Financing home energy retrofits in France Louis-Gatan Giraudet, Cyril - PowerPoint PPT Presentation

Financing home energy retrofits in France Louis-Gaëtan Giraudet, Cyril Bourgeois, Philippe Quirion Rome – 18 October 2019

Motivation • Energy efficiency key to meeting Paris goals – France scores second in EE (ACEEE 2018 Scorecard) – Has set multiple targets in residential buildings • Adequacy between targets and instruments? A comprehensive assessment – Broad: multiple subsidies, taxes, building codes – Deep: economic, environmental, distributional performance • Methodological approach – Res-IRF model: highly detailed depiction of barriers to EE – This exercise: careful treatment of policy interactions 2

Stratégie nationale bas-carbone mandates: Supporting policies: 1. Reduction of energy use by 20% in 2030 1. Income tax credit and 50% in 2050 compared to 2012 2. Zero-interest loans 2. Yearly renovation of 500,000 dwellings 3. Reduced VAT 3. Elimination of EPC labels F et G by 2025 4. Carbon tax 4. Performance label B or higher 5. White certificates widespread by 2050 6. Building codes 5. Fuel poverty alleviation by 15% in 2020 + others Effectiveness to targets? Policy efficiency and distributional impacts? 3

Res-IRF TECHNICAL PARAMETERS Giraudet et al., En J, 2011 Renovation and construction costs Giraudet et al., En Econ, 2012 Demolition rates Branger et al., Env Mod Soft, 2015 INPUTS OUTPUTS Population Renovation and constr. +0.3% p.a. (ext./int. margins) Household income Resulting consumption +1.2% p.a. for elec, ngas, oil, wood Fuel prices Heating comfort ~ +1.5% p.a. Main extension Landlord-tenant dilemma in version 3.0 Barriers to decision-making in collective housing (based on Non-energy costs Phébus survey) Credit constraints BEHAVIORAL PARAMETERS 4

Policy parameterization Reference variant Tighter variant CITE 17% ad valorem subsidy , uniform rate Restricted to high performance EPTZ ~9% ad valorem subsidy , restricted to HP Higher rate ~23% CEE Non-uniform subsidy , equivalent to an Subsidy and tax components x3 average ad valorem rate 5% + energy tax Taxe C Carbon tax , myopically expectated Perfect expectation TVA r Subsidy , VAT rate of 5,5% instead of 10% RT 2020 Building code mandating BEPOS level in 2020 4 scenarios • All policies (TP) ~ reference • No policy (ZP) • All policies in their tighter variant (TP+) counterfactuals • All policies, no land./ten. dilemma (TP sans DPL) 5

Target 1: Energy use  Feasible … with tight policies maintained until 2050!  2/3 are autonomous improvements (energy prices, building codes, etc.) 6

Target 2: Yearly renovations Ext. margin : +115,000 Int. margin: increase expenditures  Easily reached – at odds with Hulot’s resignation statement ?!?!  Note the definition: renovation = upgrade by at least one EPC label  Estimate in line with Ademe’s latest TREMI survey (2018) 7

Targets 3 & 4: Dwelling stock -75% in 2025. 50% to 70% in 2050 Target met in 2040 if landlord-tenant dilemma is overcome. 8

Objectif 5: Fuel poverty  Energy-to-income ratio: heating conventional expend. >10% income  Natural decline, despite structural increase ~0.6% p.a. (=0.3%+1.5%-1.2%)  Carbon tax has a retarding effect, subsidies accelerating 9

Summary Target Fulft Comment • ? 1 Reduction of energy use by Non-specific to the residential sector • 20% in 2030 and 50% in 2050 Requires tight policies maintained until 2050 • Progress largely autonomous • vx 2 Yearly renovation of 500,000 Largely fulfilled in private housing • dwellings, incl. 120,000 in Largely missed in social housing • social housing The definition matters! • x 3 Elimination of labels F and G Important progress, -75% en 2025 • by 2025 Target fulfilled in 2040 if landlord-tenant dilemma overcome • x 4 Label B or higher widespread 50% to 70% at best with tight policies by 2050 • ? 5 Fuel poverty alleviation by Fulfilled only with tightest policies 15% in 2020 10

Simulations vs. Observations, 2016  EPTZ over-estimated by one order of magnitude!  Unaccounted for barriers on the demand and supply sides? 11

Long-term costs 12

Policy effectiveness Considering all possible interactions among policies:  Carbon tax plays on investment + utilization  CITE is the most effective of all subsidies 13

Leverage, 2015 1  Subsidies have leverage ≥ 1, declining over time  Interactions are mostly over-additive, due to model non-linearities 14

CITE variants Leverage increases when …  Ad valorem rate is reduced  Eligibility is restricted to the most significant upgrades  Eligibility is restricted to the first two income quintiles 15

Conclusion • Key insights – Target fulfillment requires tight policies, extended to rented dwellings and maintained until 2050 – If budget constraints were to bind, restricting eligibility to low-income households would be a nice opportunity to reconcile efficiency and equity – The 500,000 target needs to be properly defined! • Contribution – Unique integrated assessment framework – Simulation/observation gap reveals barriers to EPTZ – Original approach to addressing policy interactions 16

Renovation costs € /m² Etiquette finale F E D C B A Decreasing returns G 76 136 201 271 351 442 Etiquette + initiale F 63 130 204 287 382 Economies of scale E 70 146 232 331 D 79 169 271 C 93 199 B 110 17

Income Distribution Across Dwellings Source: Phébus survey Single-family Multi-family Income category Social housing housing housing C1 (lowest income) 15% 37% 4% C2 10% 25% 4% C3 7% 15% 4% C4 5% 7% 4% C5 (highest income) 4% 5% 4% Wgd avg discount rate 8% 17% 4% 18

Landlord/Tenant Distribution in Stock & Flow Type of dwelling Renovation rate Owner-occupied Single-family 4,7% Multi-family 3,6% Rented Single-family 2,0% Multi-family 1,8% Social housing Single-family 1,5% Multi-family 2,0% 19

Intensity of Utilization Source: Cayla and Osso (2013) Intensity of utilization Energy efficiency, Carbon tax Income Theoretical budget share dedicated to heating 𝑏𝑑𝑢𝑣𝑏𝑚 𝑓𝑜𝑓𝑠𝑕𝑧 𝑣𝑡𝑓 𝐽𝑉 = 𝑞𝑠𝑓𝑒𝑗𝑑𝑢𝑓𝑒 𝑓𝑜𝑓𝑠𝑕𝑧 𝑣𝑡𝑓 ~𝑑𝑝𝑛𝑔𝑝𝑠𝑢 20

Elasticités- prix de la demande d’énergie Court terme: -0,2 Estimé sur la courbe d’intensité d’utilisation Long terme: -0,4 Estimé sur 160 scénarios d’évolution du prix des énergies 21

Simulations rétrospectives Sur la base de 1920 simulations, erreur moyenne de 3,7% par rapport aux données CEREN 22

Variables d’entrée • Population: +0,3%/an (projection INSEE) • Revenu des ménages: +1,2%/an (poursuite tendance) • Prix des énergies: scénario ADEME/DGEC/CE, ~+1,5%/an 23

Profil de la taxe carbone Scénarios TC TC+ Mode d’anticipation myope parfaite +6%/an +4%/an décroît de 1%/an à partir de 2021, Contenus carbone (gCO2/kWh PCI) reflétant une pénétration de gaz Gaz naturel 206 décarboné de 10% en 2030, 18% en Fioul domestique 271 2040 et 26% en 2050 24

Barèmes des aides F E D C B A G 11% 10% 8% 7% 6% 5% Taux de subvention des CEE à 4 € /MWh cumac F 8% 6% 5% 4% 3% E 5% 4% 3% 2% D 3% 2% 2% C 2% 1% B 1% D C B F E A G 0 0 1 1 1 1 Ciblage de l’EPTZ F 0 1 1 1 1 E 1 1 1 1 D 0 1 1 C 1 1 B 1 25

Scénario d’obligation CEE 26

Evolutions par énergies 27

Rénovations par segments 28

Rénovations énergétiques 29

Dépenses de rénovation 30

Intensité d’utilisation 31

Coût-efficacité 32

Certificats d’économies d’énergie 33

Certificats d’économies d’énergie 34