Taxation of Residential Energy Use

Abstract

The chapter focuses on different new and "classical" economic instruments, i.e., taxes and grants, and on some command and control instruments aimed at improving the energy efficiency of the residential building sector. A justification is given why energy conservation investment in the building sector is essential on the way towards sustainable consumption. The functioning and the particular implementation problems of the proposed policies are discussed. The analysis and the simulation of the economic and environmental impacts require a model that includes technical knowledge about the energy efficiency of buildings as well as behavioural relations from economic theory. The methodology framework is discussed for this model, where buildings are assumed to be heterogeneous with respect to their energy efficiency. We discuss further some failures in the working of economic instruments and show how they could be reinforced and complemented by communication and diffusion instruments.