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Study on CO2 savings in the building sector: Greenhouse gas pricing alone is not enough

EWI and FiFo calculate the costs of a CO2 price for single-family house occupants.

CO2 pricing provides incentives for investments in climate-friendly heating technologies and energy-efficient refurbishment. But a levy on greenhouse gases or emissions trading alone will hardly be enough to make them economically attractive. In order to reduce CO2 emissions in the long term, additional political instruments are needed to do justice to the special features of the building sector. These are the key findings of a study conducted jointly by the Institute of Energy Economics at the University of Cologne (EWI) and the Institute of Finance at the University of Cologne (FiFo) on behalf of the Zentrales Immobilien Ausschuss e.V. (Central Real Estate Committee) (ZIA)

In the study, the economists calculated how a possible CO2 pricing would affect selected examples of residential and commercial real estate. To this end, they examined a scenario with an additional CO2 price of 45 euros per tonne on fossil fuels. In the scenario, this price then rises by 10 euros per year until 2040. In return, the electricity tax will be reduced from 2.05 ct/kWh to the European minimum level of 0.1 ct/kWh.

The burdens on example households were relatively moderate despite the rising CO2 price. For example, a two-person household in a medium-sized apartment building with gas heating incurred additional costs of 44 euros per year in 2030, and a three-person family in a new single-family house with new gas heating 82 euros per year. A three-person family in an old single-family house with an outdated oil-fired heating system would have to pay 532 euros more per year without a climate bonus. If the 40 percent of the population with the lowest incomes were to receive a climate bonus of 100 euros, as in Switzerland, some households would even benefit.

The report by EWI and FiFo also shows that investments in new heating systems and energetic renovation are not always worthwhile despite the CO2 price. In only half of the buildings examined are the higher energy prices together with existing KfW subsidies sufficient to ensure that energy-efficient refurbishments also pay off economically.

The report also examines which supplementary instruments would be suitable for implementing energy-efficient refurbishments even in difficult constellations. An important group, for example, are elderly people in energy-inefficient properties who would often not be reached with conventional measures such as low-interest loans. New models would also be needed for the 55 percent of residential properties that are rented out, so that people are not excessively affected by CO2 pricing.

The study examines and rejects proposals such as "ecological rent index" or conventional warm rents based on the Swedish model. Instead, further developed contracting models and "smart warm rents" would offer starting points for promoting climate protection in rental properties and keeping subsidy costs within reasonable limits.

• The study "CO₂-Bepreisung im Gebäudesektor und notwendige Zusatzinstrumente" is available (in german) on the website of the Institute of Energy Economics at the University of Cologne (EWI)

• Interview with Max Gierkink (EWI) and Dr. Michael Thöne (FiFO)