Meeting climate target with realistic demand-side policies in the residential sector

Abstract

The European Union (EU) has established an ambitious policy framework for demand-side mitigation in buildings towards net-zero targets. Here, we conduct a comprehensive quantitative assessment of 384 demand-side policy combinations for residential space heating that complement supply-side decarbonization efforts. We show that implementing the EU Emissions Trading System 2, even when combined with energy supply decarbonization, falls short of climate targets. Beyond the EU Emissions Trading System 2, we emphasize the need for ambitious heat-pump subsidies as a critical component of a successful strategy. Conversely, a large-scale generic ‘Renovation Wave’ contributes modestly to decarbonization, is not a cost-effective strategy at the EU level and requires significant public spending increases. We advocate for the implementation of a carbon tax, paired with substantial heat-pump subsidies and targeted incentives for home insulation by country and building. This approach supports the decarbonization of the residential sector, limits the strain on the electricity grid and alleviates energy poverty.