Abstract
Heat pumps are a key technology for improving energy efficiency as they can significantly reduce energy costs and emissions. Given the significant role of heat pumps in carbon neutrality pathways, and pressure for related national energy efficiency programs, it is important to examine economic profitability of heat pump investments and their relative environmental and social benefits. This paper aims to answer the following main research question: are areas with lower housing prices and income less likely to invest into energy efficiency? The paper finds that in Finland heat pumps are already very profitable and converting buildings’ heating systems into heat pumps creates major environmental and economic benefits for the residents. The cost of heating and heat pump investment costs does not vary between locations whereas housing prices, rents and income do. Neighborhoods with lower housing prices have less motivation and capability to invest into heat pumps. Urban areas with positive housing price development, higher income and better financing options will likely invest into energy efficiency without subsidies. Potential subsidies should be allocated into areas with lower housing prices, because emissions are evenly distributed, and lower income areas pay relatively more for energy. Energy efficiency subsidies could be tied into housing prices or more specifically into property tax, which is universally collected in most countries. Property tax could be used to guide energy efficiency investments into locations where they would not be carried out otherwise. For areas that do not need subsidies, this paper recommends that awareness should be increased, because the economic and carbon emission reduction potential of energy efficiency measures is still not well understood.
Highlights
Global energy-related emissions produce over 80% of CO2 emissions [1] and approximately 75% of our energy is consumed in cities [2]
The aim of this paper is to answer the following main research question: are neighborhoods with lower housing prices less likely to invest into energy efficiency? The paper provides insight on economic profitability of heat pump investments as well as their relative environmental and social benefits
The results present that in Finland neighborhoods with lower housing prices have less motivation and capability to invest into heat pumps
Summary
Global energy-related emissions produce over 80% of CO2 emissions [1] and approximately 75% of our energy is consumed in cities [2]. Transition to low carbon energy system is the single most important climate challenge to overcome, and solving it requires extensive private investment. It has been estimated that on average annual global low-carbon energy investments of US$3, 400 billion are required until 2050 to meet the 1.5 ◦C global warming scenario [3]. A quarter of these investments is subjected to demand-side energy efficiency. One of the key technologies in demand side energy efficiency is heat pumps that can significantly reduce heating costs and emissions of the built environment [4]. International Energy Agency (IEA) [5] has estimated that heat pump installations should triple by 2030 to meet carbon neutrality targets
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