How do policies help to increase the uptake of carbon reduction measures in the EU residential sector? Evidence from recent studies

The residential sector is one of the EU's priority sectors where carbon mitigation needs to be realised. In this paper, we carry out a review of the effectiveness of individual policies or policy packages in terms of the uptake of these carbon mitigation measures and/or energy savings realised as a result. The focus lies on the existing residential building stock. The literature reviewed in this paper covers panel data studies, applied behavioural research, and situated approaches. Most of the reviewed quantitative studies find that financial incentives and subsidies have a positive impact on the probability of energy efficiency improvements being undertaken. However, when evaluating the energy efficiency improvements or CO₂ reductions induced by the incentives and therefore their effectiveness, the presence of free riding turns out to be a problem. Energy and CO₂ taxation should play a larger role in encouraging people to save energy and reduce CO₂ emissions, since the reviewed studies indicate that people are responsive to savings in energy costs and expected price increases in the future. The evidence on the relative impact of regulation vs. financial incentives is inconclusive. For information policies the quantitative evidence is still limited. The reviewed panel data studies find no or a negative impact. This finding however does not necessarily imply that information policies are useless, as panel data do not allow for a detailed analysis of different types of informational approaches. Situated accounts provide further necessary qualitative findings on best practices for energy savings by households.