Estimating opportunity costs for energy-efficiency renovations: Case study in Germany

IF 6.6 2区经济学 Q1 ECOLOGY

Ecological Economics Pub Date : 2025-04-09 DOI:10.1016/j.ecolecon.2025.108629

Ray Galvin , Paul Galvin

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Abstract

Since energy consumption in residential buildings produces 26 % of CO2 emissions worldwide, there is an urgent need to improve the energy efficiency of older buildings. This is expensive, and a component often poorly estimated is opportunity costs: the losses a building owner incurs by investing in an energy-efficiency upgrade rather than in a more profitable project. Some recent studies assume opportunity costs of about 6 % of the property owner's up-front cash investment, but they assume very passive investment behavior. This paper uses a case study of a standard energy-performance upgrade of a typical, gas-heated 1950s–60s western German apartment and an alternative investment of purchasing an additional rental property. It uses realistic figures for costs of renovation and finance, benefits through energy and CO2 tax savings and subsidies currently on offer, likely energy price and CO2 tax inflation rates, and realistic discount rates. The alternative investment is to purchase a rental apartment using the up-front cash as the deposit, based on actual properties for sale. After 25 years the most economically sound upgrade brings a loss of around 207 %, while the purchase brings a gain of at least 666 %, with a minimum opportunity cost of 8.49 % per year cumulative.

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来源期刊

Ecological Economics 环境科学-环境科学

CiteScore

12.00

自引率

5.70%

发文量

313

审稿时长

6 months

期刊介绍： Ecological Economics is concerned with extending and integrating the understanding of the interfaces and interplay between "nature''s household" (ecosystems) and "humanity''s household" (the economy). Ecological economics is an interdisciplinary field defined by a set of concrete problems or challenges related to governing economic activity in a way that promotes human well-being, sustainability, and justice. The journal thus emphasizes critical work that draws on and integrates elements of ecological science, economics, and the analysis of values, behaviors, cultural practices, institutional structures, and societal dynamics. The journal is transdisciplinary in spirit and methodologically open, drawing on the insights offered by a variety of intellectual traditions, and appealing to a diverse readership. Specific research areas covered include: valuation of natural resources, sustainable agriculture and development, ecologically integrated technology, integrated ecologic-economic modelling at scales from local to regional to global, implications of thermodynamics for economics and ecology, renewable resource management and conservation, critical assessments of the basic assumptions underlying current economic and ecological paradigms and the implications of alternative assumptions, economic and ecological consequences of genetically engineered organisms, and gene pool inventory and management, alternative principles for valuing natural wealth, integrating natural resources and environmental services into national income and wealth accounts, methods of implementing efficient environmental policies, case studies of economic-ecologic conflict or harmony, etc. New issues in this area are rapidly emerging and will find a ready forum in Ecological Economics.