Exploring the socio-macroeconomic impacts of buildings decarbonisation including efficiency and rebound effects

Jaime Nieto, Paul E. Brockway, Elliott Johnson, John Barrett

Greenhouse gas emissions (GHG) from the operation of buildings are now the largest worldwide, making the sector central to achieving climate targets. The UK has amongst the most inefficient building stock in Europe and is largely reliant on natural gas-fired boilers to provide heating. Given its cold northern climate, heating accounts for the majority of building energy use and associated GHG emissions. Deep retrofitting—combined with a widescale shift to efficient electric heat pumps—is therefore essential for achieving the UK’s Net Zero 2050 target, making it an ideal case study.

Discussions around this transition often focus narrowly on upfront capital investment costs, overlooking potential broader economic benefits. Thus, a better understanding of the potential socio-macroeconomic impacts of improved energy efficiency from decarbonising buildings could help reframe the debate, address energy rebound effects and accelerate the decarbonisation of the buildings sector.

This paper uses the novel MARCO-UK model, which integrates final-to-useful energy efficiency gains into an energy-economy modelling framework to analyse a sequential set of scenarios including deep building retrofit, heat pumps deployment and demand-side measures. Results show that the central Transform 2a scenario leads to a £1125bn of GDP gain by 2050, with a 2.3 return ratio on £491Bn investment. However, economy-wide rebound effects can offset 12–45% of energy savings. Only the scenario including strong demand-side measures minimises rebound and maximises net energy savings. However, the lower associated GDP growth also highlights the need for accompanying social and economic policy to ensure a just and inclusive transition.