IDEAS home Printed from https://ideas.repec.org/a/eee/enepol/v169y2022ics0301421522004116.html
   My bibliography  Save this article

Beyond good faith: Why evidence-based policy is necessary to decarbonize buildings cost-effectively in Germany

Author

Listed:
  • Singhal, Puja
  • Pahle, Michael
  • Kalkuhl, Matthias
  • Levesque, Antoine
  • Sommer, Stephan
  • Berneiser, Jessica

Abstract

The ambitious climate targets set by industrialized nations worldwide cannot be met without decarbonizing the building stock. Using Germany as a case study, this paper takes stock of the extensive set of energy efficiency policies that are already in place and clarifies that they have been designed “in good faith” but lack in overall effectiveness as well as cost-efficiency in achieving these climate targets. We map out the market failures and behavioural considerations that are potential reasons for why realized energy savings fall below expectations and why the household adoption of energy-efficient and low-carbon technologies has remained low. We highlight the pressing need for data and modern empirical research to develop targeted and cost-effective policies seeking to correct these market failures. To this end, we identify some key research questions and identify gaps in the data required for evidence-based policy.

Suggested Citation

  • Singhal, Puja & Pahle, Michael & Kalkuhl, Matthias & Levesque, Antoine & Sommer, Stephan & Berneiser, Jessica, 2022. "Beyond good faith: Why evidence-based policy is necessary to decarbonize buildings cost-effectively in Germany," Energy Policy, Elsevier, vol. 169(C).
    • Handle: RePEc:eee:enepol:v:169:y:2022:i:c:s0301421522004116
    DOI: 10.1016/j.enpol.2022.113191
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0301421522004116
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.enpol.2022.113191?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Goette, Lorenz & Tiefenbeck, Verena & Degen, Kathrin & Fleisch, Elgar & Tasic, Vojkan & Lalive, Rafael & Staake, Thorsten, 2016. "Overcoming Salience Bias: How Real-Time Feedback Fosters Resource Conservation," CEPR Discussion Papers 11480, C.E.P.R. Discussion Papers.
    2. Kenneth Gillingham & Karen Palmer, 2014. "Bridging the Energy Efficiency Gap: Policy Insights from Economic Theory and Empirical Evidence," Review of Environmental Economics and Policy, Association of Environmental and Resource Economists, vol. 8(1), pages 18-38, January.
    3. Todd D. Gerarden & Richard G. Newell & Robert N. Stavins, 2017. "Assessing the Energy-Efficiency Gap," Journal of Economic Literature, American Economic Association, vol. 55(4), pages 1486-1525, December.
    4. Myers, Erica, 2020. "Asymmetric information in residential rental markets: Implications for the energy efficiency gap," Journal of Public Economics, Elsevier, vol. 190(C).
    5. Gilbert, Ben & Graff Zivin, Joshua, 2014. "Dynamic salience with intermittent billing: Evidence from smart electricity meters," Journal of Economic Behavior & Organization, Elsevier, vol. 107(PA), pages 176-190.
    6. Lucas W. Davis, 2021. "What Matters for Electrification? Evidence from 70 Years of U.S. Home Heating Choices," NBER Working Papers 28324, National Bureau of Economic Research, Inc.
    7. Lucas W. Davis & Gilbert E. Metcalf, 2016. "Does Better Information Lead to Better Choices? Evidence from Energy-Efficiency Labels," Journal of the Association of Environmental and Resource Economists, University of Chicago Press, vol. 3(3), pages 589-625.
    8. Grant D. Jacobsen, 2019. "An Examination of How Energy Efficiency Incentives Are Distributed Across Income Groups," The Energy Journal, International Association for Energy Economics, vol. 0(Number 6).
    9. Meredith Fowlie & Michael Greenstone & Catherine Wolfram, 2015. "Are the Non-monetary Costs of Energy Efficiency Investments Large? Understanding Low Take-Up of a Free Energy Efficiency Program," American Economic Review, American Economic Association, vol. 105(5), pages 201-204, May.
    10. Raj Chetty & Adam Looney & Kory Kroft, 2009. "Salience and Taxation: Theory and Evidence," American Economic Review, American Economic Association, vol. 99(4), pages 1145-1177, September.
    11. Nicholas Rivers and Leslie Shiell, 2016. "Free-Riding on Energy Efficiency Subsidies: the Case of Natural Gas Furnaces in Canada," The Energy Journal, International Association for Energy Economics, vol. 0(Number 4).
    12. Murphy, Lorraine, 2014. "The influence of energy audits on the energy efficiency investments of private owner-occupied households in the Netherlands," Energy Policy, Elsevier, vol. 65(C), pages 398-407.
    13. Blumstein, Carl & Stoft, Steven E, 1995. "Technical efficiency, production functions and conservation supply curves," Energy Policy, Elsevier, vol. 23(9), pages 765-768, September.
    14. Severin Borenstein & Lucas W. Davis, 2016. "The Distributional Effects of US Clean Energy Tax Credits," Tax Policy and the Economy, University of Chicago Press, vol. 30(1), pages 191-234.
    15. Petrov, Ivan & Ryan, Lisa, 2021. "The landlord-tenant problem and energy efficiency in the residential rental market," Energy Policy, Elsevier, vol. 157(C).
    16. Stefano DellaVigna, 2009. "Psychology and Economics: Evidence from the Field," Journal of Economic Literature, American Economic Association, vol. 47(2), pages 315-372, June.
    17. Matthew J. Kotchen, 2017. "Longer-Run Evidence on Whether Building Energy Codes Reduce Residential Energy Consumption," Journal of the Association of Environmental and Resource Economists, University of Chicago Press, vol. 4(1), pages 135-153.
    18. Peter Grosche & Colin Vance, 2009. "Willingness to Pay for Energy Conservation and Free-Ridership on Subsidization: Evidence from Germany," The Energy Journal, International Association for Energy Economics, vol. 0(Number 2), pages 135-154.
    19. Louis-Gaëtan Giraudet & Sébastien Houde & Joseph Maher, 2018. "Moral Hazard and the Energy Efficiency Gap: Theory and Evidence," Journal of the Association of Environmental and Resource Economists, University of Chicago Press, vol. 5(4), pages 755-790.
    20. Germeshausen, Robert & von Graevenitz, Kathrine & Achtnicht, Martin, 2022. "Does the stick make the carrot more attractive? State mandates and uptake of renewable heating technologies," Regional Science and Urban Economics, Elsevier, vol. 92(C).
    21. Wichman, Casey J., 2017. "Information provision and consumer behavior: A natural experiment in billing frequency," Journal of Public Economics, Elsevier, vol. 152(C), pages 13-33.
    22. Allcott, Hunt, 2011. "Social norms and energy conservation," Journal of Public Economics, Elsevier, vol. 95(9-10), pages 1082-1095, October.
    23. Natalia Fabra & David Rapson & Mar Reguant & Jingyuan Wang, 2021. "Estimating the Elasticity to Real-Time Pricing: Evidence from the Spanish Electricity Market," AEA Papers and Proceedings, American Economic Association, vol. 111, pages 425-429, May.
    24. Richard G. Newell & Juha Siikamäki, 2014. "Nudging Energy Efficiency Behavior: The Role of Information Labels," Journal of the Association of Environmental and Resource Economists, University of Chicago Press, vol. 1(4), pages 555-598.
    25. Daire McCoy and Raphaela A. Kotsch, 2021. "Quantifying the Distributional Impact of Energy Efficiency Measures," The Energy Journal, International Association for Energy Economics, vol. 0(Number 6).
    26. Joshua Graff Zivin and Kevin Novan, 2016. "Upgrading Efficiency and Behavior: Electricity Savings from Residential Weatherization Programs," The Energy Journal, International Association for Energy Economics, vol. 0(Number 4).
    27. Nauleau, Marie‐Laure, 2014. "Free‐Riding in Tax Credits For Home Insulation in France: An Econometric Assessment Using Panel Data," Energy: Resources and Markets 165796, Fondazione Eni Enrico Mattei (FEEM).
    28. Katrina Jessoe & David Rapson, 2014. "Knowledge Is (Less) Power: Experimental Evidence from Residential Energy Use," American Economic Review, American Economic Association, vol. 104(4), pages 1417-1438, April.
    29. Marie-Laure Nauleau, 2014. "Free-Riding in Tax Credits For Home Insulation in France: An Econometric Assessment Using Panel Data," Working Papers 2014.26, Fondazione Eni Enrico Mattei.
    30. Chris Bruegge & Tatyana Deryugina & Erica Myers, 2019. "The Distributional Effects of Building Energy Codes," Journal of the Association of Environmental and Resource Economists, University of Chicago Press, vol. 6(S1), pages 95-127.
    31. Andor, Mark A. & Gerster, Andreas & Peters, Jörg & Schmidt, Christoph M., 2020. "Social Norms and Energy Conservation Beyond the US," Journal of Environmental Economics and Management, Elsevier, vol. 103(C).
    32. Steven Sexton, 2015. "Automatic Bill Payment and Salience Effects: Evidence from Electricity Consumption," The Review of Economics and Statistics, MIT Press, vol. 97(2), pages 229-241, May.
    33. Hunt Allcott & Michael Greenstone, 2017. "Measuring the Welfare Effects of Residential Energy Efficiency Programs," NBER Working Papers 23386, National Bureau of Economic Research, Inc.
    34. Amy Finkelstein, 2009. "E-ztax: Tax Salience and Tax Rates," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 124(3), pages 969-1010.
    35. Aydin, Erdal & Correa, Santiago Bohórquez & Brounen, Dirk, 2019. "Energy performance certification and time on the market," Journal of Environmental Economics and Management, Elsevier, vol. 98(C).
    36. Hendrik Schmitz & Reinhard Madlener, 2020. "Heterogeneity in price responsiveness for residential space heating in Germany," Empirical Economics, Springer, vol. 59(5), pages 2255-2281, November.
    37. Fiona Burlig & Christopher Knittel & David Rapson & Mar Reguant & Catherine Wolfram, 2020. "Machine Learning from Schools about Energy Efficiency," Journal of the Association of Environmental and Resource Economists, University of Chicago Press, vol. 7(6), pages 1181-1217.
    38. Ben Gilbert & Jacob LaRiviere & Kevin Novan, 2019. "Additionality, Mistakes, and Energy Efficiency Investment," Working Papers 2019-01, Colorado School of Mines, Division of Economics and Business.
    39. Frondel, Manuel & Andor, Mark & Ritter, Nolan & Sommer, Stephan & Vance, Colin & Matuschek, Peter & Müller, Ute, 2015. "Erhebung des Energieverbrauchs der privaten Haushalte für die Jahre 2011-2013: Bericht für das Projekt Erhebung des Energieverbrauchs der privaten Haushalte für die Jahre 2006-2013," RWI Projektberichte, RWI - Leibniz-Institut für Wirtschaftsforschung, number 113893.
    40. Erica Myers, 2019. "Are Home Buyers Inattentive? Evidence from Capitalization of Energy Costs," American Economic Journal: Economic Policy, American Economic Association, vol. 11(2), pages 165-188, May.
    41. Lucas W. Davis & Alan Fuchs & Paul Gertler, 2014. "Cash for Coolers: Evaluating a Large-Scale Appliance Replacement Program in Mexico," American Economic Journal: Economic Policy, American Economic Association, vol. 6(4), pages 207-238, November.
    42. Dominik Weiß & Claus Michelsen, 2011. "The improvement of housing conditions in post com-munist Germany – Market Mechanisms and Subsidy Impacts," ERSA conference papers ersa11p505, European Regional Science Association.
    43. Frondel, Manuel & Andor, Mark & Ritter, Nolan & Tauchmann, Harald & Vance, Colin & Matuschek, Peter & Müller, Ute, 2013. "Erhebung des Energieverbrauchs der privaten Haushalte für die Jahre 2009-2010: Teilbericht für das Projekt Erhebung des Energieverbrauchs der privaten Haushalte für die Jahre 2006-2010," RWI Projektberichte, RWI - Leibniz-Institut für Wirtschaftsforschung, number 111421.
    44. Jacksohn, Anke & Grösche, Peter & Rehdanz, Katrin & Schröder, Carsten, 2019. "Drivers of renewable technology adoption in the household sector," Energy Economics, Elsevier, vol. 81(C), pages 216-226.
    45. Meredith Fowlie & Michael Greenstone & Catherine Wolfram, 2018. "Do Energy Efficiency Investments Deliver? Evidence from the Weatherization Assistance Program," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 133(3), pages 1597-1644.
    46. Gillingham, Kenneth & Tsvetanov, Tsvetan, 2018. "Nudging energy efficiency audits: Evidence from a field experiment," Journal of Environmental Economics and Management, Elsevier, vol. 90(C), pages 303-316.
    47. Jacquelyn Pless & Cameron Hepburn & Niall Farrell, 2020. "Bringing rigour to energy innovation policy evaluation," Nature Energy, Nature, vol. 5(4), pages 284-290, April.
    48. Chandra Kiran B. Krishnamurthy and Bengt Kriström, 2015. "How large is the Owner-Renter Divide in Energy Efficient Technology? Evidence from an OECD cross-section," The Energy Journal, International Association for Energy Economics, vol. 0(Number 4).
    49. Ulf Liebe & Jennifer Gewinner & Andreas Diekmann, 2021. "Large and persistent effects of green energy defaults in the household and business sectors," Nature Human Behaviour, Nature, vol. 5(5), pages 576-585, May.
    50. Nauleau, Marie-Laure, 2014. "Free-riding on tax credits for home insulation in France: An econometric assessment using panel data," Energy Economics, Elsevier, vol. 46(C), pages 78-92.
    51. Broberg, Thomas & Egüez, Alejandro & Kažukauskas, Andrius, 2019. "Effects of energy performance certificates on investment: A quasi-natural experiment approach," Energy Economics, Elsevier, vol. 84(C).
    52. Stiglitz, Joseph E & Weiss, Andrew, 1981. "Credit Rationing in Markets with Imperfect Information," American Economic Review, American Economic Association, vol. 71(3), pages 393-410, June.
    53. Frondel, Manuel & Schmidt, Christoph M., 2005. "Evaluating environmental programs: The perspective of modern evaluation research," Ecological Economics, Elsevier, vol. 55(4), pages 515-526, December.
    54. Marie-Laure Nauleau, 2014. "Free-riding on tax credits for home insulation in France: An econometric assessment using panel data," Post-Print hal-01083206, HAL.
    55. Brian C. Prest, 2020. "Peaking Interest: How Awareness Drives the Effectiveness of Time-of-Use Electricity Pricing," Journal of the Association of Environmental and Resource Economists, University of Chicago Press, vol. 7(1), pages 103-143.
    56. Grant D. Jacobsen & Matthew J. Kotchen, 2013. "Are Building Codes Effective at Saving Energy? Evidence from Residential Billing Data in Florida," The Review of Economics and Statistics, MIT Press, vol. 95(1), pages 34-49, March.
    57. Kenneth Gillingham, Matthew Harding, and David Rapson, 2012. "Split Incentives in Residential Energy Consumption," The Energy Journal, International Association for Energy Economics, vol. 0(Number 2).
    58. Stefano Dellavigna & Joshua M. Pollet, 2009. "Investor Inattention and Friday Earnings Announcements," Journal of Finance, American Finance Association, vol. 64(2), pages 709-749, April.
    59. Manuel Frondel & Andreas Gerster & Colin Vance, 2020. "The Power of Mandatory Quality Disclosure: Evidence from the German Housing Market," Journal of the Association of Environmental and Resource Economists, University of Chicago Press, vol. 7(1), pages 181-208.
    60. Puja Singhal, 2020. "Inform Me When It Matters: Cost Salience, Energy Consumption, and Efficiency Investments," Discussion Papers of DIW Berlin 1891, DIW Berlin, German Institute for Economic Research.
    61. Sébastien Houde & Joseph E. Aldy, 2017. "Consumers' Response to State Energy Efficient Appliance Rebate Programs," American Economic Journal: Economic Policy, American Economic Association, vol. 9(4), pages 227-255, November.
    62. Michelsen, Claus & Rosenschon, Sebastian & Schulz, Christian, 2015. "Small might be beautiful, but bigger performs better: Scale economies in “green” refurbishments of apartment housing," Energy Economics, Elsevier, vol. 50(C), pages 240-250.
    63. Cass R. Sunstein, 2021. "Green defaults can combat climate change," Nature Human Behaviour, Nature, vol. 5(5), pages 548-549, May.
    64. Giraudet, Louis-Gaëtan, 2020. "Energy efficiency as a credence good: A review of informational barriers to energy savings in the building sector," Energy Economics, Elsevier, vol. 87(C).
    65. Allcott, Hunt, 2011. "Social norms and energy conservation," Journal of Public Economics, Elsevier, vol. 95(9), pages 1082-1095.
    66. Puja Singhal & Jan Stede, 2019. "Heat Monitor 2018: Rising Heating Energy Demand, Thermal Retrofit Rate Must Increase," DIW Weekly Report, DIW Berlin, German Institute for Economic Research, vol. 9(35/36), pages 303-312.
    67. Louis-Gaëtan Giraudet & Sébastien Houde & Joseph Maher, 2018. "Moral Hazard and the Energy Efficiency Gap: Theory and Evidence," Working Papers hal-01420872, HAL.
    68. Boomhower, Judson & Davis, Lucas W., 2014. "A credible approach for measuring inframarginal participation in energy efficiency programs," Journal of Public Economics, Elsevier, vol. 113(C), pages 67-79.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Giraudet, Louis-Gaëtan, 2020. "Energy efficiency as a credence good: A review of informational barriers to energy savings in the building sector," Energy Economics, Elsevier, vol. 87(C).
    2. Louis-Gaëtan Giraudet, 2018. "Energy efficiency as a credence good: A review of informational barriers to building energy savings," Working Papers 2018.07, FAERE - French Association of Environmental and Resource Economists.
    3. Gilbert, Ben & LaRiviere, Jacob & Novan, Kevin, 2022. "Uncertainty and additionality in energy efficiency programs," Journal of Environmental Economics and Management, Elsevier, vol. 115(C).
    4. Lang, Ghislaine & Lanz, Bruno, 2022. "Climate policy without a price signal: Evidence on the implicit carbon price of energy efficiency in buildings," Journal of Environmental Economics and Management, Elsevier, vol. 111(C).
    5. Puja Singhal, 2020. "Inform Me When It Matters: Cost Salience, Energy Consumption, and Efficiency Investments," Discussion Papers of DIW Berlin 1891, DIW Berlin, German Institute for Economic Research.
    6. Ramos, A. & Gago, A. & Labandeira, X. & Linares, P., 2015. "The role of information for energy efficiency in the residential sector," Energy Economics, Elsevier, vol. 52(S1), pages 17-29.
    7. Bruno Lanz and Evert Reins, 2021. "Asymmetric Information on the Market for Energy Efficiency: Insights from the Credence Goods Literature," The Energy Journal, International Association for Energy Economics, vol. 0(Number 4).
    8. Laura Abrardi, 2019. "Behavioral barriers and the energy efficiency gap: a survey of the literature," Economia e Politica Industriale: Journal of Industrial and Business Economics, Springer;Associazione Amici di Economia e Politica Industriale, vol. 46(1), pages 25-43, March.
    9. Bettina Chlond & Claire Gavard & Lisa Jeuck, 2023. "How to Support Residential Energy Conservation Cost-Effectively? An analysis of Public Financial Schemes in France," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 85(1), pages 29-63, May.
    10. Louis-Gaëtan Giraudet & Antoine Missemer, 2023. "The History of Energy Efficiency in Economics: Breakpoints and Regularities," Post-Print halshs-02301636, HAL.
    11. Henningsen, Geraldine & Wiese, Catharina, 2019. "Do Household Characteristics Really Matter? A Meta-Analysis on the Determinants of Households’ Energy-Efficiency Investments," MPRA Paper 101701, University Library of Munich, Germany.
    12. Hiroko Okajima & Shigeharu Okajima & Kenji Takeuchi, 2019. "Corporate responses to public pressures and price increases:Evidence from Japan's electricity crisis," Discussion Papers 1908, Graduate School of Economics, Kobe University.
    13. Todd D. Gerarden & Richard G. Newell & Robert N. Stavins, 2017. "Assessing the Energy-Efficiency Gap," Journal of Economic Literature, American Economic Association, vol. 55(4), pages 1486-1525, December.
    14. Ben Gilbert & Jacob LaRiviere & Kevin Novan, 2019. "Additionality, Mistakes, and Energy Efficiency Investment," Working Papers 2019-01, Colorado School of Mines, Division of Economics and Business.
    15. Bourgeois, Cyril & Giraudet, Louis-Gaëtan & Quirion, Philippe, 2021. "Lump-sum vs. energy-efficiency subsidy recycling of carbon tax revenue in the residential sector: A French assessment," Ecological Economics, Elsevier, vol. 184(C).
    16. Palmer, Karen & Walls, Margaret, 2015. "Does Information Provision Shrink the Energy Efficiency Gap? A Cross-City Comparison of Commercial Building Benchmarking and Disclosure Laws," RFF Working Paper Series dp-15-12, Resources for the Future.
    17. Gosnell, Greer & McCoy, Daire, 2023. "Market failures and willingness to accept smart meters: Experimental evidence from the UK," Journal of Environmental Economics and Management, Elsevier, vol. 118(C).
    18. Cattaneo, Cristina, 2018. "Internal and External Barriers to Energy Efficiency: Made-to-Measure Policy Interventions," CSI: Climate and Sustainable Innovation 269536, Fondazione Eni Enrico Mattei (FEEM).
    19. Singhal, Puja & Hobbs, Andrew, 2021. "The Distribution of Energy Efficiency and Regional Inequality," VfS Annual Conference 2021 (Virtual Conference): Climate Economics 242343, Verein für Socialpolitik / German Economic Association.
    20. Hondeborg, Dianne & Probst, Benedict & Petkov, Ivalin & Knoeri, Christof, 2023. "The effectiveness of building retrofits under a subsidy scheme: Empirical evidence from Switzerland," Energy Policy, Elsevier, vol. 180(C).

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:enepol:v:169:y:2022:i:c:s0301421522004116. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/enpol .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.