Copenhagen Economics has conducted a study assessing the merits of the UK initiative ‘Green Deal’ in a Danish context for the Danish Energy Agency (Energistyrelsen).
Green Deal was adopted in UK in 2013 to spur energy renovations in buildings. The cornerstone is an innovative financing mechanism where loans are repaid through the electricity bill such that the loan obligation is linked to the house – not the owner.
The main conclusions are
- The Green Deal financing mechanism will allow households with restricted credit access to initiate an economical energy renovation. These renovations are likely to have high additionality, as they affect households without other financing options.
- The financing mechanism addresses important behavioural biases by ensuring that households in principle should not have to make a single net-payment.
- Despite this, Denmark should not adopt the Green Deal financing mechanism:
- There are structural differences between UK and DK’s housing standard and financing markets making it relatively less attractive in Denmark.
- The financing mechanism does not remove credit risk: it shifts it to new providers and existing mortgage lenders.
- There are significant costs associated with establishing the needed infrastructure.
For further information please contact Sigurd Næss-Schmidt