Implications of the revisited narrative for the demand research agenda

Lastly, the research interest in demand-side solutions to climate change has grown sub-stantially. This interest, at least in the Integrated Assessment Modeling community, came as a response to the limitations of carbon dioxide removal technologies to provide the necessary amount of negative emissions while staying within sustainable boundaries. As global GHG yearly emissions are still on the rise, the carbon budgets corresponding to the 2°C and 1.5°C targets deplete at an accelerating pace. Negative emission technologies, and most prominently bioenergy coupled with carbon capture and storage (BECCS), ap-pear then as a solution to both alleviate the pressure on the energy, economic and social systems to decarbonize rapidly, but also to compensate for the emissions that could not be avoided in the future. As the environmental and social implications of a widespread use of bioenergy raised concerns about the desirability of pathways with strong BECCS implementations, another pathway has been proposed in the literature: reducing energy demand by adopting efficient technologies and behaviors.

The alternative narrative proposed here offers a complementary route, at least as far as buildings are concerned: pushing the decarbonization as far as possible also on the demand-side. In addition to energy demand reductions, the decrease in the carbon con-tent and in particular fuel switching offers a valuable strategy to decrease emissions. If all energy services in buildings were to use carbon-free energy carriers, residual emissions from buildings could fully disappear. The need for negative emissions due to buildings de-mand would also vanish, except for the role of negative emissions to alleviate the pressure on the transition speed. One of the important questions that derives from the alternative narrative and that remains in our view a blind spot in the current literature, at least in the IAM literature, is therefore: To what extent and how could buildings energy demand fully decarbonize?

Currently, the fuel switching strategy is poorly represented in Integrated Assessment Models. Usually, the technology choice on the demand-side is treated very differently from the technology choice on the supply-side. On the supply-side the decision is purely driven by resource availability, extraction and transportation costs, costs for capital, instal-lation, maintenance, etc. The heterogeneity in technology shares results from optimizing the energy supply system against this variety of costs. On the demand-side however, while energy prices and technological costs do exert an influence on choices, the degree of heterogeneity of the market is imposed exogenously byad hocassumptions. Hetero-geneity is thought to be rooted in consumers’ preferences or in the decision environment, but it remains essentially a black-box and the degree to which policies could act on the heterogeneity degree remains fully unexplored, even though this is an essential strategy to decrease emissions. The components of heterogeneity should instead be included ex-plicitly: heterogeneity in the costs of technologies (district heating would be more costly in rural than in urban areas), in the availability of technologies (geothermal heat pumps are hard to install in an urban environment), in preferences, in institutions, etc. It is only by representing these components that we will be able to understand what the limits of electrification and fuel switching are.

Mixing energy efficiency and fuel switching can deliver almost a full decarbonization of

6.5 Implications of the revisited narrative for the demand research agenda 193 the heating and cooling sectors. At the European level, the HeatRoadMap projects (Con-nolly et al., 2014; Paardekooper et al., 2018) have brought many useful insights regarding the decarbonization potential of heating and cooling. Summarizing their main result, they find that European buildings could be decarbonized by using district heating in urban centers and heat pumps in rural areas, as well as an increase in energy efficiency.

As mentioned in the alternative narrative, the strategies reducing energy demand and those reducing the carbon content of energy present strong interactions. These interactions re-quire in many cases further investigation and/or should be included in future assessments of buildings’ contribution. One important aspect is that if efficiency efforts remain weak, it gets more difficult to decarbonize supply, due to resource constraints. So high efficiency improvements might be an enabler of lowering carbon intensity in a sustainable way.

But interactions also exist between efficiency and electrification or fuel switching. Heat pumps offer an interesting example. On the one hand they are often powered by electric-ity. However, as they use ambient heat sources from the air or from the ground, they are able to provide heat to a room at a much lower input of commercial energy than from an alternative technology based on combustion. Thereby, heat pumps not only contribute to the electrification of demand, but also decrease the demand of final energy by improv-ing the useful to final energy ratio. In addition, the efficiency of heat pumps strongly depends on the temperature difference between the heat source (air, ground) and the ra-diator. Typically, radiators in current heating systems require temperatures around 70°C, depressing the efficiency of heat pumps. By improving the insulation of buildings or by adopting heating systems requiring lower temperatures, it is therefore possible to increase the physical efficiency of heat pumps, making this technology more attractive from an economic point of view. This effect is even more pronounced in case of a widespread electrification of heating demand, as it would translate in a strong peak load in the heating season and higher electricity prices. In that case, improved insulation of buildings would considerably reduce the peak capacity necessary in the power system. In the case of heat pumps therefore, improved efficiency and electrification seem to present strong synergies.

Similarly, the interactions between district heating and efficiency are also of high interest (Lund et al., 2014). The market designs must allow for the economic viability of district heating in a context of a decreased density of heating demand, following investments in energy efficiency. Heating systems running with lower temperatures also impact the feasibility and economics of green technologies in district heating.

Overall, energy efficiency and energy decarbonization show interesting interactions. In the alternative narrative, energy efficiency would abandon its role as the unique actor in the decarbonization of the buildings sector. Instead, it would share the stage with the decarbonization of energy itself and, beyond its direct role to decrease emissions, could reveal itself a necessary enabler for the other actor to play its part.

194 Chapter 6 Synthesis and Outlook

References

Allcott, H., Greenstone, M., 2012. Is there an energy efficiency gap? Journal of Economic Perspectives 26 (1), 3–28.

Clarke, L., Jiang, K., Akimoto, K., Babiker, M., Blanford, G., Fisher-Vanden, K., Hourcade, J.-C., Krey, V., Kriegler, E., Löschel, A., McCollum, D., Paltsev, S., Rose, S., Shukla, P. R., Tavoni, M., Zwaan, B. v. d., Vuuren, P. v., 2014. Assessing Transformation Pathways. In: Edenhofer, O., Pichs-Madruga, R., Sokona, Y., Fara-hani, E., Kadner, S., Seyboth, K., Adler, A., Baum, I., Brunner, S., Eickemeier, P., Kriemann, B., Savolainen, J., Schlömer, S., Stechow, C. v., Zwickel, T., Minx, J. C.

(Eds.), Climate Change 2014: Mitigation of Climate Change. Contribution of Working Group III to the Fifth Assessment Report of the Intergovernmental Panel on Climate Change. [Edenhofer, O., R. Pichs-Madruga, Y. Sokona, E. Farahani, S. Kadner, K.

Seyboth, A. Adler, I. Baum, S. Brunner, P. Eickemeier, B. Kriemann, J. Savolainen, S.

Schlömer, C. von Stechow, T. Zwickel and J.C. Minx (eds.)]. Cambridge University Press, Cambridge, United Kingdom and New York, NY, USA, p. 141, 00002.

URL http://report.mitigation2014.org/drafts/

final-draft-postplenary/ipcc_wg3_ar5_final-draft_postplenary_

chapter6.pdf

Commission, E., 2016. Communication from the Comission to the European Parliament, the European Council, the Council, the European Econmic and Social Commitee and the Comittee of the Regions and the European Investment Bank. Clean Energy for All Europeans.

URL https://ec.europa.eu/transparency/regdoc/rep/1/2016/EN/

COM-2016-860-F1-EN-MAIN-PART-1.PDF

Connolly, D., Lund, H., Mathiesen, B. V., Werner, S., Möller, B., Persson, U., Boermans, T., Trier, D., Østergaard, P. A., Nielsen, S., 2014. Heat Roadmap Europe: Combining district heating with heat savings to decarbonise the EU energy system. Energy policy 65, 475–489.

Davis, L. W., Fuchs, A., Gertler, P., 2014. Cash for coolers: evaluating a large-scale appliance replacement program in Mexico. American Economic Journal: Economic Policy 6 (4), 207–38.

Directorate-General for Energy (European Commission), Jul. 2019. Clean energy for all Europeans.

EURIMA, 2019. Why including buildings in the EU ETS is not the right tool to deliver energy-efficient homes.

Fowlie, M., Greenstone, M., Wolfram, C., 2018. Do energy efficiency investments de-liver? Evidence from the weatherization assistance program. The Quarterly Journal of Economics 133 (3), 1597–1644.

Galvin, R., 2010. Thermal upgrades of existing homes in Germany: The building code, subsidies, and economic efficiency. Energy and Buildings 42 (6), 834–844.

REFERENCES 195 Galvin, R., Sunikka-Blank, M., 2013. Economic viability in thermal retrofit policies:

Learning from ten years of experience in Germany. Energy Policy 54, 343–351.

Gillingham, K., Rapson, D., Wagner, G., Jan. 2016. The Rebound Effect and Energy Efficiency Policy. Review of Environmental Economics and Policy 10 (1), 68–88.

URL https://academic.oup.com/reep/article/10/1/68/2583834/

The-Rebound-Effect-and-Energy-Efficiency-Policy

Grubb, M., Hourcade, J.-C., Neuhoff, K., 2014. Planetary economics. Routledge London.

Hoffman, I. M., Goldman, C. A., Rybka, G., Leventis, G., Schwartz, L., Sanstad, A. H., Schiller, S., 2017. Estimating the cost of saving electricity through US utility customer-funded energy efficiency programs. Energy Policy 104, 1–12.

Jacobsen, G. D., Kotchen, M. J., 2013. Are building codes effective at saving energy?

Evidence from residential billing data in Florida. Review of Economics and Statistics 95 (1), 34–49.

URLhttp://www.mitpressjournals.org/doi/abs/10.1162/REST_a_00243 Kotchen, M. J., 2017. Longer-run evidence on whether building energy codes reduce

resi-dential energy consumption. Journal of the Association of Environmental and Resource Economists 4 (1), 135–153.

Levinson, A., Oct. 2016. How Much Energy Do Building Energy Codes Save? Evidence from California Houses. American Economic Review 106 (10), 2867–2894, 00000.

URL https://www.aeaweb.org/articles?id=10.1257/aer.20150102&

within%5Btitle%5D=on&within%5Babstract%5D=on&within%5Bauthor%5D=

on&journal=1&q=energy&from=j

Lovins, A. B., Sep. 2018. How big is the energy efficiency resource? Environmental Research Letters 13 (9), 090401.

URL http://stacks.iop.org/1748-9326/13/i=9/a=090401?key=crossref.

5064eb4d5b1d4e6ee939d249422564be

Lucon, O., Ürge Vorsatz, D., Zain Ahmed, A., Akbari, H., Bertoldi, P., Cabeza, L. F., Eyre, N., Gadgil, A., Harvey, L. D., Jiang, Y., Liphoto, E., Mirasgedis, S., Murakami, S., Parikh, J., Pyke, C., Vilariño, M. V., 2014. Buildings. In: Climate Change 2014:

Mitigation of Climate Change. Contribution of Working Group III to the Fifth Assess-ment Report of the IntergovernAssess-mental Panel on Climate Change [Edenhofer, O., R.

Pichs-Madruga, Y. Sokona, E. Farahani, S. Kadner, K. Seyboth, A. Adler, I. Baum, S.

Brunner, P. Eickemeier, B. Kriemann, J. Savolainen, S. Schlömer, C. von Stechow, T.

Zwickel and J.C. Minx (eds.)]. Cambridge University Press, Cambridge, United King-dom and New York, NY, USA. Cambridge University Press, pp. 1–103, 00002.

Lund, H., Werner, S., Wiltshire, R., Svendsen, S., Thorsen, J. E., Hvelplund, F., Math-iesen, B. V., 2014. 4th Generation District Heating (4GDH): Integrating smart thermal grids into future sustainable energy systems. Energy 68, 1–11, publisher: Elsevier.

Paardekooper, S., Lund, R. S., Mathiesen, B. V., Chang, M., Petersen, U. R., Grundal, L., Persson, U., 2018. Heat Roadmap Europe 4: Quantifying the Impact of Low-Carbon Heating and Cooling Roadmaps. Tech. rep., Aalborg Universitetsforlag.

196 Chapter 6 Synthesis and Outlook Sorrell, S., 2007. The Rebound Effect: an assessment of the evidence for economy-wide energy savings from improved energy efficiency. UK Energy Research Centre London.

Sorrell, S., Dimitropoulos, J., Sommerville, M., Apr. 2009. Empirical estimates of the direct rebound effect: A review. Energy Policy 37 (4), 1356–1371.

URL//www.sciencedirect.com/science/article/pii/S0301421508007131