What Are the Most Efficient Measures to Promote Energy Savings in Private Households?

French policies to support households in refurbishing their homes for energy savings purposes differ considerably in terms of their cost-effectiveness. This is shown by a recent analysis by ZEW Mannheim. “The result is that the white certificates scheme (energy efficiency certificates involving energy suppliers) is the most cost effective,” explains ZEW researcher Dr. Claire Gavard, one of the authors of the study.

The researchers evaluated four French incentive programmes designed to help private households carry out renovations to reduce the energy consumption of their houses and flats: a grant scheme for low-income households, a reduction of the value-added tax from 20 to 5.5 per cent and an income tax credit – all three financed by the public sector – as well as energy efficiency certificates (“white certificates”), with which private energy suppliers prove that they have carried out energy-saving measures in their customers’ homes. The researchers examine these four measures with regard to their cost efficiency and the redistribution associated with them. The analysis is based on data from a representative survey conducted on behalf of the French Agency for Ecological Transition (ADEME) in spring 2017 among 45,000 French households, of which around 14,000 implemented energy efficiency measures in the years 2014 to 2016.

In terms of cost efficiency, energy efficiency certificates by energy suppliers perform best, as they achieve the highest savings in household energy costs relative to the amount of subsidy received. This could be due to the fact that energy suppliers have an incentive to reach households that have large savings potentials. The VAT reduction and the low-income household grant score moderately with respect to cost efficiency. The lowest savings relative to the subsidy amount are achieved with the income tax credit. In terms of distributional effects, the measures under review do not differ significantly. “Households in the upper and lower half of the income distribution benefit equally from all four subsidy instruments examined. The average subsidy amount distributed and the energy cost savings in both groups do not differ for any of the instruments,” explains ZEW researcher Bettina Chlond.

The results of the ZEW study are an insightful contribution to the current debate on the effectiveness of various measures to reduce energy consumption and emissions in the buildings sector. Buildings account for 40 per cent of energy consumption in the European Union. This is why the European Commission wants to at least double the renovation rate of private and public buildings as part of the EU Green Deal. Various EU Member States have already launched a variety of funding programmes to promote the refurbishment of private buildings.