Multiple benefits of renovation in buildings - PU Europe

Multiple benefits of investing in energy
efficient renovation of buildings
bourg, Malta and United Kingdom on electricity, cf. Figure 21, while VAT on heating is
also reduced in most of the same countries, including Portugal.
Figure 21 Reduced VAT on energy consumption
per cent reduction
16
14
12
10
8
6
4
2
0
Reduced VAT on electricity
Reduced VAT on heat
Note:
All countries with reduced VAT rates on energy electricity and heating is included in the figure
Source: Copenhagen Economics based on DG TAXUD (2012)
One study which assessed policies with the objective of mitigating so called fuel poverty in
UK, Ireland and USA found that in 2010 the UK and the US together spent €6 billion on
income-supplementing fuel payments and social tariffs to reduce effective energy prices. 33
Such subsidies to energy consumption are typically based on distributional concerns, as
the energy bill typically constitutes a relatively large share of especially low-income families’
budgets. While acknowledging these income distribution considerations, we note that
the subsidies are inefficient and costly for public budgets in addition to harming the environment.
Income distribution concerns will much more effectively and efficiently be addressed
through targeted income redistribution. Indeed our proposal, as noted later, is to
push for deep and economically viable energy savings programmes that will reduce the
need for energy subsidies in the first place while replacing general energy subsidies to all
households with income transfers to the households most severely affected by the unwinding
of the subsidies. The net effect will be public savings, energy savings, and safeguarding
of income distribution objectives. Indeed if the EU removed existing general
reduced VAT-rates on energy consumption (heating and electricity), energy consumption
in EU would fall by app. 0.8 per cent, 34 and public budgets would be improved by €3.4
billion corresponding to 0.03 per cent of GDP. 35 These energy saving estimates are medi-
33 IEA (2011a), p. 7
34 Copenhagen Economics (2008), p. 66. The model simulations in this study are based on reduced VAT rates present in 2008.
Some countries have removed these reduced rates since giving rise to a lower expected reduction in energy consumption.
35 Copenhagen Economics (2008), p. 68. Some countries have removed these reduced rates since giving rise to a lower expected
increased in VAT revenue
32