The impact of energy prices in decarbonizing buildings’ energy use in the EU27

Abstract

The recent surge in end-use energy prices in the EU has intensified the debate on how price signals influence the decarbonization of the building sector, a key contributor to global energy consumption and emissions. This study investigates the role of energy price signals in driving the decarbonization of the EU-27 building sector using the Invert/EE-Lab model to simulate various scenarios up to 2050. The analysis examines the elasticity of energy demand, particularly how different price scenarios impact investment decisions in energy-related technologies. The findings reveal that a 10 % increase in energy prices can lead to a reduction in energy demand by up to 3 %, depending on the scenario. Furthermore, price elasticity varies across different policy and price settings, with stricter regulations resulting in lower elasticity. The results underscore that while stringent regulatory measures can achieve significant energy savings and reduce greenhouse gas emissions, they also limit the responsiveness to price signals, with heat pump shares reaching 47–86 % in high-efficiency scenarios. Conversely, more moderate policy measures increase price elasticity, leading to 15–55 % heat pump shares. This study highlights the importance of better understanding price elasticity in energy modeling to project better the outcomes of policy interventions aimed at achieving a low-carbon energy system.