Simulation-based identification of appropriate economic framework conditions for the transformation to a climate-neutral housing stock

Limited economic feasibility due to high investment costs and relatively small energy cost savings is seen as a major reason for low refurbishment rates of the building stock in many countries. Improving economic feasibility can therefore be essential to grow refurbishment rates. Carbon tax or funding grants are possible ways to achieve this. Furthermore, the cost-effectiveness of energy-efficient modernization depends on the necessity for refurbishment. If refurbishment measures are necessary, additional energy-efficient modernization can be carried out at comparatively low cost. Accordingly, modernizations are strongly dependent on the refurbishment cycle of the building. Based on a self-developed housing stock model for Germany, this paper presents a modeling approach to link the influence of the economic efficiency of modernizations on the modernization rate in the housing stock. This makes it possible to investigate the effects of adjustments to the economic framework (e.g., carbon tax or funding grants). This further allows the identification of target-oriented economic framework conditions for the transformation to a climate-neutral housing stock. The modeling results suggest that modernizing all existing buildings by 2045 would require unrealistically high economic incentives. In particular, the efficiency of pulling instruments such as funding grants decreases with the amount of funds used, since the share of funds allocated to those already willing to modernize increases steadily. Additionally, the economic obstacles would be particularly high for younger buildings, which have significantly lower energy savings potential, and for buildings that do not require refurbishment. Instead, the model is used to show how a successful transformation to a climate-neutral housing stock in Germany can be achieved with a mix of measures consisting of legal regulations and subsidies that address the current weak points. The results are also relevant to housing markets in Europe and beyond.