Multiple benefits of renovation in buildings - PU Europe

Multiple benefits of investing in energy
efficient renovation of buildings
Figure 18 Real interests rates of government bonds
per cent
5
4
3
2
1
0
-1
-2
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Note:
We use the nominal interest on a 10-year government bond for most European countries. We use the
HICP index to adjust for inflation.
The curve shows a weighted average for all EU countries except countries severely affected by the
economic crisis leading to extraordinarily high interest rates such as: Italy, Spain, Portugal, and Ireland.
The real interest rate has been weighted by the countries’ GDP.
Source: Copenhagen Economics, based on data from Eurostat
MAC and IRR studies typically only include the energy savings that may be derived from
energy efficient renovations of buildings. However, as we showed in Chapter 1, these renovations
will also give rise to a range of co-benefits, which makes each individual project
even more profitable from a societal point of view than by just realising energy savings.
The marginal abatement cost curves, and studies on profitability of actual energy efficiency
investments suggest that there is a large unfulfilled potential for otherwise profitable
investment projects to be undertaken. This is accentuated by the very low real interest
rates in most European countries, which by definition makes more investment projects
economically profitable. We argue that there are several barriers holding these investments
back. The barriers may be grouped into: 1) Regulatory failures, and 2) Market failures.
We will describe these barriers in detail in the following sections.
2.2 Barriers from regulatory failure
In our view, the existence of regulatory related barriers is the most convincing argument
for the existence of unreleased potential for energy efficiency investments in buildings.
Several types of regulatory failures are likely to exist:
Rent regulation
Rent regulation is a common feature of almost all EU Member States’ housing policies.
While concrete regulation differs between countries, the most common feature is rent
control, which typically prevents landlords from increasing the rent level above some
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