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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
2010-2030
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
© 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
© OECD/IEA 2011
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?
© OECD/IEA 2011
Contact: Lisa.ryan@iea.org

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Economic Instruments to support investment for low energy buildings

  • 1. © OECD/IEA 2011 Economic Instruments to support investment for low energy buildings Lisa Ryan 18th of November
  • 2. © OECD/IEA 2011 Presentation overview  Investment needs  Introduction to economic instruments  Economic instruments in the building sector  Discussion suggestions
  • 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. © OECD/IEA 2011 Introduction to Economic instruments
  • 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. © 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. © OECD/IEA 2011 Economic instruments in energy efficiency policy in the buildings sector
  • 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. © 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. © 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. © 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. © 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. © 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. © OECD/IEA 2011 Contact: Lisa.ryan@iea.org