How to finance energy renovation of residential buildings: Review of current and emerging financing instruments in the EU

Abstract

The Paris Agreement goals require net-zero CO 2 emissions by mid-century. The European Commission in its recent proposal for climate and energy strategy for 2050 indicated the need for more intensified actions to substantially improve the energy performances of buildings. With the rate of new construction in Europe, the challenge is to increase both the pace and depth of building energy renovations. Several barriers inhibit the wide uptake of comprehensive energy renovations, including the inability or inertia to finance upfront costs of energy renovations. Despite various policies implemented to address some of these barriers, current investments in buildings remain at suboptimal levels. The paper reviews current financing practices for energy renovations and investigates some innovative instruments with a special focus on their applicability to residential buildings. In addition to "traditional" financial schemes such as subsidies, tax incentives, and loans, the paper assesses innovative financing schemes: On property tax and on-bill financing, energy efficiency mortgages, and energy efficiency feed-in tariffs. The paper also investigates the concept of one-stop shops for building renovations and crowdfunding. The paper offers an assessment of the characteristics, benefits, and challenges of each analyzed financing instrument and provides policy recommendations for their successful implementation. In general, as financing instruments involve different stakeholders and due to complex nature of the sector, there is no single solution to accelerate energy renovation investment in buildings. The emerging financial models offer the potential to address the long-standing barriers to investment in energy efficiency.

Evaluation of financial incentives for green buildings in Canadian landscape

“…Reviews on FIs are available for a number of countries. However, these reviews either focus on a single FI in a number of countries like the work by Shazmin et al [ 13 ] on property tax incentives for a number of countries including Canada, or they focus on policy instruments in countries other than Canada; example, Sebi et al [ 14 ] work on incentives in Germany, France, and the US or Bertoldi et al [ 15 ] work on financial instruments for residential buildings in Europe. Some recent reviews focus on policy instruments in a single country, such as G. Liu et al [ 16 ] work on policy instruments (including FIs) in China.…”

GIS-based urban energy modelling and energy efficiency scenarios using the energy performance certificate database

“…The number of certificates (see the percentages) of the 33 districts was very close to that of the city of Turin, and the EPs of the buildings covered by the 33 districts, as characterised by their EPCs, were therefore statistically representative of the whole building stock of the entire city of Turin. Moreover, the quota of retrofitted buildings is particularly low, and to reach the European energy and climate targets it would be necessary to promote EE in buildings through the use of new financial instruments and already existing incentives (Bertoldi et al, 2020).…”

Identification of the behavioural factors in the decision-making processes of the energy efficiency renovations: Dutch homeowners

“…Other countries provide similar support, such as low interest rates, third-party financing, payment on energy bills, energy efficiency mortgages, and crowdfunding (Bergman & Foxon, 2020;Bertoldi et al, 2020;Kerr & Winskel, 2020;Wilson et al, 2015). Flanders, France, Italy, the United Kingdom, and Poland offer energy efficiency obligation programs, in which energy suppliers must provide evidence of contributing energy savings by promoting energy efficiency activities or financial support for residents (Bertoldi et al, 2020;Kerr & Winskel, 2020). The Green Deal in the United Kingdom was an example of financing by a third party and paying back on energy bills.…”