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on entities that produce negative externalities, and by granting financial aid to entities
with positive externalities, in other words, by regulating the market.
For the real estate market, implementing an environmental policy means promoting
“environmental regulation” in its broader sense. When earthquake resistance was
recognized as a major issue, the Building Standards Act was revised to specify aseismic
standards, and phrases such as “new aseismic standards” and “old aseismic standards”
were newly coined. It is therefore likely that sustainability in the market will depend on its
conformity with environmental standards. If the market changes in this way, liquidity for
nonconforming properties will not just decrease but evaporate. Put another way, the
economic value of green buildings is not represented by higher rents, lower costs, or
lower discount rates alone. Rather, when viewed in the medium-to-long range, the true
economic value is avoidance of the risk of being excluded from the market due to
nonconformity with environmental standards, just as buildings that failed to meet
aseismic standards were no longer liquid in the investment market—in other words, it
relates to the avoidance of exposure to heavy taxes or levies.
What all participants in the real estate investment market should be aware of is that
real estate is physical matter that continues to give society negative externality by
discharging carbon compounds. Real estate owners, users, and investors must
recognize that this issue is identical in structure and nature to that of air pollution, which
gave rise to many lawsuits in Japan’s high-growth period, and accurately understand the
environmental risks involved in owning, using, and investing in real estate.
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11)
This is known as the Pigovian regulation.
