Climate Change, Buildings and Energy Prices

Buildings are crucial to control present and future energy demand and, therefore, greenhouse gas concentrations in the atmosphere. In this chapter we suggest that, due to a number of general and specific barriers to the implementation of energy efficiency in buildings, energy prices and conventional energy and environmental policy instruments may not achieve the desired outcomes. Instead, we suggest a novel package of complementary measures that can simultaneously tackle the problems of imperfect information, split incentives among agents, uncertainty about cost and limited access to capital. The proposed policy package is defined around energy certification of buildings, uses flexible building codes, smart metering and employs a new tax on energy inefficiency to foster continuous incentives towards energy efficiency improvements and to provide revenues for an energy efficiency fund that provides capital to firms and poor households.