Energy efficiency policy in an n-th best world: Assessing the implementation gap

Lucas Vivier () and Louis-Gaëtan Giraudet ()
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Lucas Vivier: CIRED - Centre International de Recherche sur l'Environnement et le Développement - Cirad - Centre de Coopération Internationale en Recherche Agronomique pour le Développement - EHESS - École des hautes études en sciences sociales - AgroParisTech - ENPC - École des Ponts ParisTech - Université Paris-Saclay - CNRS - Centre National de la Recherche Scientifique, ENPC - École des Ponts ParisTech
Louis-Gaëtan Giraudet: CIRED - Centre International de Recherche sur l'Environnement et le Développement - Cirad - Centre de Coopération Internationale en Recherche Agronomique pour le Développement - EHESS - École des hautes études en sciences sociales - AgroParisTech - ENPC - École des Ponts ParisTech - Université Paris-Saclay - CNRS - Centre National de la Recherche Scientifique, ENPC - École des Ponts ParisTech

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Abstract: The market failures and behavioral anomalies at the source of the Energy Efficiency Gap tend to be studied in isolation, which biases welfare assessment of energy efficiency policies. We develop a dynamic model of home energy retrofit fit for capturing cumulative inefficiencies due to multiple frictions -- CO2 externality, cold-related illness, credit rationing, landlord-tenant dilemma, free-riding in multi-family housing, present bias and status quo bias. Focusing on France, we find that health, rental and multi-family frictions each entail higher deadweight losses than the CO2 externality alone. Taking all frictions into account implies that energy efficiency subsidies generate net social benefits -- at odds with previous findings. In contrast, the benefit-cost balance of regulations is net negative due to ancillary costs. Finally, the French policy portfolio, which blends subsidies, taxes and regulations, only closes half of the energy efficiency gap. Its efficiency could be improved by better targeting low-income families, multi-family housing and rental housing.

Keywords: climate change mitigation; energy efficiency; residential sector; building stock models; ex-ante policy assessment; applied policy analysis (search for similar items in EconPapers)
Date: 2024-01-30
New Economics Papers: this item is included in nep-ene, nep-env and nep-eur
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