What Can Policy-Makers Do to Increase the Effectiveness of Building Renovation Subsidies?

Heating is responsible for a substantial share of global energy consumption and still relies strongly on fossil fuels. In order to reduce energy consumption for heating, subsidies for building renovations are a common policy measure in Europe. Policy makers often combine them with information and advice measures. Policy mixes of this kind have been acknowledged widely in the literature, but their effectiveness needs further empirical examination. Based on a survey of the recipients of renovation subsidies and on four focus groups, we examine the (cost) effectiveness of subsidies, as follows: The effectiveness of renovation subsidies was measured by the extent to which receiving subsidies contributed either to the decision to renovate at all, or to the decision to enhance the quality or scope of the renovation. Fifty percent of the recipients surveyed reported that the subsidies contributed to a more energy-efficient renovation than was initially intended. The other fifty percent must be considered as free riders. Multivariate analyses further show that homeowners who used advice services and attributed outstandingly positive characteristics to the policy implementer were more likely to spend subsidies to improve energy efficiency. The findings demonstrate the importance of applying a combination of financial and persuasive policy measures. Additionally, they illustrate the importance of non-financial and non-technical factors, such as the communication competencies of the implementer, when designing policy measures.