Home Improvement, Wealth Inequality, and the Energy-Efficiency Paradox

Martijn I. Dröes and Yasmine Van Der Straten
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Martijn I. Dröes: University of Amsterdam
Yasmine Van Der Straten: University of Amsterdam
Authors registered in the RePEc Author Service: Martijn I. Dröes

No 24-026/IV, Tinbergen Institute Discussion Papers from Tinbergen Institute

Abstract: This article examines the rate at which different households go green and how this affects the distribution of both wealth and CO2 benefits. Using a unique dataset from the Netherlands, we find that lower-income households are less likely to make their homes more energy efficient. At the same time, higher-income households sort themselves into homes that are already more energy efficient to begin with. Over a 15-year horizon, the combined effect on energy savings accumulates to 17% of median net wealth, with ex ante sorting explaining 65% of this effect. Although a policy that encourages lower-income households to own energy-efficient homes reduces wealth inequality and poverty, it leaves 83% of the potential CO2 benefits unrealized because the brownest households are in the upper part of the income distribution. Our results indicate that there is a policy trade-off between sheltering low-income households against climate risk on the one hand and effectively reducing CO2 emissions on the other.

Keywords: Energy efficiency; home improvement; wealth inequality; CO2 emissions (search for similar items in EconPapers)
JEL-codes: D31 Q41 Q43 Q54 R31 (search for similar items in EconPapers)
Date: 2024-04-17
New Economics Papers: this item is included in nep-ene and nep-res
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Persistent link: https://EconPapers.repec.org/RePEc:tin:wpaper:20240026

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