Governance Mixes, Retrofit Diffusion, and Social Sustainability in Urban Neighbourhoods: An Agent-Based Simulation

Neighbourhood-scale improvements in building energy efficiency face intertwined challenges of retrofit adoption, distributional equity, and resilience to energy price shocks. While existing studies often examine individual policy instruments in isolation, how governance tools jointly shape diffusion dynamics, social sustainability, and fiscal feasibility remains insufficiently understood. This paper develops an agent-based model of a heterogeneous urban neighbourhood to examine how four governance instruments—incentives, feedback, participation, and compliance—interact to influence household retrofit adoption, emissions, energy burden outcomes, and public budget exposure. Outcomes are evaluated using an ESG-informed indicator structure: E captures aggregate neighbourhood emissions; S captures household energy burden (level, overburden prevalence, and inequality); and G captures governance feasibility (adoption/compliance dynamics and cumulative net public cost, defined as administration + subsidies + enforcement minus fine revenues). An exogenous energy price shock is introduced to assess social resilience using burden peaks, overshoots, recovery time, and post-shock volatility. The simulation results show that participation-based mechanisms generate rapid early diffusion and higher endpoint adoption, with correspondingly earlier and larger emission reductions; in the baseline runs, the incentive–participation mix (I+P) attains the highest endpoint adoption and the lowest endpoint emissions. Incentives and feedback yield more gradual diffusion and moderate improvements, while compliance reduces voluntary uptake but delivers partial emission reductions through enforcement and can generate net fiscal revenue under the accounting definition when fine revenues exceed enforcement outlays. Participation-centred mixes tend to lower the average burden trajectories and exhibit modestly smaller shock-induced peaks and overshoots, whereas inequality outcomes are more trade-off dependent: compliance-based enforcement can compress burden dispersion even with limited voluntary adoption, and adding compliance to participation primarily shifts performance toward lower inequality at higher net fiscal exposure. These findings suggest that neighbourhood-scale building energy governance depends on matching policy mixes to diffusion mechanisms, distributional objectives, and fiscal constraints.