Modelling thermal insulation investment choice in the EU via a behaviourally informed agent-based model

In spite of the established importance that retrofitting the existing building stock has in decreasing end-use carbon emissions and of the large availability of policies aimed at financially supporting renovations, investments in the residential sector remain below the optimal levels. The paper proposes an encompassing theoretical framework that merges economic, behavioural and social motives and suggests diverse policy instruments to promote retrofitting and their appropriate targets. The paper exploits the Consumers Survey data from the Second consumer market study on the functioning of the retail electricity markets for consumers in the EU (2016) to calibrate an agent-based model of the thermal insulation investment choice. The model simulates the investment choice of 19,538 homeowners based on their perceived financial situation and environmental concern, and introduces unobserved networks on which adoption by imitation occurs. We investigate the effect of a financial incentive, a pro-environmental campaign and a norm-based intervention on the adoption rate. Results show that the interplay between economic, behavioural, and social motives produces unexpected outcomes: policies that leverage only one motive are nonetheless affected by the others.