Appraisal of policy instruments for reducing buildings' CO₂ emissions

Abstract

The building sector currently contributes approximately one-third of energy-related CO₂ emissions worldwide. It is economically possible to achieve a 30% reduction. However, numerous barriers such as financial and behavioural issues, market failures, and misplaced incentives prevent the realization of the high economic potentials. Which policy instruments are the most appropriate and cost-effective for reducing these barriers? To address this question, 20 policy instruments were assessed for their effectiveness in reducing emissions, cost-effectiveness, applicability and special conditions for success. The appraisal is based on over 60 ex-post policy evaluation reports from about 30 countries and country groups, representing best-practice examples of the application of these instruments. Appliance standards, building codes, tax exemptions and voluntary labelling were found to be the most effective policy instruments contrary to others such as Kyoto Protocol flexible mechanisms or energy/carbon taxation. The most cost-effective instruments, all achieving energy savings at negative costs for society, were appliance standards, demand-side management programmes and mandatory labelling. Since all policy instruments have limitations and only help overcome some barriers, they are most effective if combined into policy packages designed for the respective location, economy and culture.

Le secteur du bâtiment est actuellement responsable d'environ un tiers des émissions de CO₂ dans le monde liées à la production d'énergie. Il est économiquement possible de réduire ces émissions de 30%. Toutefois, de nombreux obstacles comme les questions financières et comportementales, les échecs commerciaux et des incitations mal orientées empêchent d'atteindre cet objectif. Quels sont les moyens d'action les plus appropriés et les plus rentables pour réduire ces obstacles? Pour répondre à cette question, on a évalué 20 de ces moyens en ce qui concerne leur efficacité à réduire les émissions, leur rentabilité, leur applicabilité et les conditions particulières pour assurer leur succès. Cette étude repose sur 60 rapports d'évaluation d'incidence concernant une trentaine de pays ou groupes de pays; ils donnent des exemples des meilleures pratiques de l'application de ces moyens d'action. Les normes des appareils, les codes du bâtiment, les exemptions fiscales et l'étiquetage volontaire se sont avérés être les moyens les plus efficaces contrairement à d'autres comme les mécanismes souples du Protocole de Kyoto ou la fiscalité de l'énergie/carbone. Les moyens les plus rentables, qui permettent tous des économies d'énergie à des coûts négatifs pour la société, sont les normes des appareils, les programmes de gestion de la demande et l'étiquetage obligatoire. Vu que tous les moyens des limitations et ne font que seulement contribuer à lever certains obstacles, leur efficacité est maximisé quand ils sont combinés en fonction des différents lieux, des conditions économiques et de la culture.

Mots-clés: parc de bâtiments, réduction du CO₂, changement climatique, instruments économiques, efficacité énergétique, atténuation, politique publique, réglementation

Keywords:

• building stock
• carbon reduction
• climate change
• economic instruments
• energy efficiency
• mitigation
• public policy
• regulation

Acknowledgements

The authors would like to thank the Central European University, especially the Centre for Policy Studies, for contributing to the research costs related to the work. They are indebted to the following persons for their invaluable contributions to refining the methodology and providing an expert review on the qualitative evaluation of the instruments, beyond general comments on the paper: Paolo Bertoldi, Eberhard Jochem, Niclas Svenningsen, Jonathan Koomey, Eoin Lees, Mithra Moezzi, Aleksandra Novikova, Silvia Rezessy, Jacques Rilling, Laura Van Wie McGrory, Danny Harvey, and Hiroshi Yoshino.

Notes

1. However, the opposite is also true. In some cases, such as for the UK EEC or appliance standards and mandatory labelling practices, ex-post evaluations found significantly larger savings than was estimated ex-ante (Eoin Lees and Benoit Lebot, personal communication).

2. Initially, an effort was also made to evaluate the impact of the policies on sustained innovation as a third criterion, but in the late internal review phases of the work this analysis was criticized as difficult to reproduce due to the limited supporting literature available, and thus this criterion was also dropped.

3. When there was a larger selection of countries for sources, priority was given to show best practices from developing countries or countries in transition. The authors also aimed at selecting from a diverse group rather than relying only on the few front-running countries in order to demonstrate that good examples are also abound in countries not typically regarded as energy-efficiency champions.

4. Even if these costs only include direct societal costs, and no indirect or external costs.

5. The rebound effect refers to the phenomenon that when consumers purchase a more energy-efficient product, they tend to use it more or purchase a larger capacity product, therefore cancelling part of the energy savings through the technical efficiency.

6. A perceived exception in the list of instruments is tradable energy efficiency certificates. However, this instrument comprises two key components: a regulatory measure (the obligation) and a market-based one (the possibility of compliance through certificate trading). Since the regulatory component, which is mandatory for obliged parties, is discussed under the section on regulatory instruments under energy efficiency obligations, the focus here is on the market-based component, i.e. the certificate trading tool, which is voluntary.

7. The UK EEC scheme could also be potentially discussed in this category. While the EEC gives possibilities for trading of savings from measures and of obligations among obliged parties with the approval of the regulator, horizontal trade between suppliers has been virtually non-existent. At the same time, vertical trade has been common with suppliers contracting out to project developers most of their measures.

8. Price elasticity measures the percentage change in quantity demanded for a commodity resulting from a 1 % change in the price of this commodity.

9. For example, in the Netherlands short-run price elasticity for electricity in households was estimated to be between 0 and − 0.25, whereas the long-run elasticity was estimated to be − 0.3 to − 0.45 (Berkhout et al., 2000). Therefore, the direct effectiveness as well as cost-effectiveness of taxes is often limited. For example, the German energy tax reduced household energy consumption by only 0.9% (Kohlhaas, 2005).

10. With a few exceptions where only ex-ante evaluations were available.

11. In addition to synergistic policy packages, experts also recommend the exploration of interactions among co-existing instruments – even if these are confronting, not only complementary (Rezessy, personal communication)

Additional information

Notes on contributors

Diana ürge-Vorsatz

E-mail: [email protected]

Sonja Koeppel

E-mail: [email protected]