Green housing: Toward a new energy efficiency paradox?

• The study assesses the feasibility of improving buildings energy performance.
• Valuation approach is based on the Discounted Cash Flow analysis.
• Empirical findings show a widespread lack of financial viability.
• Investing in energy efficiency is a hedge against the upward trend of energy price.
• Energy efficiency should reduce energy price and disincentive further investments.

Buildings energy efficiency has occupied a prominent place on the agenda over the last decade. This study aims to assess the economic viability of improving the energy performance of residential buildings, by comparing additional costs of investment with the monetary savings achievable through reduced energy consumption.The evaluation model relies on the methodological framework of Discounted Cash Flow analysis, from a purely financial point of view in which externalities are not considered. The assessment is applied to two case studies located in Northern Italy. For each case study, several energy improvement alternatives are investigated.Empirical findings can be summarized as follows: at least partly, investing in buildings energy efficiency lacks economic viability; nevertheless, it can be interpreted as a hedge against a sharp rise in energy supply pricing in the coming years.As original contribution, the achieved findings provide an empirical support to highlight a new kind of energy efficiency paradox: investing in improving the buildings energy performance should allow a reduction to both climate-altering emissions and, in an efficient market, the price of energy supplies; but a decreasing price also lowers the profitability of the self-same investment, and acts as a deterrent to further improvements.