Overcoming the split incentive barrier in the building sector : unlocking the energy efficiency potential in the rental & multifamily sectors

While the rental and multifamily sectors are associated with a significant energy efficiency potential, it is widely recognised that these are difficult sectors to tap into. Asymmetric information and split incentives are typically regarded as major barriers to fostering energy efficiency upgrades in rented and multi-unit properties both in the private and public as well as residential and commercial sectors. As Article 19 of the Directive 2012/27/EU on energy efficiency calls for Member States to take appropriate measures addressing this barrier, increased interest is drawn on how to design policies and measures that unlock the energy efficiency potential in these difficult-to-access sectors. Current solutions vary in nature, ranging from revised rent acts, green leases, on-bill finance mechanisms, minimum energy performance standards, use of inclusive rents and others. In this context, the European Commission's Joint Research Centre, on behalf of DG Energy, organised a workshop in Brussels on 20/1/2016 on unlocking the energy efficiency potential in the rental & multifamily sectors with the aim to exchange information about the extent at which split incentives act as a barrier to energy efficiency investments in the building sector as well as investigate current solutions, their effectiveness and ways forward. This report provides an overview of the split incentive issue with some recommendation on how to address it and the workshop presentation summaries.