvi et al. (2010) for an overview of the green building labels available in Switzerland.
2. All Minergie related figures are based on data and publications of the Verein Minergie, see
http://www.minergie.ch/publications.478.html.
3. Directive on the energy performance of buildings (EPBD, Directive 2002/91/EC of the European
Parliament and Council). The limit of the energy bound A is set at 32 kWh/a. The energy band B
corresponds to an annual energy consumption between 32 and 65 kWh/a.
4. The focus on residential properties is also dictated by the limits of the Swiss construction statistics.
Annual new constructions data is available only for housing.
5. As of the beginning of 2009, LEED had approximately 2,000 certified units. Minergie, in the roughly 40
times smaller Swiss market, counted 7 times more (Beyeler et al., 2009).
6. We give the exact description of the data sources and discuss the issues related to the construction of
the variables in the data appendix.
7. This proposition, however, is disputed. See, e.g., Kriström and Riera (1996) for evidence of an income
elasticity of environmental improvements less than one.
8. The OLS regression of the heating degree day index of 44 locations in Switzerland on the respective
2
altitude has a R of 0.96.
9. Note that for the initiative "Right of Appeal of NGOs" (Verbandsbeschwerdeinitiative) the 'no' votes
signals support for environmental issues.
10. The wording of the initiative may have confused many voters. In an exit poll one third of the voters
recognized to have cast a vote against their true voting intentions (GfS Bern, 2008). Although the
unintended yes and no votes have approximately leveled out each other, the deviation from the true
voting intention may partially explain the lower correlation of this initiative to the other initiatives.
11. Elections for the National Council are held every four years. Each of the 26 cantons is a constituency.
The number of deputies of each constituency depends on the population of the canton.
12. If we do not allow for individual heterogeneity, we obtain the standard Poisson regression model.
13. As of 2008, the average Swiss municipality had 2'945 residents.
14. For the sake of a clear exposition we do not tabulate the coefficients of the logistic model in Table 5.
15. The reference category is the share of residents aged 0 to 19.
16. Unfortunately, we cannot further differentiate the impact of language affiliation. Both the Italian- and
the Romansh-speaking communities are almost completely located within the boarders of a single
canton, Ticino for the former and Graubünden for the latter. They are thus nearly collinear with the
cantonal fixed effects or with the subsidy variable.
17. The mean share of the green parties’ votes is 9.6% in the French-speaking and 9.2% in the German-
speaking municipalities. The mean share of the higher income category is 29.9% and 30.0%,
respectively.

21
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Delmas, M. A. and Grant, L. E. (2008), “Eco-labeling Strategies: The Eco-premium Puzzle in the
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Kahn, M.E. (2007), “Do Greens drive Hummers? Environmental Ideology as a Determinant of
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pp. 129-145.
Kahn, M. E. and Vaughn. R. K. (2009), “Green Market Geography: The Spatial Clustering of
Hybrid Vehicles and LEED Registered Buildings”, The B.E. Journal of Economic Analysis &
Policy, Vol. 9 No. 2 (Contributions), Article 2.
Kotchen, M. and Moore, M. (2007), “Private Provision of Environmental Public Goods:
Household Participation in Green-electricity Programs”, Journal of Environmental
Economics and Management, Vol. 53, pp. 1-16.
Kotchen, M. and Moore, M. (2008), “Conservation Behavior From Voluntary Restraint to a
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Kriström, B. and Riera, P. (1996), “Is the Income Elasticity of Environmental Improvements Less
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Linn, J. and Klier, T. (2009), “The Price of Gasoline and the Demand for Fuel Efficiency: Evidence
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23
Data Appendix
The Data Appendix provides additional information on the data sources and discusses
some issues related to the construction of the variables used in the paper. All data are
available at the municipality level with the exception of the government subsides to
Minergie buildings, available at the cantonal level only. The number of political
municipalities in Switzerland steadily decreased from 2’899 at the beginning of the
year 2000 to 2’596 at the end of 2009. Our cross-section consistently distinguishes
between 2’571 municipalities. Municipalities that merged during the investigated time
period are added together for the full time period.

Political voting results

The first indicator (GREEN_IND1) is based on a factor analysis of the results of five
federal initiatives on environmental issues, listed in Table 3. Out of the 44 national
initiatives submitted to the vote between 2000 and 2009, we identified five issues that
were suitable to characterize the voters’ sentiments towards environmentalism. As
detailed in the main text, we also use results of the most recent (2007) election for the
Swiss National Council (GREEN_IND2). Election and voting data at the municipal level
can be downloaded at the site of the Swiss Federal Office of Statistics.
http://www.bfs.admin.ch/bfs/portal/de/index/themen/17/03.html

Altitude
The average altitude of municipalities (ALTITUDE) is extracted from the RIMINI public
use map of the Swiss Federal Office of Topography.
http://www.swisstopo.admin.ch/internet/swisstopo/de/home/products/downloads/h
eight/rimini.html

Income
The share of residents subject to the Federal income tax in seven income brackets is
from the Swiss Federal Tax Administration, 2006. We merged it to three classes, CHF 0
to 40’000 (INCOME_LOW), 40’000 to 75’000 (INCOME_MID), and above 75’000
(INCOME_HIGH).

24
http://www.estv.admin.ch/dokumentation/00075/00076/00701/index.html?lang=de#
sprungmarke0_8

Minergie data
Minergie provides address data for all certified new and retrofitted buildings, including
the year of certification. We obtain 11’555 new residential buildings (MIN_BUILD) that
were certified from 2001 to 2008.
http://www.minergie.ch/list-of-buildings.html

Linguistic affiliation
The language spoken by the majority of the residents in a municipality is from the 2000
decennial census. Each municipality is assigned to one of the four official languages in
Switzerland, i.e. German, French, Italian, and Romansh. In the regressions we
distinguish German speaking (DGERMAN) from non-German speaking municipalities.
http://www.bfs.admin.ch/bfs/portal/de/index/infothek/lexikon/bienvenue___login/bl
ank/zugang_lexikon.topic.1.html

Demographical data
The share of the population in four age classes, 0 to 19 (AGE_0_19), 20 to 39
(AGE_20_39), 40 to 59 (AGE_40_59) and over 60 (AGE_60_99) is from the 2000
decennial census.
http://www.bfs.admin.ch/bfs/portal/de/index/infothek/lexikon/bienvenue___login/bl
ank/zugang_lexikon.topic.1.html

New Residential Buildings Construction

The number of new residential buildings per municipality between 1998 and 2008
(NEW_BUILD) is from the construction statistics of the Swiss Federal Office of
Statistics.
http://www.bfs.admin.ch/bfs/portal/de/index/infothek/onlinedb/superweb/presentat
ion_generale.html

Government subsidies

25
The average grant for a new Minergie building in each canton (MIN_GRANT) is from
the Swiss Federal Office of Energy. The data covers the period 2003 to 2008. For 2001
to 2003, the share of funding allocated to new Minergie buildings is available at the
national level only. We allocated this sum to the cantons in proportion to their share of
payments between 2004 and 2008.
http://www.bfe.admin.ch/dokumentation/publikationen

26
Figure 1. Number of new Minergie residential buildings and their share of total new
residential buildings, 1998 to 2008

27
Figure 2. Minergie’s share of new residential buildings in Swiss regions, 1998 to 2008

28
Figure 3. Difference between observed and predicted frequencies of Minergie building
counts for Poisson, negative binomial, ZINB, and ZIP models

0.1
Difference between predicted and observed frequencies,

0.05

0
0 1 2 3 4 5 6 7 8 9 10 11 12 13

-0.05
percentage points

-0.1

-0.15

POISSON

-0.2
NEGBIN

ZIP
-0.25

ZINB

-0.3

Minergie buildings per municipality (counts)

29