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              <p>To accelerate the energy renovation of buildings necessary to achieve carbon neutrality by 2050, the French government has launched an energy renovation plan for buildings. This plan allocates funds across various subsidy and aid mechanisms for housing renovation. What is the impact of these investment subsidies for energy retrofit on such investment and on the consumption and savings of a homeowner household that is not in fuel poverty? How much subsidy is needed to make homes energy efficient? To answer these questions, we develop a two-period, two-goods model that incorporates "essential baskets", i.e., baskets of goods (with a "minimum energy" level and an "essential composite good"). Investment subsidy for energy retrofit is effective if it is targeted and, this targeting should not be based solely on income. Indeed, we highlight non-monetary side effects as one of the key parameters of policy effectiveness. To be effective and as inexpensive as possible for public authorities, subsidies must depend not only on household income, but also on the cost of the work and therefore on the condition of the housing before the work is carried out. For illustrative purposes, we estimate and calibrate the parameters of the model with data from French households that only use electricity as an energy source for their homes. We determine the subsidies that encourage households to renovate their homes to make them more energy efficient.</p>
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