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Economic Instruments to support investment for low energy buildingsDr. Lisa RYAN, International Energy Agency
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© OECD/IEA 2011
Economic Instruments to support investment for low energy buildings
Lisa Ryan
18th of November
© OECD/IEA 2011
Presentation overview
Investment needs
Introduction to economic instruments
Economic instruments in the building sector
Discussion suggestions
© OECD/IEA 2011
Additional investment needs in the BLUE Map scenario by region and sector
0
50
100
150
200
250
300
350
400
450
2010-2
030
2030-2
050
2010-2
030
2030-2
050
2010-2
030
2030-2
050
2010-2
030
2030-2
050
OECD Other Major Economies
Emerging Economies
Least Developed Countries
An
nu
al
incre
men
tal
investm
en
ts (U
SD
bn
)
Buildings
Transport
Industry
Power
© OECD/IEA 2011
Introduction to Economic instruments
© OECD/IEA 2011
Economic policy instruments for energy efficiency
Fiscal instruments
Tax relief
Taxes
User charges
Financial measures
Loans
Grants
Market-based instruments
Emissions trading
schemes
White certificate schemes
Direct investment
Public procurement
rules
Public infrastructure
RD&D investment
© OECD/IEA 2011
Economic instruments for EE in industry, transport and buildings
Industry
• Tax relief
• Audit support
• CO2 emissions trading
• Energy management support
• R&D incentives
• Energy prices
• 3rd party finance and ESCOs
Transport
• Vehicle tax incentives
• Advanced vehicle subsidies
• Fuel taxes
• User charges
• Infrastructure investment
• CO2 emissions trading
Buildings
• Grants for EE equipment
• Loans and grants for refurbishment
• Direct investment in social housing
• Tax relief
• Energy prices
• 3rd party finance and ESCOs
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Economic instruments in energy efficiency policy in the buildings sector
© OECD/IEA 2011
BUILDINGS energy efficiency policy target
Economic instrument
Funding mechanism
Home-owners
Landlords
Social housing
Public sector
Private sector
Tax incentives
Grants
Loans
Private banks
Public funds
3rd party
Treasury budget
MLDB’s
“Special” funds
ESCO’s
Utilities
Commercial buildings
Residential buildings
© OECD/IEA 2011
Current economic instruments used in the buildings sector in IEA countries
0
5
10
15
20
25
30
35
40
Tax Tax relief Grant Loan 3rd party finance White certificates R&D Direct investment
Very few target deep renovation…..
© OECD/IEA 2011
Economic evaluation matrix Category Criteria Indicators
Environmental
effectiveness
Impact on market Uptake of programme (units, share of market)
Level of awareness/influence (%)
Energy savings Gross energy saved (kWh or toe)
Gross CO2 emissions (tCO2)
Rebound effect Increase in sales of energy using equipment (%)
Increase in use of energy efficient technologies (%)
Economic
efficiency
Free-ridership
Share of subsidies to purchasers who would have
bought the energy efficient equipment anyway (%)
Multiplier/spillover effects (%)
Costs
Value of awarded subsidies (€)
Administrative costs (€)
Total costs (€)
Cost-effectiveness = total costs/energy saved (€/kWh)
Policy interaction Qualitative analysis of policies
Other criteria Process features
Ease of administration
Transaction and administration costs (€)
Market distortion Price changes (€)
© OECD/IEA 2011
Early findings from initial review
Nearly all IEA countries have at least one economic instrument for energy-efficient buildings – but not tied to level of energy performance
More than one third are grants to owners
Loans and tax relief are also widely used
Policies and capital to facilitate 3rd party finance is a more recent phenomenon and likely to grow
Complete information on the effectiveness and economic efficiency of instruments is rarely available and unmeasured
High potential for waste of money and little action
© OECD/IEA 2011
Assessment of current economic instruments Building Policy objectives Economic
instrument
Policy linkage Status quo
New
buildings
Encourage EE design
and construction
Tax relief,
grants
Building codes
and labels
Mainly
unambitious
Support finance of low
energy new buildings
Loans, 3rd
party finance
Building codes,
labels
Few
programmes
but some
better
Existing
buildings
Increase rate of EE
renovation
Energy
prices/taxes,
grants
Labels,
awareness
Low success
so far
Encourage deeper
renovation
Energy prices,
tax relief,
grants
Regulation,
training
professionals
Mainly target
equipment,
insulation
replacement
Support finance Loans, 3rd
party finance
Building codes,
technical
assistance
Fewer
programmes,
less
ambitious
© OECD/IEA 2011
Key issues to discuss on economic instruments for low energy buildings
Which economic instruments to create incentives for large and real improvements in energy performance at least cost? Different for each target?
Commercial? Residential?
New/existing?
Country situation – legal, culture, economics
How to finance the policies and private investments?
What mix of economic, regulatory, information policies necessary to overcome all market failures?
How to minimise overlap – “double dipping”?
How to design economic instruments to include monitoring and evaluation from the start?
