Unequal Transitions: Evaluating the Effectiveness and Equity of the ISDE Retrofit Subsidy

Abstract

This thesis investigates the effectiveness and equity of the Dutch ISDE subsidy scheme, which supports energy retrofits in the residential sector. The research focuses on insulation subsidies and evaluates whether they have reduced energy consumption and whether their benefits are equitably distributed across municipalities with varying levels of energy poverty. To address these questions, the study employs a twostage Difference-in-Differences design, using panel data from Dutch municipalities between 2012 and 2022. Insulation uptake is used as the treatment variable, instrumented by the share of eligible buildings to correct for potential endogeneity. The analysis also examines heterogeneous effects by energy poverty levels, using a structural vulnerability index. The findings suggest that the ISDE has not led to significant reductions in natural gas use, and in some cases may have triggered rebound effects. Moreover, the uptake of the subsidy is systematically lower in energy-poor municipalities, and its marginal impact on energy savings is weaker in those areas. The results underscore the importance of improving subsidy schemes that currently disproportionately benefit already well-off households, undermining climate objectives and energy justice. The thesis contributes to the growing policy debate on how to make climate interventions effective and inclusive.