Deep energy retrofits: How effective and robust are policy instruments?

Abstract

Motivating landlords to deep energy retrofits is challenging, particularly if only tenants benefit from energy savings. We introduce the concept of net-benefit curves to quantify how the reduction in CO2 emissions on the macro level and the economic viability-based retrofit decision on the micro level are connected, and how climate policy instruments influence this connection. Applying this method to a typical multi-unit dwelling, we derive the parameter levels at which different policy instruments start to show an effect on the building owner’s decision to retrofit. The shape of the net-benefit curve suggests a tipping-point effect, where a slight change in policy parameters will lead from no retrofit at all to substantial retrofitting. Further policy tightening will not lead to a significant further effort, but make the retrofit decision more robust, that is, narrow the range of economically attractive retrofits. As policy instruments, we analyze prototypical systems that share energy savings, retrofit costs, or carbon taxes between landlord and tenants.