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Briefing
In 2020, energy use in buildings accounted for 42% of the EU’s total energy consumption, 35% of energy-related greenhouse gas emissions and a significant share of air pollutant emissions (EEA, 2022c, d, EEA, 2023). To achieve the EU’s energy, climate and air quality targets, reducing the energy consumption of buildings is critical, in parallel with decarbonising the heating, cooling and electricity sectors (JRC, 2021a). This creates an imperative for new buildings to be carbon neutral and existing buildings to be renovated to improve their energy performance (EEA, 2022a).
To achieve this, the EU’s renovation wave aims to at least double the annual energy renovation rate of residential and non-residential buildings by 2030 and initiate deep energy renovations that could reduce buildings’ energy consumption by at least 60% (EC, 2020a, b, c). However, despite progress and demonstrated potential, current investment in improving the energy performance of EU buildings is too low to meet the EU’s climate objectives (EEFIG, 2021).
As Figure 1 illustrates, a number of stakeholders are often involved in deciding whether or not to invest in building renovation. The role of human behaviour in determining whether to undertake energy renovation in buildings is often overlooked by policies, which tend to focus on monetary and financial incentives (e.g. subsidies, low interest loans, tax cuts). This briefing, and the report on which it builds, explores how an approach that takes behavioural insights[1] into account could help to inform the development of policies aimed at increasing residential building renovation rates.
Owners are the most influential stakeholder group, as they are the ones who pay for the renovations and ultimately decide whether or not to renovate. It is useful to differentiate between homeowners, who live in the property they own (e.g. a detached house or apartment), and owners who rent out their property, as making the decision to renovate can be driven by different factors in each group. Owners who rent out their property can be further categorised based on the ownership structure of the building they own (privately owned buildings, social public housing, etc.). Homeowners consume the energy and pay operating costs, for instance for gas or electricity, for the building they own. In the case of properties that are rented out, it is the residents who consume and cover the related energy costs.
An owner’s decision to invest in energy renovations is often highly influenced by installers and contractors. They supply the technical knowledge, shape the scope of the renovations and ultimately affect energy consumption patterns. Installers and contractors are often craftspeople who carry out renovations, advise owners and provide technical and practical expertise (e.g. on materials to use, implementation techniques). Owners of single-family houses in particular tend to rely heavily on this professional advice, as the renovation process is less complex for this type of building than it is for large, multi-family buildings. This means that installers’ and contractors’ expertise and skills are often instrumental in determining the technical solutions implemented in residential buildings.
The process of deciding whether or not to invest in improving the energy efficiency of residential buildings is often complex and involves several stages and multiple decisions (see Figure 4). It can be broken down into three main phases:
During these three phases, several important behavioural drivers and barriers influence the decisions and actions of the stakeholders involved. The way in which stakeholders, particularly residents, behave in the post-renovation phase will significantly influence the greenhouse gas emission savings and reduction in energy consumption that the renovations achieve. In addition, the individual situation of each stakeholder, which may be very different between and within European countries (e.g. in relation to well-being, income, energy poverty, education, skills, legal framework), is also a key consideration when trying to understand what influences decision-making in relation to investing in the energy efficiency of buildings and the post-renovation behaviour of stakeholders.
In recent decades, the traditional neoclassical economic approach has been supplemented by a behavioural approach. The latter incorporates experimental and empirical evidence nuancing the traditional assumption of the economic rationality of human behaviour (Bavel, 2021). Both approaches are valuable for guiding effective policy development. This is particularly true in an area as complex and multifaceted as energy policy, which often takes an economic approach. While such economic incentives are often successful and increase energy efficiency[2], to achieve their full potential, energy policies could benefit from a more holistic approach that incorporate better behavioural insight (JRC, 2021b).
Behavioural insights and biases explain how behaviours are shaped by psychological factors (EEA, 2022b). Figure 2 presents examples of insights and biases that are relevant for energy efficiency investment decision-making, divided into the neoclassical and behavioural approaches[3]. Considering behavioural factors helps us to understand why owners do not always make rational decisions on investing in energy efficiency renovations, even when the economic benefits of such renovations are clear. Therefore, it is essential to investigate which factors have most influence over stakeholders’ decisions, with the aim of shaping energy efficiency policies in a behaviourally informed way and addressing potential inconsistencies. For instance, considering behavioural factors can help to ensure that communication actions are better designed (e.g. targeting the most influential stakeholders, addressing key trigger points) and that interventions are more tailored to specific target groups (e.g. one-stop shops, financial support).
Note: Further definitions and explanations are available in the background report
A broad range of drivers and barriers influences stakeholders’ decision-making in relation to investing in energy efficiency renovations. These drivers and barriers are summarised below (figure 3) and can be explained by one or several of the behavioural factors illustrated in Figure 2.
Note: EERM, energy efficiency renovation measure.
Behavioural factors also influence the type of advice that installers and contractors choose to provide to owners. These factors are influenced by the culture and social impact of their workplaces. Personal commitment to energy efficiency also appears to be a key motivator for promoting energy efficiency interventions.
As with owners, installers and contractors are also influenced by the behaviour of their peers, such as other practitioners in the sector, and by existing positive relationships, for example with certain suppliers, which can lead them to maintain the status quo.
Applying knowledge about the most prominent factors affecting stakeholders’ decision-making (behaviourally informed policy design) allows policymakers to better address non-monetary motives for renovation and the heterogeneity of population groups. This may improve the effectiveness of policies and measures aiming to encourage energy efficiency renovation.
However, there is a lack of evidence and only some knowledge about what influences owners’ decision-making and the role played by behavioural factors in the renovation process. This indicates not only the existence of a research gap in the scientific literature, but also that there is a limited number of policy instruments available to address behavioural barriers and improve the effectiveness of policies on the energy efficiency of buildings.
A few examples are shown in Figure 4 and described below of how behavioural insights could be used to inform the development of future policy measures aimed at incentivising energy renovation at each stage of the decision-making process. These measures are based on the best practice examples identified and on commonly used behavioural insights tools.
Note: EER, energy efficiency renovation; EERM, energy efficiency renovation measure.
Increase awareness and engagement by using crucial messengers as advisors: as well as using media information campaigns to raise awareness about the benefits of energy renovation and to debunk incorrect beliefs, using influential stakeholders as crucial messengers could enhance existing or new policies. This could be done by, for example, providing free advice on energy savings and examples of good practice to homeowners. Energy consultants and companies could do this, and so could local communities and well-established organisations such as charities and local associations. The effectiveness of this approach was demonstrated by the Reduce Energy use and Change Habits (REACH) project, in which trusted, local institutions in the geographical area of the project provided energy efficiency advice to homeowners. When contacted by, for example, the Red Cross or Caritas through the project, owners tended to be more receptive to advice than they were if the advice came from sources they did not know. This practice could also help to reduce uncertainties around the benefits of energy efficiency renovation measures.
Tailor key messages to different target groups: While awareness campaigns aim to reduce uncertainties associated with energy efficiency, these could also be tailored to specific target groups. On the one hand, communication campaigns could be directed towards groups that are more prone to environmentally sustainable behaviour and implementing energy efficiency interventions. On the other hand, policies aimed at the more difficult-to-reach groups should be tailored to overcoming the barriers they face. For example, step-by-step renovations compatible with deep energy renovation objectives[8] should be promoted among young homeowners and tenants, since these renovations are less costly and easier to implement, while large-scale renovations may better suit the daily routine of older homeowners. As property owners are diverse (resident, small owners who rent out their property, real estate companies, etc.), have different needs and face different challenges, different instruments need to be combined to effectively overcome barriers to energy efficiency renovation. For instance, this could involve combining regulation and financial incentives with effective communication[9].
Target owners at key ‘trigger points’: most homeowners decide to renovate their homes, especially through deep renovation, at key trigger points. These include the end-of-life replacement of a heating system or other major piece of equipment, when taking out a mortgage or during a major building renovation (initially for reasons other than energy efficiency), etc (BPIE, 2017). Shallow retrofits (e.g. draught-proofing) could be triggered by minor renovations (e.g. redecorating a room). Therefore, policymakers should target policies aimed at encouraging energy efficiency interventions concurrently with these trigger points. For example, they could introduce incentives for renovating when buying a new property and combine this with financial instruments that are targeted to house buyers.
Make the decision-making process easier for owners: the ‘hassle’ factor is a major barrier for owners, both homeowners and owners who rent out their property, and there is a major need to simplify the decision-making process and reduce the perceived or actual effort involved. This requires simplifying the administrative procedures involved in applying for subsidies or loans by helping owners to find reliable contractors and adapting procedures to the needs of specific target groups. As shown by the ReFURB project, providing a full end-to-end service via one-stop shops that offer a choice of financial advice and renovation packages tailored to different target groups (e.g. young families, empty nesters) can help owners to access all the required information in a single place, significantly simplifying their decision-making process. Clearly, the one-stop shop needs to be tailored to the target group. For example, websites and internet tools could work well for younger homeowners and setting up physical contact points might work better for older people, while business-to-business communication could work well for real estate companies. Another practice that has proven to be effective in reducing the perceived burden for private and public owners who rent out their property is performing step-by-step renovations, as this may better suit tenants’ needs.
Make the available financial support and programmes more appealing to owners: financially related barriers, such as perceived financial risk and uncertainty around financial benefits, could be addressed by making financial support more broadly available and increasing the appeal of programmes addressing owners’ decision-making. These could help clarify benefits, make investment profitable and address owners’ perceptions of risk. Simplifying the administrative process for accessing financial support could ease access, while innovative solutions aimed at ensuring clear guidance for homeowners on which institutions can provide financial support for energy efficiency renovations may increase adoption rates. An example of a project that adopted these measures is the SustaiNAVility project in Spain, which used attractive regional grants to boost or drive energy efficiency-related investments in projects incorporating state-of-the-art technology and funding schemes.
Clarify the financial benefits of implementing energy efficiency renovation measures: the up-front costs of renovation are a major barrier to investing in energy efficiency in residential buildings. This is because owners are not always fully aware of how much they will save on energy costs as a result of increased efficiency and instead focus on the immediate investment costs. While this behavioural pattern is well known in the literature, estimates of the amount of energy that will be saved thanks to renovations need to be reliable[10]) and policymakers should prioritise communication aimed at highlighting the resulting energy cost savings. The current energy crisis in Europe has reduced the payback period of renovation, and people are becoming more aware of the importance of being resilient to future price shocks, as they are directly facing the impact of their energy bills. This is particularly true for homeowners, but owners who rent out their property might also experience more pressure from their tenants to implement energy efficiency measures.
Reduce uncertainties by clarifying the outcomes and advantages of energy efficiency renovation: estimates of energy use and costs before and after implementing a renovation should be more accurate and transparent. While energy performance certificates are a valuable tool for understanding the energy performance of a building during sale and lease transactions (EC, 2023d), the information provided in these certificates does not directly determine the energy-related operating expenses for the user before or after renovation. More transparent information could allow owners to make more informed decisions and provide incentives for investing at key trigger points. In this sense, policymakers could ask utility companies to include on each energy bill the amount of energy and corresponding cost savings that could be achieved if the dwelling’s energy class were to be improved.
Combine the implementation of energy efficiency measures with training from a trusted advisor: training is an essential aspect of energy efficiency renovation, as it helps to ensure that renovation measures result in significant energy and emission reductions. On the one hand, providing training to the user at the same time as the new technology (or other energy efficiency intervention) is adopted has been proven to be effective in addressing the rebound effect after renovation. Evidence shows that combining education on energy saving behaviour and the effective use of newly installed products helps to reduce energy consumption compared with installation without education. On the other hand, providing training to the workers who carry out the renovation ensures that the energy efficiency measure is implemented correctly and that its benefits are realised. The lack of skilled installers and contractors can in some cases lead to poorly installed renovations, thereby reducing their energy efficiency potential. To counteract this, policies should include training programmes for installers and contractors, as well as appliance standards.
Even if policy interventions are successful in encouraging investment in energy efficient buildings, the result in terms of energy savings in reality might not be as would be expected in a theoretical, techno-economic world, without considering behavioural factors. The rebound effect[11], also known as the Jevons paradox, has been identified as a risk to the achievement of sustainability goals (Trincado et al., 2021). Recent studies conclude that, even if the rebound effect in the buildings sector tends to decrease over time, its size is very context dependent (e.g. income level) and can range from 0% to 100%[12]. These findings also highlight the importance of moving beyond fossil fuel use in buildings if we are to decrease greenhouse gas and air pollutant emissions.
Considering behavioural factors represents a promising way to mitigate the rebound effect after renovation. A growing body of evidence suggests that behaviour, lifestyle and culture have a major impact on energy demand in buildings, and that promoting pro-environmental behaviours, in particular by raising awareness about energy efficiency, can counter the direct rebound effect. Again, homeowners’ peers, such as neighbours and the wider community, also exert a significant influence on behaviour, since they determine what is approved social practice and considered appropriate behaviour.
This can be achieved through regulation, for example, that promotes smart meter adoption and the inclusion of additional information on energy consumption levels on bills, both of which have been shown to reduce the direct rebound effect from efficiency improvements. Setting product and technical standards (e.g. for different types of energy efficiency renovation interventions) can also help to minimise the risk of implementing counterproductive and low-quality renovations.
Moreover, behaviour-influencing initiatives are believed to be an effective complementary strategy to promote environmentally friendly behaviours. This type of action can be pursued through mass media campaigns by using pro-environmental role models and confronting consumers with their individual consumption levels. Ultimately, this can reduce the direct rebound effect from efficiency improvements and foster an exchange about measures taken and their success. However, evidence on how traditional information campaigns affect actual behaviours is mixed. Information campaigns could therefore accompany policy measures that guide the target group at the time decisions are made.
Importantly, it is recommended that policy pathways are designed to both encourage investment in energy renovation and mitigate the rebound effect, and that behavioural initiatives are not regarded as a standalone solution to the rebound effect. Rather, change should be brought about by a combination of economic and behavioural actions. In addition, studies show that there is likely to be an indirect rebound effect to consider: when the additional revenue generated by lower energy costs results in increased household budgets, the latter can be spent on the consumption of goods and services. As for energy efficiency investment policies, those promoting more environmentally friendly decisions by consumers (e.g. decisions consistent with circular economy principles) will be most effective if they account for factors shaping individual behaviour (EEA, 2022b).
The EEA would like to thank all those who contributed to developing the knowledge base for this briefing, in particular (alphabetical order):
Altuğ Murat BAŞER (Turkish Statistical Institute), Ana Iglesias (EEA Scientific Committee), Božidar Pavlović (Ministry of Capital Investments, Kosovo), Caren Herbstritt (PBL Netherlands), Cecile Gracy (ADEME, France), Daire McCoy (SEA of Ireland), Dániel Zách (Hungarian central statistical office), Guillermo Borragán Pedraz (ETC-CM), Janka Szemesová (Slovak Hydrometeorological Institute), Jesús Pulido Domínguez (Ministerio para la Transición Ecológica y el Reto Demográfico, Spain), Joachim Spangenberg (EEA Scientific Committee), Joze Orecný (Slovak Hydrometeorological Institute), Katja Kruit (CE Delft), Marce Zemko (Slovak Hydrometeorological Institute), Melek YÜCEL (Turkish Statistical Institute), Natasa Kovac (Slovenian Environment Agency), Nives Della Valle (Joint Research Centre of the European Commission), Oğuz Kürşat KABAKÇI (Ministry of Energy and Natural Resources of Turkey), Paula Cristina Gomes (Direção de Serviços de Sustentabilidade Energétic, Portugal), Paulo Zoio (Direção de Serviços de Sustentabilidade Energétic, Portugal), Rajko Dolinsek (Pozitivnaenergija, Slovenia), Sajan Shalin (SEA of Ireland), Tessa Bogers (FOD Economie - SPF Economie, Belgium), Volkan KOYUNC (Turkish Statistical Institute), Yann Trausch (Klima-Agence Luxembourg).
[1] Behavioural insights (noun): “an inductive approach to policymaking that combines insights from psychology, cognitive science and social science with empirically tested results to discover how humans actually make choices” (source: OECD, 2023, Behavioural insights).
[2] However, they may have negative distributive consequences resulting in increasing inequalities if no other actions are taken to counteract this tradeoff (EEA, 2021).
[3] In practice, some factors are difficult to categorise on the basis of these theoretical concepts. An example of this is imperfect information (which is a neoclassical factor) and information processing (which becomes biased because of behavioural factors such as inattention or framing).
[4] It is, however, important to note that options to raise the rent after an energy renovation might be limited and/or insufficient to make the investment cost effective, and the willingness to pay for energy efficiency on the rental market might also be below the energy cost saving that can be gained from the improved energy efficiency of buildings (see Taruttis and Weber, 2022).
[5] The Russian invasion of Ukraine in 2022 generated a profound shock on energy markets and a sharp increase in the price of the most commonly used fuel for indoor heating (i.e. natural gas), which, historically, has largely been imported to Europe.
[6] A similar conclusion can be drawn for those who engage in energy saving practices, such as reducing indoor temperature/air conditioning, washing clothes more efficiently and switching off the stand-by mode on appliances.
[7] One can also note that investment in energy efficiency is not always cost effective from a household’s project- level perspective, depending on the context. A recent study in the Netherlands found that after insulation of the floor, roof, facade, glass and doors to the national insulation standard, the consumption of gas in households decreased by 25%. In addition, for 6 out of 10 households, net income was greater each month than net income in the situation before these insulation measures (CPB and TNO, 2023).
[8] To avoid situations of becoming locked into lower energy performance than theoretically possible.
[9] For instance, for large property owners, increasing the value and profitability of their stock may be a key message in the communication.
[10] These estimates may vary considerably among regions and types of houses and households.
[11] The rebound effect is associated with consumers’ tendency to consume more energy due to the economic gains achieved through efficiency improvements.
[12] The rebound effect is usually higher in a low-income context. It is important to consider that when low-income households redirect new-found savings from energy efficiency towards increased energy consumption it allows to keep a more comfortable indoor temperature. While this results in a direct rebound effect, it also improves the overall quality of their living environment.
Bavel, v R., 2020, ‘Behavioural insights for EU policymaking’, in: Šucha, V. and Sienkiewicz, M. (eds), Science for Policy Handbook,Elsevier, Amsterdam, pp. 196-205 (https://www.sciencedirect.com/science/article/pii/B9780128225967000176).
BPIE, 2017, Trigger points as a "must" in national renovation strategies > BPIE - Buildings Performance Institute Europe.
CPB and TNO, 2023, Inkomenseffecten van woningisolatie naar de isolatiestandaard [Income effects of home insulation to insulation standard] (https://www.cpb.nl/inkomenseffecten-van-woningisolatie-naar-de-isolatiestandaard) accessed 17 May 2023.
EC, 2020a, Commission Staff Working Document ‘Impact assessment accompanying the document Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions — Stepping up Europe’s 2030 climate ambition: investing in a climate-neutral future for the benefit of our people’ (SWD(2020) 176 final).
EC, 2020b, Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions ‘A renovation wave for Europe: greening our buildings, creating jobs, improving lives’ (COM(2020) 662 final).
EC, 2023c, Renovation wave (europa.eu) website consulted in April 2023.
EC, 2023d, Certificates and inspections (europa.eu).
EEA, 2021, ‘Exploring the social challenges of low-carbon energy policies in Europe’, European Environment Agency (https://www.eea.europa.eu/publications/exploring-the-social-challenges-of) accessed 17 May 2023.
EEA, 2022a, ‘Building renovation: where circular economy and climate meet’, European Environment Agency (https://www.eea.europa.eu/publications/building-renovation-where-circular-economy) accessed 17 May 2023.
EEA, 2022b, ‘Enabling consumer choices for a circular economy’, European Environment Agency (https://www.eea.europa.eu/publications/influencing-consumer-choices-towards-circularity) accessed 17 May 2023.
EEA, 2022c, ‘Greenhouse gas emissions from energy use in buildings in Europe’, European Environment Agency (https://www.eea.europa.eu/data-and-maps/indicators/greenhouse-gas-emissions-from-energy/assessment) accessed 17 May 2023.
EEA, 2022d, ‘Sources and emissions of air pollutants in Europe’, European Environment Agency (https://www.eea.europa.eu/publications/air-quality-in-europe-2022/sources-and-emissions-of-air) accessed 17 May 2023.
EEA, 2023, ‘Decarbonising heating and cooling — a climate imperative’, European Environment Agency (https://www.eea.europa.eu/publications/decarbonisation-heating-and-cooling) accessed 17 May 2023.
EEFIG, 2021, The evolution of financing practices for EE in buildings, SMEs and industry, Publications Office of the European Union (https://op.europa.eu/en/publication-detail/-/publication/a3032517-c761-11ec-b6f4-01aa75ed71a1/language-en/format-PDF/source-256242892) accessed 17 May 2023.
JRC, 2021a, Nijs, W., et al., 2021, EU challenges of reducing fossil fuel use in buildings — the role of building insulation and low-carbon heating systems in 2030 and 2050, Publications Office of the European Union.
JRC, 2021b, Della Valle, N. and Bertoldi, P., Mobilizing citizens to invest in energy efficiency, EUR 30675 EN, Publications Office of the European Union, Luxembourg, 2021, ISBN 978-92-76-36152-7, doi:10.2760/137315, JRC124667.
OECD, 2023, website consulted in May 2023, Behavioural insights - OECD.
Taruttis, L. and Weber, C., 2022, Inefficient markets for energy efficiency — empirical evidence from the German rental housing market, HEMF Working Paper No 02/2022, Social Science Research Network (http://dx.doi.org/10.2139/ssrn.4047715).
Trincado, E., et al., 2021, ‘The European Union Green Deal: clean energy wellbeing opportunities and the risk of the Jevons paradox’, Energies14(14), 4148 (https://doi.org/10.3390/en14144148).
Briefing no. 14/2023
Title: Accelerating the energy efficiency renovation of residential buildings — a behavioural approach
EN HTML: TH-AM-23-016-EN-Q - ISBN: 978-92-9480-577-5 - ISSN: 2467-3196 - doi: 10.2800/273495
EN PDF: TH-AM-23-016-EN-N - ISBN: 978-92-9480-578-2 - ISSN: 2467-3196 - doi: 10.2800/325264
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