Mobilizing carbon offsetting to reduce energy cost burdens: a new approach for calculating and monetizing the offset value of energy efficiency upgrades to low-income housing

Energy-inefficient buildings are a major driver of climate change. The aging, energy inefficient housing occupied by low-income households in the US and other high-income countries is a driver of notable environmental and health disparities as well. Public policies for alleviating the financial and health burdens of energy inefficient housing have existed for decades, but fallen short of reaching most households in need. This paper proposes a promising new approach to filling gaps left by public programs — one that relies on mobilizing the tools of private governance, carbon offsetting and the voluntary carbon market (VCM) to finance energy upgrades for low-income households. We develop a new and readily applicable methodology for calculating energy and carbon savings from efficiency upgrades based on readily accessible publicly available data. Tailored to the needs of estimating energy and carbon savings from efficiency upgrades to low-income units, rentals in particular, this methodology can be fruitfully deployed in monetizing the carbon savings from efficiency driven reductions in household energy use. Specifically, we propose packaging the emission reductions generated through energy savings as carbon offsets, then selling these offsets on the voluntary carbon market to generate financing for energy upgrades to low-income homes not served by public energy efficiency programs. Given the multiple economic and health co-benefits from low-income energy upgrades, we expect that carbon offsets generated through such upgrades will be attractive to many corporate and institutional offset buyers, particularly those who seek to fulfill climate commitments while also advancing economic and human development in their host communities.