Split Incentives for Owners and Tenants

A significant barrier that obstructs low carbon and renewable technologies projects in existing buildings is the principal-tenant dilemma:

Energy bills are generally not paid by owners. Investing in energy efficiency solutions is not in the interest of owners, as they do not receive the benefits generated by savings, as long as those cannot be charged to the tenants. Tenants are generally not interested in energy efficient solutions, because they have no certainty of recovering the investment, as the benefits generated through savings can only be sufficient over periods of time that are longer than their tenancy.  

This stalemate results in inaction instead of cooperation between the two actors, thus, mutual benefits are foregone. The landlord’s main incentive is to install the cheapest technologies, which usually rely on conventional energy sources. In other cases, the owner may be interested in developing a renewable energy project, but the improper communication with the tenants can lead to inaction.