[Paper Review] Simulating the deep decarbonisation of residential heating for limiting global warming to 1.5C

Florian Knobloch, Hector Pollitt+3 more|arXiv (Cornell University)|Oct 30, 2017

Climate Change Policy and Economics4 citations

TL;DR

This study uses the FTT:Heat bottom-up model to simulate policy-driven decarbonization of residential heating, showing that near-zero emissions by 2050 are achievable through coordinated policy mixes—especially carbon taxes (€50–200/tCO2) combined with renewable subsidies—despite household inertia and bounded rationality, with medium-term cost reductions in most regions despite initial increases.

ABSTRACT

Whole-economy scenarios for limiting global warming to 1.5C suggest that direct carbon emissions in the buildings sector should decrease to almost zero by 2050, but leave unanswered the question how this could be achieved by real-world policies. We take a modelling-based approach for simulating which policy measures could induce an almost-complete decarbonisation of residential heating, the by far largest source of direct emissions in residential buildings. Under which assumptions is it possible, and how long would it take? Policy effectiveness highly depends on behavioural decision- making by households, especially in a context of deep decarbonisation and rapid transformation. We therefore use the non-equilibrium bottom-up model FTT:Heat to simulate policies for a transition towards low-carbon heating in a context of inertia and bounded rationality, focusing on the uptake of heating technologies. Results indicate that the near-zero decarbonisation is achievable by 2050, but requires substantial policy efforts. Policy mixes are projected to be more effective and robust for driving the market of efficient low-carbon technologies, compared to the reliance on a carbon tax as the only policy instrument. In combination with subsidies for renewables, near-complete decarbonisation could be achieved with a residential carbon tax of 50-200Euro/tCO2. The policy-induced technology transition would increase average heating costs faced by households initially, but could also lead to cost reductions in most world regions in the medium term. Model projections illustrate the uncertainty that is attached to household behaviour for prematurely replacing heating systems.

Motivation & Objective

• To assess the feasibility of achieving near-zero direct carbon emissions from residential heating by 2050 under 1.5°C global warming constraints.
• To examine how household behavior, particularly inertia and bounded rationality, affects the adoption of low-carbon heating technologies.
• To evaluate the effectiveness of different policy instruments—especially carbon taxes and subsidies—in driving the transition to low-carbon heating systems.
• To identify policy mixes that are more robust and effective than single-instrument approaches for accelerating market transformation.

Proposed method

• The FTT:Heat model is a non-equilibrium, bottom-up model simulating household-level decisions on heating technology adoption under behavioral constraints.
• The model incorporates inertia in technology replacement and bounded rationality, reflecting real-world delays and limited information in household decisions.
• It simulates transitions across heating technologies (e.g., gas boilers, heat pumps, biomass) under various policy scenarios, including carbon pricing and renewable subsidies.
• The model evaluates policy effectiveness across 15 world regions, accounting for regional differences in energy systems, costs, and infrastructure.
• Policy scenarios are simulated with varying carbon tax levels (€50–200/tCO2) and renewable support, assessing impacts on emissions, costs, and technology uptake.
• The analysis integrates whole-economy climate scenarios to ensure consistency with 1.5°C global warming targets.

Experimental results

Research questions

• RQ1 To what extent can policy instruments induce near-complete decarbonization of residential heating by 2050 under 1.5°C climate targets?
• RQ2 How do household behavioral factors such as inertia and bounded rationality affect the pace and success of low-carbon heating transitions?
• RQ3 Which policy mix—carbon tax, subsidies, or combinations—is most effective and robust in driving market adoption of efficient low-carbon heating technologies?
• RQ4 What are the projected cost implications for households during the transition, and when do cost reductions emerge?

Key findings

• Near-complete decarbonization of residential heating is achievable by 2050, but only with substantial and sustained policy efforts.
• Policy mixes combining carbon taxes (€50–200/tCO2) and renewable subsidies are more effective and robust than relying on carbon taxes alone.
• Household behavior, particularly the reluctance to prematurely replace heating systems, introduces significant uncertainty and delays in the transition.
• Initial policy-induced cost increases for households are expected, but medium-term cost reductions are projected in most world regions due to technology learning and efficiency gains.
• The transition to low-carbon heating technologies is highly sensitive to policy design, with strong policy signals accelerating adoption and reducing emissions.