Market based instruments to reduce air emissions from household heating appliances. Analysis of scrappage policy scenarios

This document explores the potential for the use of a market-based instrument to contribute to reducing the emissions of particulate matter of less than 10 micrometres from household heating appliances in the framework of the review of the Thematic Strategy on Air Pollution. The study is focused on the assessment of the economic and environmental impacts of possible scrappage policies for promoting the accelerated replacement of existing heating appliances with cleaner ones. Under these policy programmes, households replacing an old appliance with a cleaner one would receive a subsidy from the government. This subsidy would compensate households for the residual value of the scrapped appliance and the opportunity costs of the early investment in a new one. Two different scenarios are analysed: The scrappage and replacement of all the different types of conventional appliances that do not incorporate any emission control technology ('non-controlled'), and the scrappage and replacement of only 'non-controlled' firewood- and hard-coal-fired manual single house boilers. It is assumed that the scrappage programme is in force between 2018 and 2020. For each scenario, the study focuses on the effects of different levels of replacement of the 'non-controlled' appliances and the size of subsidies relative to the investment costs.