Conference Agenda

We calculate income effects of home insulation at the individual household level and show how these effects are distributed across heterogeneous households, which differ in terms of income, house type, and ownership status. The analysis is motivated by the observation that welfare effects of home insulation and heat-pump adoption are ambiguous and unevenly distributed among households, while unequal welfare effects of energy transition policies may be at odds with the idea of a just energy transition. To this end, we develop an innovative modeling platform that links a new energy microsimulation model for the built environment (HESTIA) to an existing income simulation model (MIMOSI) and to administrative microdata on the income and wealth position, ownership situation and energy consumption of each individual household in The Netherlands. The annual income effects of dwelling insulation and heat-pump adoption consist of the higher rent or mortgage costs due to retrofit and installation investments (adjusted for subsidy), lower gas expenditure, and the change in rent allowance or mortgage interest deduction. Calculations indicate that the average investment cost per home to meet insulation standards is approximately €18,000. On average, gas savings in volume amount to around 32% of original gas consumption. In the base case, the median income effect is 1.3% for tenants in the social housing sector, compared to -0.2% and -0.1% for homeowners and tenants in the commercial housing sector, respectively. Variations in assumptions regarding gas prices, interest rates, and energy savings have a limited impact on these median income effects. Across all scenarios, the income effects would be significantly less favorable without policy measures to support insulation efforts. Approximately 15% of homeowners and private renters experience a negative income effect exceeding 1%. These households are typically characterized by relatively large homes, low incomes, low gas consumption, and older occupants.