We build a model in which home owners decide when to switch to carbon-neutral heating and investments in energy efficiency. Agents differ with regard to abatement costs, home ownership, labor productivity and time they are alive. The investment model is nested in an overlapping generations Mirrlesian optimal taxation model. We develop a compensation mechanism which guarantees a Pareto-improvement consisting of five key components: (1) carbon pricing, (2) a category-based transfer based on building characteristics exactly compensating carbon prices, (3) uniform ad-valorem subsidies on investments and operational costs associated with decarbonizing a building, (4) public debt to finance the ad-valorem subsidies and (5) income tax adjustments based on climate mitigation benefits to service debt. We show that exact compensation only depends on the interest rate, fossil fuel price path and ambition of climate policy.

The uptick in energy prices has sparked concerns about the equity of the distribution of energy expenditures across households.

We employ data from the European Household Budget Survey for 19 European countries and the years 2010, 2015, and 2020 to gauge the level of inequality through concentration indices of energy expenditures and Kakwani indices. In 2020, the proportion of equivalent disposable income allocated to energy expenses for the lowest income quintile ranges from 7.5% in Luxembourg to 30.1% in Croatia. All countries analysed exhibit regressive energy expenditures.

Significant variations exist in the degree of regressivity. Luxembourg stands out with the highest regressivity at -0.26, while Bulgaria features the least regressivity with a value of -0.07. We also analyze the distinct impact of various socio-demographic factors on energy expenditure inequality. Taking Germany as an example, our findings reveal that the household type, accounts for nearly 63% of the concentration index.

The factors determining the allocation of renewable energy facilities and their effects are questions of growing interest. Using data on all wind farms and solar farms installed in Spain and electoral results at the municipal level from 1991 to 2019, we conduct a diffin-diff event-study to determine the effect of siting these facilities on different electoral outcomes. Our findings reveal that siting a wind farm results in an electoral loss of 2.2 percentage points for the party incumbent at the regional level, while the local incumbent faces no significant punishment. However, when we perform heterogeneity estimation based on political alignment, the electoral loss increases to 4.8% for the party holding office at the regional level on those municipalities in which both layers of government are aligned, while the local incumbent in aligned municipalities experience a 2.2% loss of their vote-share.