Association for Public Policy Analysis & Management

Complex policy designs provide flexibility and discretion for impacted firms. This paper examines variance in green certification pathways for Leadership in Energy and Environmental Design (LEED), a highly customizable approach to green building. Builders may certify LEED to signal corporate social responsibility (CSR), or the voluntary provision of public goods. Yet flexible certifications often lead to noisy signals, leaving open the question of how to interpret CSR signals in terms of environmental benefits. This paper examines the link between evolving motivations to certify (or signal), and the environmental benefits that result from certification. I use a large, high resolution dataset on LEED certification for green buildings to examine trends in how organizations certify green.

Analysis reveals green building benefit distributions among building owners and their communities. Early adopters, seeking gains from product differentiation, are shown to certify through tailored pathways that provide substantial public good provision. By contrast, late adopters avoid technical and social losses through certification strategies that increasingly rely on technology conferring private benefits. Statistical models reveal that organizations shift toward certification pathways that use greater energy efficiency, despite many alternative expectations for how certification pathways may evolve. Cost estimates indicate that the emerging preference for these technologies is not driven by technology learning or cost minimization, but may be driven by search and transaction costs, as builders mimic designs executed by peers and earlier adopters. The growing emphasis on private benefits contrasts programmatic aims related to public benefits, in part due to the flexible program design. Observed trends suggest potential tradeoffs between flexibility and simplicity in policy design.