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How to finance energy renovation of residential buildings: Review of current and emerging financing instruments in the EU

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  • Paolo Bertoldi
  • Marina Economidou
  • Valentina Palermo
  • Benigna Boza‐Kiss
  • Valeria Todeschi

Abstract

The Paris Agreement goals require net‐zero CO2 emissions by mid‐century. The European Commission in its recent proposal for climate and energy strategy for 2050 indicated the need for more intensified actions to substantially improve the energy performances of buildings. With the rate of new construction in Europe, the challenge is to increase both the pace and depth of building energy renovations. Several barriers inhibit the wide uptake of comprehensive energy renovations, including the inability or inertia to finance upfront costs of energy renovations. Despite various policies implemented to address some of these barriers, current investments in buildings remain at suboptimal levels. The paper reviews current financing practices for energy renovations and investigates some innovative instruments with a special focus on their applicability to residential buildings. In addition to “traditional” financial schemes such as subsidies, tax incentives, and loans, the paper assesses innovative financing schemes: On property tax and on‐bill financing, energy efficiency mortgages, and energy efficiency feed‐in tariffs. The paper also investigates the concept of one‐stop shops for building renovations and crowdfunding. The paper offers an assessment of the characteristics, benefits, and challenges of each analyzed financing instrument and provides policy recommendations for their successful implementation. In general, as financing instruments involve different stakeholders and due to complex nature of the sector, there is no single solution to accelerate energy renovation investment in buildings. The emerging financial models offer the potential to address the long‐standing barriers to investment in energy efficiency. This article is categorized under: Energy Efficiency > Economics and Policy Energy Efficiency > Climate and Environment Energy and Climate > Economics and Policy

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  • Paolo Bertoldi & Marina Economidou & Valentina Palermo & Benigna Boza‐Kiss & Valeria Todeschi, 2021. "How to finance energy renovation of residential buildings: Review of current and emerging financing instruments in the EU," Wiley Interdisciplinary Reviews: Energy and Environment, Wiley Blackwell, vol. 10(1), January.
    • Handle: RePEc:bla:wireae:v:10:y:2021:i:1:n:e384
    DOI: 10.1002/wene.384
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    1. Federico Dell’Anna, 2023. "An ELECTRE TRI B-Based Decision Framework to Support the Energy Project Manager in Dealing with Retrofit Processes at District Scale," Sustainability, MDPI, vol. 15(2), pages 1-15, January.
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    3. Inoussa Laouali & Antonio Ruano & Maria da Graça Ruano & Saad Dosse Bennani & Hakim El Fadili, 2022. "Non-Intrusive Load Monitoring of Household Devices Using a Hybrid Deep Learning Model through Convex Hull-Based Data Selection," Energies, MDPI, vol. 15(3), pages 1-22, February.
    4. Schlindwein, L.F. & Montalvo, C., 2023. "Energy citizenship: Accounting for the heterogeneity of human behaviours within energy transition," Energy Policy, Elsevier, vol. 180(C).
    5. Maia, Iná E.N. & Harringer, Daniel & Kranzl, Lukas, 2024. "Household budget restrictions as reason for staged retrofits: A case study in Spain," Energy Policy, Elsevier, vol. 188(C).
    6. Minyoung Kwon & Erwin Mlecnik & Vincent Gruis, 2021. "Business Model Development for Temporary Home Renovation Consultancy Centres: Experiences from European Pop-Ups," Sustainability, MDPI, vol. 13(15), pages 1-18, July.
    7. Belaïd, Fateh & Flambard, Véronique, 2024. "Ecological-behavioral economics: Impact of information on energy-renovation decision through third-party investing," Ecological Economics, Elsevier, vol. 221(C).
    8. Ohlsson, K.E. Anders & Nair, Gireesh & Olofsson, Thomas, 2022. "Uncertainty in model prediction of energy savings in building retrofits: Case of thermal transmittance of windows," Renewable and Sustainable Energy Reviews, Elsevier, vol. 168(C).
    9. Fanghella, Valeria & Guetlein, Marie-Charlotte & Schleich, Joachim & Sebi, Carine, 2023. "Preferences on financing mechanisms for thermal retrofit measures in multi-owner buildings: A discrete choice experiment with landlords and owner-occupiers in France," Resource and Energy Economics, Elsevier, vol. 74(C).
    10. Nima Monghasemi & Amir Vadiee & Konstantinos Kyprianidis & Elaheh Jalilzadehazhari, 2023. "Rank-Based Assessment of Grid-Connected Rooftop Solar Panel Deployments Considering Scenarios for a Postponed Installation," Energies, MDPI, vol. 16(21), pages 1-16, October.
    11. Frantál, Bohumil & Dvořák, Petr, 2022. "Reducing energy poverty in deprived regions or supporting new developments in metropolitan suburbs? Regional differences in the use of subsidies for home energy efficiency renovations," Energy Policy, Elsevier, vol. 171(C).
    12. Fabrizio Battisti & Orazio Campo, 2021. "The Assessment of Density Bonus in Building Renovation Interventions. The Case of the City of Florence in Italy," Land, MDPI, vol. 10(12), pages 1-21, December.
    13. Galvin, Ray, 2024. "The economic losses of energy-efficiency renovation of Germany's older dwellings: The size of the problem and the financial challenge it presents," Energy Policy, Elsevier, vol. 184(C).
    14. Theo Lynn & Pierangelo Rosati & Antonia Egli & Stelios Krinidis & Komninos Angelakoglou & Vasileios Sougkakis & Dimitrios Tzovaras & Mohamad Kassem & David Greenwood & Omar Doukari, 2021. "RINNO: Towards an Open Renovation Platform for Integrated Design and Delivery of Deep Renovation Projects," Sustainability, MDPI, vol. 13(11), pages 1-21, May.
    15. Luiz de Mello, 2023. "Real Estate in a Post-Pandemic World: How Can Policies Make Housing More Enviromentally Sustainable and Affordable?," Hacienda Pública Española / Review of Public Economics, IEF, vol. 244(1), pages 111-139, March.
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    17. Elissaios Sarmas & Vangelis Marinakis & Haris Doukas, 2022. "A data-driven multicriteria decision making tool for assessing investments in energy efficiency," Operational Research, Springer, vol. 22(5), pages 5597-5616, November.
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