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Energy efficiency investments in the context of split incentives among French households

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  • Charlier, Dorothée

Abstract

The residential sector offers considerable potential for reducing energy use and greenhouse gas (GHG) emissions, particularly through energy-efficient renovations. The objective of this study is twofold. First, I aim to provide initial empirical evidence of the extent to which split incentives between landlords and tenants may lead to underinvestment. Second, I investigate the influence of tax credits and energy burdens on energy efficiency expenditures. Given the complexity of studying the decision to invest in energy-saving renovations, I use a bivariate Tobit model to compare decisions about energy-efficient works and repair works, even when the renovation expenditures seem quite similar. The analysis shows that tenants are doubly penalized: they have high energy expenditures due to energy-inefficient building characteristics, and because they are poorer than homeowners, they are unable to invest in energy-saving systems. The results also confirm that tax credits are ineffective in the split incentives context. In terms of public policy, the government should focus on low-income tenants, and mandatory measures such as minimum standards seem appropriate. Financial support from a third-party financer also might be a solution.

Suggested Citation

  • Charlier, Dorothée, 2015. "Energy efficiency investments in the context of split incentives among French households," Energy Policy, Elsevier, vol. 87(C), pages 465-479.
    • Handle: RePEc:eee:enepol:v:87:y:2015:i:c:p:465-479
    DOI: 10.1016/j.enpol.2015.09.005
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