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Energy efficiency policy in an n-th best world: Assessing the implementation gap

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  • Lucas Vivier

    (CIRED - Centre International de Recherche sur l'Environnement et le Développement - Cirad - Centre de Coopération Internationale en Recherche Agronomique pour le Développement - EHESS - École des hautes études en sciences sociales - AgroParisTech - ENPC - École des Ponts ParisTech - Université Paris-Saclay - CNRS - Centre National de la Recherche Scientifique, ENPC - École des Ponts ParisTech)

  • Louis-Gaëtan Giraudet

    (CIRED - Centre International de Recherche sur l'Environnement et le Développement - Cirad - Centre de Coopération Internationale en Recherche Agronomique pour le Développement - EHESS - École des hautes études en sciences sociales - AgroParisTech - ENPC - École des Ponts ParisTech - Université Paris-Saclay - CNRS - Centre National de la Recherche Scientifique, ENPC - École des Ponts ParisTech)

Abstract

The market failures and behavioral anomalies at the source of the Energy Efficiency Gap tend to be studied in isolation, which biases welfare assessment of energy efficiency policies. We develop a dynamic model of home energy retrofit fit for capturing cumulative inefficiencies due to multiple frictions -- CO2 externality, cold-related illness, credit rationing, landlord-tenant dilemma, free-riding in multi-family housing, present bias and status quo bias. Focusing on France, we find that health, rental and multi-family frictions each entail higher deadweight losses than the CO2 externality alone. Taking all frictions into account implies that energy efficiency subsidies generate net social benefits -- at odds with previous findings. In contrast, the benefit-cost balance of regulations is net negative due to ancillary costs. Finally, the French policy portfolio, which blends subsidies, taxes and regulations, only closes half of the energy efficiency gap. Its efficiency could be improved by better targeting low-income families, multi-family housing and rental housing.

Suggested Citation

  • Lucas Vivier & Louis-Gaëtan Giraudet, 2024. "Energy efficiency policy in an n-th best world: Assessing the implementation gap," CIRED Working Papers hal-04510798, HAL.
  • Handle: RePEc:hal:ciredw:hal-04510798
    Note: View the original document on HAL open archive server: https://hal.science/hal-04510798v2
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    References listed on IDEAS

    as
    1. Marie-Laure Nauleau, 2014. "Free-Riding in Tax Credits For Home Insulation in France: An Econometric Assessment Using Panel Data," Working Papers 2014.26, Fondazione Eni Enrico Mattei.
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    5. Alain Quinet, 2019. "What Value Do We Attach to Climate Action?," Economie et Statistique / Economics and Statistics, Institut National de la Statistique et des Etudes Economiques (INSEE), issue 510-511-5, pages 165-179.
    6. Nauleau, Marie-Laure, 2014. "Free-riding on tax credits for home insulation in France: An econometric assessment using panel data," Energy Economics, Elsevier, vol. 46(C), pages 78-92.
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    8. Nauleau, Marie‐Laure, 2014. "Free‐Riding in Tax Credits For Home Insulation in France: An Econometric Assessment Using Panel Data," Energy: Resources and Markets 165796, Fondazione Eni Enrico Mattei (FEEM).
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    Full references (including those not matched with items on IDEAS)

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    Keywords

    climate change mitigation; energy efficiency; residential sector; building stock models; ex-ante policy assessment; applied policy analysis;
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