Fiscal impacts of energy efficiency programmes — the example of solid wall insulation investment in the UK

Programmes supporting the installation of energy efficiency measures typically incur a cost in the form of subsidies as well as lost VAT income due to reduced energy consumption. Those costs are to some extent offset by the tax receipts and other revenue streams generated as a result of the activities promoted under the programme. In this paper we analyse the budgetary effects of energy efficiency programmes focusing on the example of solid wall insulation in the UK. Three distinct subsidy options have been defined and modelled for the purpose of this research including two policies with varying degrees of direct subsidy and a low interest loan scheme. Our analysis shows that a significant amount of the cost of a scheme funding solid wall insulation would be offset by increased revenues and savings. A loan scheme, due to the high leverage, achieves not only budget neutrality but generates additional revenue for the Exchequer.