Template-Type: ReDIF-Paper 1.0
Series: Tinbergen Institute Discussion Papers
Creation-Date: 2024-04-17
Number: 24-026/IV
Author-Name: Martijn I. Dröes
Author-Workplace-Name: University of Amsterdam
Author-Name: Yasmine Van Der Straten
Author-Workplace-Name: University of Amsterdam
Title: Home Improvement, Wealth Inequality, and the Energy-Efficiency Paradox
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.
Classification-JEL: D31, Q41, Q43, Q54, R31
Keywords: Energy efficiency, home improvement, wealth inequality, CO2 emissions
File-URL: https://papers.tinbergen.nl/24026.pdf
File-Format: application/pdf
File-Size: 709.972 bytes
Handle: RePEc:tin:wpaper:20240026