IDEAS home Printed from https://ideas.repec.org/p/zbw/ufzdps/319624.html
   My bibliography  Save this paper

Carbon pricing and the affordability of residential heating: A theoretical model with endogenous technology choice

Author

Listed:
  • Reda, Milan Jakob
  • Gawel, Erik
  • Lehmann, Paul

Abstract

This paper analyses the impact of carbon pricing on residential heating affordability using a theoretical household model with endogenous choice of a renewable heating technology. We compare two compensation policies: a renewable heating subsidy and a lump-sum transfer. The subsidy is the most effective policy to reduce the household's burden if the renewable heating technology is the optimal choice with carbon pricing alone. Otherwise, the relative effectiveness of the compensation policies depends on whether they shift the household's choice towards renewable heating. Overall, our study emphasizes the need of considering technological adjustment when analyzing how carbon pricing affects heating affordability.

Suggested Citation

  • Reda, Milan Jakob & Gawel, Erik & Lehmann, Paul, 2025. "Carbon pricing and the affordability of residential heating: A theoretical model with endogenous technology choice," UFZ Discussion Papers 2/2025, Helmholtz Centre for Environmental Research (UFZ), Division of Social Sciences (ÖKUS).
    • Handle: RePEc:zbw:ufzdps:319624
    as

    Download full text from publisher

    File URL: https://www.econstor.eu/bitstream/10419/319624/1/1928068758.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Hänsel, Martin C. & Franks, Max & Kalkuhl, Matthias & Edenhofer, Ottmar, 2022. "Optimal carbon taxation and horizontal equity: A welfare-theoretic approach with application to German household data," Journal of Environmental Economics and Management, Elsevier, vol. 116(C).
    2. Yuru Guan & Jin Yan & Yuli Shan & Yannan Zhou & Ye Hang & Ruoqi Li & Yu Liu & Binyuan Liu & Qingyun Nie & Benedikt Bruckner & Kuishuang Feng & Klaus Hubacek, 2023. "Burden of the global energy price crisis on households," Nature Energy, Nature, vol. 8(3), pages 304-316, March.
    3. Stephen Malpezzi, 2023. "Housing affordability and responses during times of stress: A preliminary look during the COVID‐19 pandemic," Contemporary Economic Policy, Western Economic Association International, vol. 41(1), pages 9-40, January.
    4. Bourgeois, Cyril & Giraudet, Louis-Gaëtan & Quirion, Philippe, 2021. "Lump-sum vs. energy-efficiency subsidy recycling of carbon tax revenue in the residential sector: A French assessment," Ecological Economics, Elsevier, vol. 184(C).
    5. Charlier, Dorothée & Legendre, Bérangère, 2021. "Fuel poverty in industrialized countries: Definition, measures and policy implications a review," Energy, Elsevier, vol. 236(C).
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Missbach, Leonard & Steckel, Jan Christoph & Vogt-Schilb, Adrien, 2024. "Cash transfers in the context of carbon pricing reforms in Latin America and the Caribbean," World Development, Elsevier, vol. 173(C).
    2. Xu, Qi & Liu, Kui, 2024. "Hero or Devil: A comparison of different carbon tax policies for China," Energy, Elsevier, vol. 306(C).
    3. Núñez-Sánchez, Ramón & Otoya-Chavarría, Marco & Soberón, Alexandra, 2024. "Price and budget elasticities under utility poverty policies in Spain," Utilities Policy, Elsevier, vol. 88(C).
    4. Nicholas Bamegne Nambie & Philomena Dadzie & Dorcas Oye Haywood-Dadzie, 2023. "Measuring the Effect of Income Inequality, Financial Inclusion, Investment, and Unemployment, on Economic Growth in Africa: A Moderating Role of Digital Financial Technology," International Journal of Economics and Financial Issues, Econjournals, vol. 13(4), pages 111-124, July.
    5. Szczygielski, Jan Jakub & Charteris, Ailie & Obojska, Lidia & Brzeszczyński, Janusz, 2025. "Energy in turmoil: Industry resilience to uncertainty during the global energy crisis," Applied Energy, Elsevier, vol. 389(C).
    6. Qiang Wang & Yuanfan Li & Rongrong Li, 2024. "Rethinking the environmental Kuznets curve hypothesis across 214 countries: the impacts of 12 economic, institutional, technological, resource, and social factors," Palgrave Communications, Palgrave Macmillan, vol. 11(1), pages 1-19, December.
    7. Rao, Amar & Srivastava, Mrinalini & Parihar, Jaya Singh & Chavriya, Shubham & Hosen, Mosharrof, 2024. "Minerals at the crossroads: Economic policies, global trade, and renewable energy in the global South," Resources Policy, Elsevier, vol. 97(C).
    8. Alina Kalle & Miriam Muller, 2024. "If Children Aren’t Full, Can Adults Eat?," World Bank Publications - Reports 42272, The World Bank Group.
    9. George, Jan Frederick & Werner, Simon & Preuß, Sabine & Winkler, Jenny & Held, Anne & Ragwitz, Mario, 2023. "The landlord-tenant dilemma: Distributional effects of carbon prices, redistribution and building modernisation policies in the German heating transition," Applied Energy, Elsevier, vol. 339(C).
    10. Niu, Jide & Li, Xiaoyuan & Tian, Zhe & Yang, Hongxing, 2024. "Uncertainty analysis of the electric vehicle potential for a household to enhance robustness in decision on the EV/V2H technologies," Applied Energy, Elsevier, vol. 365(C).
    11. Işık, Cem & Kuziboev, Bekhzod & Ongan, Serdar & Saidmamatov, Olimjon & Mirkhoshimova, Mokhirakhon & Rajabov, Alibek, 2024. "The volatility of global energy uncertainty: Renewable alternatives," Energy, Elsevier, vol. 297(C).
    12. Semet, Raphaël, 2024. "Coordinating social equity and emissions: Challenges in carbon tax policy," Energy Policy, Elsevier, vol. 185(C).
    13. Jakub Sokołowski & Piotr Lewandowski & Jan Frankowski, 2023. "How to Prevent Yellow Vests? Evaluating Preferences for a Carbon Tax with a Discrete Choice Experiment," IBS Working Papers 03/2023, Instytut Badan Strukturalnych.
    14. Kusum Mundra & Ruth Uwaifo Oyelere, 2024. "In Need of a Roof: Pandemic and Housing Vulnerability," Journal of Economics, Race, and Policy, Springer, vol. 7(1), pages 27-44, March.
    15. Gu, Jiafeng, 2023. "Energy poverty and government subsidies in China," Energy Policy, Elsevier, vol. 180(C).
    16. Filippo Maria D’Arcangelo & Ilai Levin & Alessia Pagani & Mauro Pisu & Åsa Johansson, 2022. "A framework to decarbonise the economy," OECD Economic Policy Papers 31, OECD Publishing.
    17. Minh Nguyen Dat & Kien Duong Trung & Phap Vu Minh & Chau Dinh Van & Quynh T. Tran & Trung Nguyen Ngoc, 2023. "Assessment of Energy Efficiency Using an Energy Monitoring System: A Case Study of a Major Energy-Consuming Enterprise in Vietnam," Energies, MDPI, vol. 16(13), pages 1-15, July.
    18. Missbach, Leonard & Steckel, Jan Christoph, 2024. "Distributional impacts of climate policy and effective compensation: Evidence from 88 countries," EconStor Preprints 296491, ZBW - Leibniz Information Centre for Economics.
    19. Yuru Guan & Yuli Shan & Ye Hang & Qingyun Nie & Yu Liu & Klaus Hubacek, 2025. "Unlocking global carbon reduction potential by embracing low-carbon lifestyles," Nature Communications, Nature, vol. 16(1), pages 1-16, December.
    20. Abatemarco, Antonio & Dell'Anno, Roberto & Lagomarsino, Elena, 2025. "Measuring equity in environmental care: methodology and an application to air pollution," FEEM Working Papers 359332, Fondazione Eni Enrico Mattei (FEEM).

    More about this item

    Keywords

    ;
    ;
    ;
    ;

    JEL classification:

    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:zbw:ufzdps:319624. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ZBW - Leibniz Information Centre for Economics (email available below). General contact details of provider: https://edirc.repec.org/data/doufzde.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.