Improving your building code might not save any energy… but solving this is quite easy

There has been some discussion lately about increasing the insulation requirements in the New Zealand Building Code. I think this is an important discussion and that it does not happen often enough, so I wanted to contribute to it. Of course—considering the editorial line of Buildings for People—this contribution relates to behavioural elements. Specifically, about the fact that—because of how people behave in their homes—increasing the insulation requirements might not reduce New Zealand’s energy consumption. This discussion is likely to be relevant to other countries as well.

The first thing you need to know to understand my argument is that, according to Behavioural Economics, people seem to practice what is known as mental accounting. In broad terms (and among other things), this means that money is not “just money”. On the contrary, different “money” belongs to different mental accounts which have different purposes and, therefore, are treated differently. For example, if you receive $100 as a gift, you might happily “waste them” by doing things that you would not do with the money you earned working hard. For instance, you might go to a restaurant you always wanted to go to, or you might buy yourself something nice. On the contrary, spending this gift on heating does not feel so well. This is not very rational. A dollar is a dollar and heating is arguably more important than food... why do behave like this? I do not know but this is how we humans behave.

My research suggests that people have a utility bill account in their heads and that they do not like to go over budget. For instance, people from Chile and New Zealand mentioned that, if the utility bills were subjectively too expensive, they would sacrifice thermal comfort in order to keep them low. (This is not a simple affordability phenomenon because it also applies to the people who can afford larger bills.) Apparently, common strategies used to save money are to heat only a fraction of the dwelling and stay there (e.g., heat the bedroom and watch TV in bed), and simply choosing to tolerate lower temperatures. This is an example of what I call a Trade-Off, and an important characteristic of Trade-Offs is that it can be mitigated through architectural design. This, of course, can be motivated by improvements in the Building Code.

Conceptualizing this as a Trade-off has the advantage of emphasizing how the outcome of this situation is the result of a choice. People need to choose whether to live in a cold home or to spend more than they would like on heating. An improvement in the performance of their homes, then, presents them with a new dilemma. Should they spend less money on heating and tolerate the same temperatures they are used to? Or should they spend the same amount of money on heating (which is already within budget) and enjoy a warmer home? Or a bit of both? The answer to this question probably varies from person to person. However, it is, probably, highly depends on the initial quality of their dwelling.


People whose home was initially really cold will probably choose to make their homes warmer while maintaining their heating budget, thus not reducing their energy consumption. On the contrary, people whose homes were already warm before retrofitting will probably not choose to warm up their homes even more (that would make no sense), meaning that they will save energy. Figure 1 shows this graphically. This is not just theoretical, an example of this was documented by Attia for people in Brussels (Belgium). (Note that, for simplicity’s sake, Figure 1 does not properly consider the case of people whose homes were initially slightly cold, whose behaviour after retrofitting might be to lower their budget in heating and also warm their homes up a bit, saving some energy.)

The implications of this behavioural phenomenon are quite important because they suggest that, unless the homes in a country are already good enough, small changes in its Building Code will not save any energy. The energy savings only start once the performance of homes goes above "OK". Consequently, if the intention is to reduce the environmental impact of the housing sector, then the changes in the Building Codes need to ensure that homes go beyond "OK". On the contrary, if the changes are only meant to make people relatively happier, then just targeting "just OK" homes will still be beneficial. I would personally aim high.