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Meeting climate target with realistic demand-side policies in the residential sector

Nature Climate Change (2025)Cite this article

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Abstract

The European Union (EU) has established an ambitious policy framework for demand-side mitigation in buildings towards net-zero targets. Here, we conduct a comprehensive quantitative assessment of 384 demand-side policy combinations for residential space heating that complement supply-side decarbonization efforts. We show that implementing the EU Emissions Trading System 2, even when combined with energy supply decarbonization, falls short of climate targets. Beyond the EU Emissions Trading System 2, we emphasize the need for ambitious heat-pump subsidies as a critical component of a successful strategy. Conversely, a large-scale generic ‘Renovation Wave’ contributes modestly to decarbonization, is not a cost-effective strategy at the EU level and requires significant public spending increases. We advocate for the implementation of a carbon tax, paired with substantial heat-pump subsidies and targeted incentives for home insulation by country and building. This approach supports the decarbonization of the residential sector, limits the strain on the electricity grid and alleviates energy poverty.

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Fig. 1: Impact of standalone demand-side policy implementation on emissions, energy use and social cost compared to the Baseline scenario by 2050.
Fig. 2: Impact of policy mix on emissions, electricity use and social cost.
Fig. 3: Impact of different designs (standard/improved realization rate and increased number or depth) of energy renovation policies as a complement to ambitious heat-pump policies.
Fig. 4: Evolution of space-heating emissions and energy use by heating technology across policy scenarios.
Fig. 5: Social cost compared to the Baseline scenario per household and per year between 2025 and 2050.

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Data availability

The data supporting the findings of this study are openly available. Input data are available via GitHub at https://github.com/iiasa/message-ix-buildings/tree/eu-ncc. Additional datasets and output results are available via Zenodo at https://doi.org/10.5281/zenodo.15201830 (ref. 69). Source data are provided with this paper.

Code availability

Source code is available via GitHub at https://github.com/iiasa/message-ix-buildings/tree/eu-ncc. MESSAGEix-Buildings is an open-source model available at https://github.com/iiasa/message-ix-buildings. The version of MESSAGEix-Buildings and additional input files associated with this study are available via Zenodo at https://doi.org/10.5281/zenodo.13919539 (ref. 70).

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Acknowledgements

This research was supported by the Agence Nationale de la Recherche (ANR) under grant no. ANR-19-CE22-0013-01 (PREMOCLASSE): L.V. Part of the research was developed in the Young Scientists Summer Program at the International Institute for Applied Systems Analysis (IIASA), Laxenburg (Austria) with financial support from the Energy, Climate and Environment (ECE) group: L.V. This study has received funding from the European Union’s Horizon 2020 research and innovation programme under grant no. 821124 (NAVIGATE) and from the Energy Demand changes Induced by Technological and Social innovations (EDITS) project, which is an initiative coordinated by the Research Institute of Innovative Technology for the Earth (RITE) and International Institute for Applied Systems Analysis (IIASA) and funded by the Ministry of Economy, Trade and Industry (METI), Japan: A.M., B.v.R. We thank L.-G. Giraudet and P. Quirion for useful comments and suggestions on previous versions of this paper.

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Authors and Affiliations

  1. CIRED-ENPC, Nogent sur Marne, France

    Lucas Vivier

  2. Energy, Climate, and Environment Program, International Institute for Applied Systems Analysis (IIASA), Laxenburg, Austria

    Lucas Vivier, Alessio Mastrucci & Bas van Ruijven

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  1. Lucas Vivier
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  2. Alessio Mastrucci
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Contributions

L.V. conceptualized and designed the study, curated data, supported model development, ran the model, created visualizations, wrote the original draft, and reviewed and edited the manuscript. A.M. conceptualized and reviewed and edited the manuscript. B.v.R. reviewed and edited the manuscript.

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Correspondence to Lucas Vivier.

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Nature Climate Change thanks Peter Berrill, Katelyn Stenger and the other, anonymous, reviewer(s) for their contribution to the peer review of this work.

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Extended data

Extended Data Fig. 1 Ranking of the most impactful policies across emissions, energy use, energy poverty and social cost outcomes.

Ranking of most impactful policies on A, Emission, B, Energy use, C, Energy poverty and D, Social cost outcomes. Policies are ranked based on their impact when assessed in interaction. First Order and Total Order effects are calculated using Sobol global sensitivity analysis, which quantifies the contribution of each input variable to the output variability. First Order effects measuring individual contributions and Total Order effects capturing combined contributions including interactions.

Source data

Extended Data Fig. 2 Share of Fossil-Fuel Boilers in EU-27 Member States in 2015 (Initial) and in the Baseline Scenario.

A, Initial 2015. B, Baseline Scenario.This figure explains why some countries do not rely on heat pump cost reductions or subsidies to meet climate targets. For example, Sweden, Finland, and the Baltic countries had a low share of fossil fuel boilers in 2015, while countries like the Czech Republic and Poland are projected to reach a similarly low share by 2050 due to current dynamics.

Source data

Extended Data Fig. 3 Social costs of renovation policies in EU-27 Member States compared to the ‘Baseline’.

A, High subsidies. B, Medium subsidies prioritizing deep renovation. C, Medium subsidies without prioritization. Expressed in euros per households (hh).

Source data

Extended Data Fig. 4 Evolution of energy and equity outcomes across policy scenarios in the EU.

Evolution of A. energy poverty, B. space heating consumption and C. electricity consumption in the EU across policy scenarios.

Source data

Extended Data Table 1 Key factors contributing to differences in the impact of renovation policies in the EU-27 Member States
Full size table
Extended Data Table 2 Summary of the main results of the policy mix scenarios
Full size table

Supplementary information

Supplementary Information

Supplementary Notes 1 and 2, Figs. 1–7 and Data.

Source data

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Vivier, L., Mastrucci, A. & van Ruijven, B. Meeting climate target with realistic demand-side policies in the residential sector. Nat. Clim. Chang. (2025). https://doi.org/10.1038/s41558-025-02348-4

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