Household investment in home energy retrofit: A review of the evidence on effective public policy design for privately owned homes

Home energy retrofit is distinctive as a low carbon policy option because it often requires collaboration between private households and public policy in the deeply personal environment of the home. While there is a strong case for public investment in retrofit there is also a strong case for private investment, and as a result there is often a joint public-private contribution to its costs. This paper reports the results of a systematic evidence review and synthesis on policy effectiveness for private household investment in energy retrofit. The review considered how public policy can be used to effectively and efficiently leverage private household investment, across both demand-side and supply-side aspects. On the demand-side, the results show policy interventions leverage a wide range of private funding, from well below public funds, to several multiples of them. At the same time, calculating leverage is not straightforward, but involves various additionality, positive spill-over and market effects. In terms of different policy tools, subsidised loans offer the highest private to public leverage ratios, but are less attractive to households – and are less widely used – than one-off payment grants and tax incentives. The review highlights inadequate policy attention on the role of the supply-side in retrofit policy making, with missed opportunities for improved retrofit performance and sales. The paper also considers the effectiveness of the overall policy mix, in terms of stability, flexibility and simplicity. Finally, understanding policy effectiveness in complex systems such as household retrofitting requires a broad and realist approach to evidence review.