Economic Instruments to support investment for low energy buildings

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Economic Instruments to support investment for low energy buildings
Dr. Lisa RYAN, International Energy Agency

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Economic Instruments to support investment for low energy buildings

  1. 1. © OECD/IEA 2011 Economic Instruments to support investment for low energy buildings Lisa Ryan 18th of November
  2. 2. © OECD/IEA 2011 Presentation overview  Investment needs  Introduction to economic instruments  Economic instruments in the building sector  Discussion suggestions
  3. 3. © 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 2010-2030 2030-2050 2010-2030 2030-2050 2010-2030 2030-2050 2010-2030 2030-2050 OECD Other Major Economies Emerging Economies Least Developed Countries Annualincrementalinvestments(USDbn) Buildings Transport Industry Power
  4. 4. © OECD/IEA 2011 Introduction to Economic instruments
  5. 5. © 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
  6. 6. © 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
  7. 7. © OECD/IEA 2011 Economic instruments in energy efficiency policy in the buildings sector
  8. 8. © 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
  9. 9. © 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…..
  10. 10. © 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 (€)
  11. 11. © 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
  12. 12. © 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
  13. 13. © 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?
  14. 14. © OECD/IEA 2011 Contact: Lisa.ryan@iea.org

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