Feasibility study for a financial instrument and a review of existing retrofit loan schemes

The report investigates the potential for a new on-tax financing model (EuroPACE) to drive deep energy efficiency retrofits in European residential buildings. It identifies significant market failures, such as long payback periods and knowledge gaps, that hinder private investment. Through analysis of four target countries and three successful case studies (Energiesprong, Oktave, and KfW), the document highlights that success depends on low-cost, long-term financing and the ability to aggregate demand. It projects a total lending potential for EuroPACE of nearly €4bn over ten years across the four primary countries, provided that penetration and renovation rates increase.

• Residential buildings are a major source of emissions in the EU, accounting for approximately 40% of energy consumption and 36% of CO2 emissions, with about three-quarters of the building stock being old and energy-inefficient.
• There is a massive gap between current annual investments in household energy efficiency (approximately €80 bn) and the estimated €281 bn required annually between 2012-2030 for buildings and industry.
• The report identifies several market failures impeding commercial funding for retrofits, including a lack of savings among poorer households, long payback periods relative to capital costs, and split incentives in the rental market.
• In Belgium, high energy prices and a high percentage of buildings constructed before 1970 (62%) create a strong need for renovation, although only 7% of households currently use loans to finance such projects.
• The Netherlands aims for a fossil-free built environment by 2050, which would require retrofitting approximately 200,000 dwellings per year, but current progress is slow, as seen by the Energiesprong programme which retrofitted only 5,000 buildings out of an initial 111,000 plan.
• Portugal's energy efficiency efforts are hampered by a high rate of household indebtedness (approximately 36.7% of dwellings have an outstanding mortgage) and a reliance on private banks that often offer unattractive interest rates for unsecured loans.
• Spain's PAREER II programme has shown significant results by renovating 42,491 dwellings, avoiding 105,985 tCO2 per year and creating 5,480 jobs, though it has struggled with budget overruns.
• The German KfW model is highly successful due to its on-lending principle, where KfW refinances local retail banks, triggering over €340bn in building measures by June 2019 and reducing CO2 emissions by approximately 9 million tonnes annually.
• The Energiesprong model achieves scale by targeting social housing providers and using standardized, off-site manufactured 'net-zero' packages, which reduces costs and minimizes disruption for tenants.
• The French Oktave programme acts as a 'one-stop-shop' that reduces the knowledge gap for homeowners by providing technical advice and coordinating between contractors and financing organizations.
• The report projects that the total lending potential for EuroPACE across Belgium, Spain, Portugal, and the Netherlands is approximately €3.69bn (rounded to almost €4bn) over the next 10 years, with Spain expected to show the fastest growth in penetration.

APA

Vaze, P., Mok, L., Bossut, M., Chandrasekaran, A., & MacLean, E. (2020). Feasibility study for a financial instrument and a review of existing retrofit loan schemes. Climate Bonds Initiative. https://www.climatebonds.net/files/documents/publications/EuroPACE-2.4-Feasibility-study-for-a-financial-instrument-and-a-review-of-existing-retrofit-loan-schemes.pdf

Chicago

Vaze, Prashant, Lionel Mok, Mathilde Bossut, Abhinaya Chandrasekaran, and Eduard MacLean. Feasibility study for a financial instrument and a review of existing retrofit loan schemes. Climate Bonds Initiative, 2020. https://www.climatebonds.net/files/documents/publications/EuroPACE-2.4-Feasibility-study-for-a-financial-instrument-and-a-review-of-existing-retrofit-loan-schemes.pdf.

Wikipedia

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BibTeX

@techreport{vaze2020feasibility, author = {Vaze, Prashant and Mok, Lionel and Bossut, Mathilde and Chandrasekaran, Abhinaya and MacLean, Eduard}, title = {{Feasibility study for a financial instrument and a review of existing retrofit loan schemes}}, institution = {Climate Bonds Initiative}, year = {2020}, url = {https://www.climatebonds.net/files/documents/publications/EuroPACE-2.4-Feasibility-study-for-a-financial-instrument-and-a-review-of-existing-retrofit-loan-schemes.pdf}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }