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

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

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Population

+0.3% p.a.

Household income

+1.2% p.a.

Fuel prices

~ +1.5% p.a.

INPUTS OUTPUTS Renovation and constr. (ext./int. margins) Resulting consumption for elec, ngas, oil, wood Heating comfort Renovation and construction costs Demolition rates Landlord-tenant dilemma Barriers to decision-making in collective housing Non-energy costs Credit constraints TECHNICAL PARAMETERS BEHAVIORAL PARAMETERS

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Res-IRF

Giraudet et al., En J, 2011 Giraudet et al., En Econ, 2012 Branger et al., Env Mod Soft, 2015

Main extension in version 3.0 (based on Phébus survey)

Policy parameterization

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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 average ad valorem rate 5% + energy tax Subsidy and tax components x3 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)
• No policy (ZP)
• All policies in their tighter variant (TP+)
• All policies, no land./ten. dilemma (TP sans DPL)

~ reference counterfactuals

Target 1: Energy use

• Feasible…with tight policies maintained until 2050!
• 2/3 are autonomous improvements (energy prices, building codes, etc.)

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Target 2: Yearly renovations

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• Int. margin: increase expenditures
• Ext. margin : +115,000
• 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)

Targets 3 & 4: Dwelling stock

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50% to 70% in 2050

• 75% in 2025.

Target met in 2040 if landlord-tenant dilemma is overcome.

Objectif 5: Fuel poverty

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• 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

Summary

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Target Fulft Comment 1 Reduction of energy use by 20% in 2030 and 50% in 2050

?

• Non-specific to the residential sector
• Requires tight policies maintained until

2050

• Progress largely autonomous

2 Yearly renovation of 500,000 dwellings, incl. 120,000 in social housing

vx

• Largely fulfilled in private housing
• Largely missed in social housing
• The definition matters!

3 Elimination of labels F and G by 2025

x

• Important progress, -75% en 2025
• Target fulfilled in 2040 if landlord-tenant

dilemma overcome 4 Label B or higher widespread by 2050

x

• 50% to 70% at best with tight policies

5 Fuel poverty alleviation by 15% in 2020

?

• Fulfilled only with tightest policies

Simulations vs. Observations, 2016

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• EPTZ over-estimated by one order of magnitude!
• Unaccounted for barriers on the demand and supply sides?

Long-term costs

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Policy effectiveness

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Considering all possible interactions among policies:

• Carbon tax plays on investment + utilization
• CITE is the most effective of all subsidies

Leverage, 2015

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1

• Subsidies have leverage ≥ 1, declining over time
• Interactions are mostly over-additive, due to model non-linearities

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

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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

• pportunity 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

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Renovation costs

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€/m² Etiquette finale F E D C B A Etiquette initiale G 76 136 201 271 351 442 F 63 130 204 287 382 E 70 146 232 331 D 79 169 271 C 93 199 B 110

Decreasing returns + Economies of scale

Income Distribution Across Dwellings

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Source: Phébus survey

Income category Single-family housing Multi-family housing Social 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%

Landlord/Tenant Distribution in Stock & Flow

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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%

Intensity of Utilization

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

Elasticités-prix de la demande d’énergie

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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

Simulations rétrospectives

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

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

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Profil de la taxe carbone

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Contenus carbone (gCO2/kWh PCI) Gaz naturel 206 Fioul domestique 271

décroît de 1%/an à partir de 2021, reflétant une pénétration de gaz décarboné de 10% en 2030, 18% en 2040 et 26% en 2050

+6%/an +4%/an Scénarios TC TC+ Mode d’anticipation myope parfaite

Barèmes des aides

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F E D C B A G 11% 10% 8% 7% 6% 5% F 8% 6% 5% 4% 3% E 5% 4% 3% 2% D 3% 2% 2% C 2% 1% B 1%

Taux de subvention des CEE à 4€/MWh cumac

F E

D C B

A G 1 1 1 1 F 1 1 1 1

E

1 1 1 1 D 1 1 C 1 1 B 1

Ciblage de l’EPTZ

Scénario d’obligation CEE

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Evolutions par énergies

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Rénovations par segments

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Rénovations énergétiques

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Dépenses de rénovation

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Intensité d’utilisation

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Coût-efficacité

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Certificats d’économies d’énergie

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Certificats d’économies d’énergie

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