Practices to overcome split incentives in the EU building stock

Panel: 6. Policies and programmes towards a zero-energy building stock

This is a peer-reviewed paper.

Authors:
Marina Economidou, European Commission, Joint Research Centre (JRC) Ispra, Italy
Paolo Bertoldi

Abstract

Split incentives are typically regarded as a major barrier to investments in energy efficiency upgrades in the building sector. Stemming from a transaction whose benefits do not accrue to the person who pays for it, they affect a large share of Europe's buildings: privately rented homes, multi-apartment buildings, social housing units and leased commercial or public premises. As the Energy Efficiency Directive calls for Member States to take appropriate measures and address this barrier, increased interest is drawn on how to design policies and measures that successfully resolve this long-lasting problem.

Our paper focuses on how various regulatory measures, contractual solutions and financial mechanisms can effectively mitigate this barrier. A broad overview of the split incentive problem across Europe is first outlined, by identifying the different groups affected, most vulnerable groups and extent to which the building sector is exposed to this problem in different parts of Europe. It is then shown that current solutions addressing split incentives in the building sector vary in nature, ranging from revised rent acts, green leases, on-bill finance mechanisms, minimum energy performance standards, use of inclusive rents and others. Each solution and its applicability for each segment of the building sector are discussed and a set of common principles upon which successful strategies are drawn is provided. Current and planned efforts by the EU Member States outlined in the recently published National Energy Efficiency Action Plans are reviewed. The paper concludes with a number of policy recommendations for stimulating energy efficiency investments in the affected segments of the building sector.