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<p>Housing wealth effects on consumption are conventionally treated as uniform, yet this assumption overlooks how climate transition risk and institutional quality may generate “green premiums” and “brown discounts” across Europe’s heterogeneous policy landscape. This study examines whether real house price increases exert asymmetric effects on real household consumption under varying carbon intensity and regulatory regimes. Utilising a balanced panel of 18 European and EFTA countries from 2010 Q1 to 2024 Q4, we apply a Panel ARDL–Pooled Mean Group estimator with data from Eurostat, BIS, and the World Bank. Results indicate a robust positive association between real house prices and real household consumption, consistent with theoretical predictions of the Permanent Income Hypothesis (β = 0.003, <i>p</i> = 0.000). Crucially, the interaction between house prices and CO₂ emissions is strongly negative (β = − 0.003, <i>p</i> = 0.000), confirming a “brown discount” in high-emission economies. Surprisingly, the interaction with regulatory quality is also negative (β = − 0.002, <i>p</i> = 0.000), revealing that strong institutions attenuate, rather than amplify, consumption, likely by heightening risk awareness of retrofit liabilities. These findings extend the Permanent Income Hypothesis and Collateral Channel by redefining housing wealth as quality-contingent and inform EU Green Deal policies to avoid unintended demand suppression in carbon-intensive regions.</p>

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Green premiums and brown discounts: asymmetric housing wealth effects in Europe under climate transition risk and institutional constraints

  • 期刊论文

  • 发表日期：

    2026年4月20日

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  • Saqib Munir,
  • Mushab Rashid,
  • Kashif Rashid

摘要

Housing wealth effects on consumption are conventionally treated as uniform, yet this assumption overlooks how climate transition risk and institutional quality may generate “green premiums” and “brown discounts” across Europe’s heterogeneous policy landscape. This study examines whether real house price increases exert asymmetric effects on real household consumption under varying carbon intensity and regulatory regimes. Utilising a balanced panel of 18 European and EFTA countries from 2010 Q1 to 2024 Q4, we apply a Panel ARDL–Pooled Mean Group estimator with data from Eurostat, BIS, and the World Bank. Results indicate a robust positive association between real house prices and real household consumption, consistent with theoretical predictions of the Permanent Income Hypothesis (β = 0.003, p = 0.000). Crucially, the interaction between house prices and CO₂ emissions is strongly negative (β = − 0.003, p = 0.000), confirming a “brown discount” in high-emission economies. Surprisingly, the interaction with regulatory quality is also negative (β = − 0.002, p = 0.000), revealing that strong institutions attenuate, rather than amplify, consumption, likely by heightening risk awareness of retrofit liabilities. These findings extend the Permanent Income Hypothesis and Collateral Channel by redefining housing wealth as quality-contingent and inform EU Green Deal policies to avoid unintended demand suppression in carbon-intensive regions.