Financial Costs (EEB)

This section is concerned with the barriers that arise as a result of the relatively high costs of energy efficiency projects for urban-based buildings. Coupled with a problematic access to capital, the costs of energy efficient new and refurbished buildings can often deter investors and ultimately block the initiation of projects. There are three specific barriers to low carbon technologies and renewable energy sources that fall under the category of financial costs:

High upfront costs

The initial costs of a project may prevent investment, because project developers do not have the appropriate access to capital. Energy-efficient measures tend to add especially to the upfront costs of projects. Studies demonstrate that, even when stakeholders are assured that the costs of energy-efficient measures can be recovered through energy savings, they tend to stick to the cheaper less efficient solutions, because of the following:

 

  • Owners and tenants prefer a quicker and a more secure return of investment;
  • Divergent  incentives  can emerge between project developers, landlords and tenants;
  • Lack of awareness about the wider benefits of energy-efficient projects;
  • Low and uncertain yearly savings associated to the solutions implemented.

 

For existing buildings, economic instruments form the main policy tool, while for new buildings the main vehicle is regulations, such as energy building codes.

Economic instruments as part of well-designed packages can be more effective in addressing the various barriers hindering energy efficiency than standalone measures.

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