The ‘Green buildings’ directive: A quantification of its costs and benefits in two Italian regions

• This paper assesses the monetary costs, based on current technologies, of meeting the intermediate targets for 2025 and 2030 outlined in the EU Energy Performance of Buildings Directive (EPBD). The analysis focuses on two Italian regions with an ageing building stock and demonstrates that these costs are substantial. • It employs open-source microdata on Energy Performance Certificates (EPCs) for the Lombardy and Piedmont regions, which provide information on dwellings’ energy class and recommendations of the necessary retrofits to reach a higher energy class, as well as CO2 emissions and energy consumption. • It estimates a total expenditure of €118.9 billion to take Lombardy's and Piedmont's residential stock to at least energy class D, which is 20.2% of the two regions’ GDP and 5.6% of Italy's GDP. • Understanding the balance of costs and benefits is crucial to evaluate the economic incentives for homeowners to adopt energy efficiency measures. Households are estimated to save yearly €3.3 billion in lower energy bills in the two regions, and CO2-equivalent emissions are estimated to drop annually by 6.9 million tons. • While homeowners may internalize the private benefits, they are unlikely to account for the social benefits in terms of lower emissions. As a result, achieving the EPBD targets is likely to require public subsidies. The building sector is responsible for a significant portion of greenhouse gas (GHG) emissions in Europe. Thus, achieving 2050 net-zero emissions targets necessitates the decarbonisation of the sector. This paper assesses the monetary costs, based on current technologies, of meeting the intermediate targets for 2030 and 2033 outlined in the EU Energy Performance of Buildings Directive (EPBD). The analysis focuses on two Italian regions with an ageing building stock and demonstrates that these costs are substantial. We employ open-source microdata on Energy Performance Certificates (EPCs) for the Lombardy and Piedmont regions, which provide information on dwellings’ energy class and recommendations of the necessary retrofits to reach a higher energy class, as well as CO2 emissions and energy consumption. We estimate a total expenditure of €118.9 billion to take Lombardy's and Piedmont's residential stock to at least energy class D, which is 20.2% of the two regions’ GDP and 5.6% of Italy's GDP. Understanding the balance of costs and benefits is crucial to evaluate the economic incentives for homeowners to adopt energy efficiency measures. Households are estimated to save yearly €3.3 billion in lower energy bills in the two regions, and CO2-equivalent emissions are estimated to drop annually by 6.9 million tons. While homeowners may internalise the private benefits, they are unlikely to account for the social benefits in terms of lower emissions. As a result, achieving the EPBD targets is likely to require public subsidies.