Impact of Financial Subsidy Schemes on Climate Goals in the Residential Building Sector

Title data

Wiethe, Christian:
Impact of Financial Subsidy Schemes on Climate Goals in the Residential Building Sector.
In: Journal of Cleaner Production. Vol. 344 (2022) . - 131040.
ISSN 0959-6526
DOI: https://doi.org/10.1016/j.jclepro.2022.131040

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Abstract in another language

The international Paris agreement climate goals regarding the residential building sector were mainly incorporated into national legislation as CO2 emission reduction levels for specific years (e.g., 80% CO2 emission reduction until 2035). Financial subsidy schemes incentivizing early retrofitting can lead to lock-in effects, not realizing energy savings potential from technological advancements in the long run and potentially failing emission reduction goals. However, early retrofitting leads to CO2 emission reductions over longer periods, minimizing the combined total CO2 emissions. Depending on which of these two conflicting goals is pursued, differing subsidy schemes are suitable to incentivize respective retrofits. Knowledge about the effects of these subsidy schemes is relevant to setting correct incentives. We, therefore, investigate the difference in CO2 emission reductions of time-dependent subsidy schemes per monetary unit invested. In doing so, this study is the first to investigate time-dependent subsidy schemes. We apply an agent-based building stock model for a case study to the German residential building stock using an extensive real-world dataset. Results indicate that prioritizing early retrofits reduces the probability of achieving emission reduction goals while simultaneously minimizing total CO2 emissions. Total CO2 emission reductions per monetary unit invested differ up to 675% compared to static subsidy schemes. We conclude that political incentive mechanisms should not be designed to
meet the climate goals but instead minimize total CO2 emissions.