Aiming for mediocrity: The case of Australian housing thermal performance

Concerns about climate change, energy security and energy productivity are driving countries to improve energy and thermal efficiency of their housing. Australia established a Nationwide House Energy Rating Scheme (NatHERS) in the mid-1990s to encourage improved energy performance, before regulating minimum energy standards in the 2000s. While minimum standards in Australia have improved, they fall short of requirements for a low carbon future. Resistance to new standards has been predicated on the argument that consumers will drive the market. Others argue that market failures result in lower than optimal house energy performance. There has been limited investigation of this in the Australian context. This paper analyses over 187,000 NatHERS certificates from 2016 to 2018 to determine the response to market desires and the regulatory environment. The research finds 81.7% of housing is designed only to meet minimum standards, and 98.5% falls below the economic and environmental optimum. This demonstrates significant market failure and indicates that building energy regulation is a powerful instrument for delivering improved performance outcomes. If governments are seeking a larger contribution from the housing sector to carbon abatement and other energy policies, systematically raising minimum building energy regulations is probably the most important and effective mechanism.