Carbon Dioxide Emissions Reduction In The Housing Sector: Who Pays The Bill?

A clean natural environment is a public good. Environmental pollution, especially carbon dioxide emissions caused by residential heating and air-conditioning, generates complex external effects. Residents in the European Union are living in a carbon-constrained world. The internalisation of the external effects comes at a cost, both politically and economically. Environmental economics can provide many different recommendations, the most common being a system in which polluters pay a fee based on the volume of pollution they create; also known as the polluter-pays-principle. However, it is not always possible to identify the polluter. Even if it is possible, it is not always economical feasible to refinance investments in order to reduce greenhouse gas emissions, More than that: Some polluters are simply unwilling to do so. Based on these insights, this paper proposes a financial burden-sharing model between owners, occupants and the public and demonstrates the political implications of the results. The analysis and data are based on research on housing sectors conducted within a climate protection commission mandated by the German government.