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.

Many policies and programs, especially complex ones and those administered to vulnerable groups, rely for their implementation on frontline staff. We contribute to an emerging literature in economics that opens the ‘black box’ of how the characteristics and attitudes of frontline staff impact public program performance. Matching survey data (n = 114) collected from energy advisors that staff a nation-wide energy efficiency assistance program in Germany with data from around 16,300 energy efficiency consultations in the homes of low-income households, we find significant heterogeneity in performance between staff. Advisors' economic preferences and their own energy efficiency investment choices contribute to our understanding of the impact of frontline staff on adviser-determined audit outcomes as well as households' investment decisions. While advisors' socio-demographic characteristics do not predict audit outcomes, socio-demographics matter in combination with household demographics via peer effects.

We analyze energy-efficiency policy in the form of a minimum-efficiency standard for consumer durables such as cars, building insulation, or household appliances. Such a policy has two effects. At the intensive margin, a household that invests will choose a more efficient device. At the extensive margin, more households will choose not to invest at all. We analyze the equilibrium effects of a minimum-efficiency standard, taking household heterogeneity, endogenous investment decisions, and price adjustments into account. A moderate minimum-efficiency standard increases demand for more efficient consumer durables and reduces energy demand. A stricter policy is less effective or even counterproductive.

In particular, we show that a stricter minimum-efficiency standard increases the rebound effect and ultimately backfires. We decompose the rebound effect and uncover a new channel arising from the endogenous investment decisions. In our central calibration of the CAFE standard, this investment effect accounts for one third of the total rebound effect and makes a stricter standard almost ineffective. Finally, we analyze the distributional consequences of a minimum-efficiency standard and compare them to those of an energy tax. Producers of household appliances (‘’energy-efficiency capital”) benefit more and energy producers suffer more from the standard than from the tax. Furthermore, non-investing households prefer the standard, whereas investing households tend to prefer the tax.

We asked a sample of French and German homeowners to estimate the change in the rental value of their homes under a series of well specified, but hypothetical, conditions that include participation in a positive energy district (PED), various levels of disruption in the electricity supply, and attributes of energy efficient dwellings, like ventilation and air filtration systems, and apps that optimize appliance use or space heating or cooling. Our respondents were for the most willing and able to engage in such valuation exercises. The value of a PED connection captured into the rental value (some € 420/year) falls between the WTP for the homeowner to participate in a PED as a “customer” (€ 100-200/year) and the WTA to serve as a supplier in one (€ 500/year). We use the responses to our rental value questions to compute the Value of Lost Load (VOLL) and to trace out an electricity supply function based on rooftop PVs.