How can whole house fiscal measures encourage consumers to improve the energy efficiency of their homes?

Panel: Panel 7. New economic instruments

Author:
Elaine Waterson, Energy Saving Trust

Abstract

Over recent years energy efficiency markets in the UK have shown significant growth in the sale of energy efficient white goods and, more recently, efficient boilers. However, despite significant incentives available through energy supplier EEC programmes (a market mechanism), insulation markets have shown limited growth. In particular, cavity wall insulation - the largest single household energy efficiency opportunity in the UK - is difficult to sell. It is a discretionary purchase and not a priority for most consumers.

To date UK fiscal measures for energy efficiency have been designed specifically to tackle barriers to the purchase of defined products, including insulation, rather than to tackle the energy efficiency of the house as a whole. For example contractor installed insulation already benefits from 5% VAT, but this is of little or no benefit where insulation is installed for free or is highly subsidised.

This paper considers how a more holistic fiscal approach could stimulate consumer action on measures that have, to date, been difficult to sell. Specifically a fiscal approach that focuses on the energy efficiency of the house as a whole. In the context of introduction of the energy report in 2006, under the Energy Performance of Buildings Directive, this paper

identifies a number of promising new fiscal measures,
discusses the prospects for their future success and
sets out the contribution that their introduction could make to the UK government's climate change targets and its sustainable energy agenda.