Report:

Five Economic Reasons to Prioritise Low-Income Earners in the EU Renovation Wave

Ben Quinn 

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Boosting the energy efficiency of buildings is crucial for the EU to meet its climate, energy, and air quality goals, necessitating a swift increase in renovation rates. Currently, Europe's buildings contribute significantly to energy consumption and greenhouse gas emissions, accounting for 40% and 36%, respectively, while over 75% of buildings are considered energy inefficient. Inefficient buildings also contribute heavily to air pollution, responsible for over half of the primary emissions of fine particulate matter (PM2.5) – with detrimental impacts on public health. It is estimated that chronic exposure to such pollution leads to 400,000 premature deaths annually in the EU.

EU renovation funding should incorporate social conditions to guarantee that a fair portion of financing is ring-fenced for the lowest-income groups. The poorest 10-30% of households should qualify for 100% coverage of energy efficiency renovation costs, provided upfront rather than through reimbursement. Additionally, the funding available to households should be tailored to accommodate variegated income levels, decreasing as income levels rise to ensure the most effective distribution of finance.

A broader inclusion of energy efficiency related co-benefits in decision making is crucial to accelerate the renovation wave.  Although the literature related to co-benefits is growing, there are few examples that specifically focus on the economic co-benefits to be derived from focusing on fuel poor-households, who tend to live in the worst-performing dwellings. 

Against this backdrop, this short article will outline five key economic arguments for prioritizing low-income households and the worst-performing stock in public funding mechanisms related to the Renovation Wave.  Including, health cost savings, fuel subsidy cost savings, economic benefits for energy providers, improved education outcomes and their impact on macro-economic well-being, and finally job creation and productivity gains.