Achieving economy‐wide gains from residential energy efficiency improvements: The importance of timing and funding approach in driving the transition

Abstract

Residential energy efficiency improvements are generally considered integral to achieving climate change targets. Alongside the primary benefits of reducing energy use and consumer bills, there is increasing policy interest in the potential for energy efficiency programmes to deliver economy‐wide gains, measured by gross domestic product, employment, household real incomes and spending power etc. Our previous research shows that such sustained gains are likely over time. Here, we consider how transitory outcomes are likely to be heavily influenced by the timing of actions and who pays, how and when. Insight in this regard is crucial for policy makers considering the mix and timing of measures to reach net zero outcomes that are economically as well as technically feasible. We consider alternative funding, distributions and timeframes for residential retrofitting costs and projects using a UK economy‐wide scenario simulation model. The key insight is that while government support for the provision of low‐cost finance options is strategically important in alleviating budget constraints and mitigating potential short‐term negative impacts on household spending, producer responses to the wind down of retrofitting spending can disrupt the adjustment of the economy. Here we identify pros and cons of different trajectories of action towards high‐level energy efficiency policy targets.