In Europe, the push for energy-efficient housing has led to widespread use of financial incentives such as grants, loans, and tax rebates to encourage homeowners to undertake retrofits. These measures aim to reduce energy consumption and improve the environmental performance of residential buildings. Governments across the continent have adopted various programs to support these efforts, offering significant financial aid to make energy-saving improvements more accessible to homeowners. In addition to subsidies, some countries implement energy taxes to further promote efficiency and fund sustainability initiatives. At the European Union level, comprehensive strategies are being developed to enhance the energy efficiency of buildings, including proposals for new regulatory frameworks and financial incentives. This multi-faceted approach reflects a growing recognition of the importance of sustainable housing in achieving broader environmental and economic goals. Subsidisation of housing retrofit, through grants and loans, as well as tax rebates are commonly used across Europe to incentivise the energy-efficient retrofit of the housing stock (Castellazzi et al., 2019). Following this trend, the Dutch government has put in place a series of grants and subsidised loans to incentivise retrofit. First, the “Subsidie Energiebesparing Eigen Huis” is a grant programme covering up to 50% of retrofit costs when at least two energy-saving measures improving EPC levels have been implemented. Dutch homeowners can also apply for the Investment Grant for Sustainable Energy Savings (ISDE) in the case of single measures such as solar boilers or heat pumps (Ministry of Economic Affairs and Climate Policy, 2019). Since 2022, 0% interest loans are also available to low-income households from the National Heat Fund. On the stick side of retrofit incentivation, the Netherlands implements a regressive form of carbon taxation on individual households (Maier & Ricci, 2024). Research by the Dutch National Bank has also alluded to the strong impact of energy taxation on lower incomes and the inelasticity of energy consumption. Havlinova et al. (2022) have found that the introduction of stronger forms of energy taxation in heated energy markets can impinge on lower incomes resulting in regressive distributional impacts. At the EU level, the Renovation Wave is actively promoting this approach to housing retrofit through its proposal to include buildings in the Emissions Trading Scheme (ETS) together with the implementation of retrofit subsidies(2003/87/EC). As a result, while owner-occupied housing is undertaxed, the tax burden on energy consumption at the household level is poised to increase. Retrofit subsidies usually come to join fiscal systems favouring owner occupation. These forms of direct subsidisation of housing retrofit coalesce with increases in the fiscal burden on energy consumption. According to Haffner & Heylen (2011), the housing taxation structure favours owner-occupation with a mortgage through large deductions in income tax. In the Netherlands, imputed rent, the main form of housing taxation is calculated on the basis of a notional rent value and then added onto box 1 which comprises labour income. All other income from investments is taxed under box 3 at a different rate. Haffner & Heylen (2011) have analysed the lack of tax neutrality in this system and propose to include the taxation of housing assets under box 3 as a tax-neutral benchmark. In the context of housing retrofit, the favourable fiscal treatment of homeownership comes to join generous subsidies for owner-occupied housing retrofit with no maximum income threshold offered by the Dutch government. A green tax  is a viable alternative to incentivise retrofit in a more progressive manner. The Dutch approach to incentivising housing retrofits exemplifies a broader European commitment to enhancing energy efficiency through a combination of financial incentives and regulatory measures. While generous subsidies and tax incentives significantly benefit homeowners, particularly those with mortgages, the regressive nature of energy taxation presents challenges for lower-income households. Research indicates that increased energy taxation disproportionately impacts these households, underscoring the need for more progressive solutions. The EU’s Retrofit Wave, along with the proposed inclusion of buildings in the ETS, reflects an ongoing effort to balance these measures. In the context of housing retrofits, a shift towards green taxes could provide a more equitable framework, ensuring that the financial burden and benefits of energy-efficient improvements are more evenly distributed across different income groups.   (This text is an excerpt from : Fernández, A., Haffner, M. & Elsinga, M. Subsidies or green taxes? Evaluating the distributional effects of housing renovation policies among Dutch households. J Hous and the Built Environ (2024). https://doi.org/10.1007/s10901-024-10118-5 )