Energy conservation: fiscal and financial options

This report, commissioned by the Dutch environment ministry following a parliamentary motion on the issue, examines fiscal and financial options for energy saving in the built environment. Such measures can be designed to tie in with Energy Performance certification for dwellings and other buildings, scheduled for introduction in mid-2007.

The conclusions are as follows:

  • The envisaged annual rate of energy conservation in the built environment (1.3% as of 2008, 1.5% as of 2012) cannot be achieved with the policies in place today; perhaps worse, these policies fail to tap into many of the options with a pay-back of less than 4 to 6 years.
  • To increase the tempo of energy savings, overcome resistance and instil a sense of urgency requires policies that oblige parties to improve the energy performance of their entire building stock.
  • Fiscal and financial instruments can be designed to specifically address the remaining barriers and instances of market failure.
  • This means an array of dedicated measures targeting the following groups:

    • Private housing: A discount on property transfer tax may be an effective instrument, particularly because of the scope for tying in with renovation work. After all, property sale is often taken as a natural opportunity for structural renovations like insulation or purchase of energy-efficient equipment and appliances.
    • Social housing: Greater weight should be given to energy efficiency in housing valuation procedures, to give housing corporations greater flexibility to ask more rent for low-energy dwellings, which occupants can then compensate with the lower energy bill. Experience has shown that renovation projects provide substantial scope for CO2 cuts without a need for any increase in overall gross monthly rent (i.e. inclusive of energy costs).
    • Utility buildings: Energy conservation agencies can develop new funding modes and administrative structures that allow owners to make a better job of weighing up the costs and benefits of conservation measures. A key problem in the utility sector is that owner-investors have nothing to gain from their investments, through a lower energy bill or greater comfort; there is thus a split incentive.