Beyond Good Faith: Why Evidence-Based Policy is Necessary to Decarbonize Buildings Cost-Effectively

The ambitious climate targets set by industrialized nations worldwide cannot be met without decarbonizing the building and heating sectors. Using Germany as a case study, this paper takes stock of the extensive set of energy-efficiency policies that are already in place and clarifies that they have been designed “in good faith” but lack in overall effectiveness as well as cost-efficiency in achieving these climate targets. We map out the market failures and behavioural considerations that are potential reasons for why realized energy savings fall below expectations and why the household adoption of energy-efficient and low-carbon technologies has remained low. We highlight the pressing need for empirical research to assess the efficacy of existing energy-efficiency programs and apply modern statistical methods to develop targeted and cost-effective policies. To this end, we identify some key research questions and identify gaps in the data required for evidence-based policy.