The efficacy of energy efficiency: Measuring the returns to home insulation

Energy efficiency in the housing market is key to reducing energy consumption and carbon emissions, as well as enhancing national energy independence and protecting consumer budgets. Insulation plays an important role in improving the energy efficiency of a home. However, studies on the impact of investments in home insulation on actual gas consumption and the resulting financial returns are rare, and the efficacy of insulation measures is subject to debate. This study exploits a large sample of home insulation interventions, combined with detailed household data on actual gas consumption before and after these interventions, and information on the socio-economic characteristics of occupants. Using a difference-in-difference approach, we document that home insulation reduces gas consumption by about 19%, on average, both for owner-occupied and rental homes, and that the reduction in gas consumption is consistent up to ten years after the intervention. We also find that investments in home insulation are financially beneficial. The average treatment effect translates into a €350 reduction in the annual gas bill and an average financial return of 19.9% on the initial investment.