Brussels moves on energy efficiency

The European Commission has published a Green Paper on energy efficiency setting out options for cutting European energy consumption by 20% by 2020.1 In contrast, Energy Ministers have weakened a draft Directive on end-use energy efficiency by opting for a non-binding goal to increase energy efficiency by 6% over six years, instead of the more challenging mandatory targets backed by the Commission and European Parliament.

The Green Paper on energy efficiency emerged at the end of June following a last-minute rewrite to emphasise synergies with the EU's over-arching Lisbon Agenda for jobs and growth (see pp 3-4 ).

The paper says it is technically feasible, and cost-effective, to cut energy consumption across the EU by 20% in the next 15 years. This would save €60 billion per year, create one million new jobs, cut carbon dioxide emissions and reduce dependence on imported oil and gas, the Commission says.

The paper estimates that just over half of the savings can be achieved through full and effective implementation of existing legislation, along with incoming policies such as Directives on energy performance of buildings and eco-design, and voluntary agreements with industry.

However, new measures are needed to deliver the rest of the savings. The Commission has focused on greater provision of information and the use of financial instruments, but notes that such approaches "cannot always be a substitute for adopting regulatory measures".

The Commission will draw up an action plan to build on the Green Paper and to outline actions which could be taken at EU, national and local levels. It also suggests that Member States should prepare their own action plans, setting out progress towards national energy efficiency targets, and include them in annual reports under the Lisbon process.

Member States should also make more effort to ensure that consumers are better informed about energy efficiency through education, publicity campaigns and product labelling. The paper notes that simple measures such as using energy efficient light bulbs and having vehicle tyres at the correct pressure make economic sense, but lack of awareness is hindering action.

Information provision should be reinforced with financial messages - either in the form of incentives to companies and individuals or through taxation. Opportunities for tax reform highlighted by the paper include vehicle taxation, tax breaks to promote renewables and VAT on transport. Recognising the sensitivity surrounding fiscal measures, the paper promotes the use of co-operation at regional level - an option that is increasingly in vogue in the enlarged Europe of 25 States (ENDS Report 365, pp 22-25 ).

State aid should also be used to provide incentives, where "justified, proportionate and necessary". Meeting the criteria is not always easy, as the Energy Savings Trust recently discovered when its schemes for incentivising clean vehicles fell foul of state aid rules (ENDS Report 361, p 52 ).

The paper also identifies public procurement as a powerful mechanism for kick-starting the uptake of energy efficient measures. It notes that even when measures are cost effective, it can be difficult for companies to secure financing. Public procurement can speed acceptance of new products and push their use into the mainstream.

The Green Paper focuses on the housing and transport sectors, as these are seen as having the greatest potential for cost-effective savings. The Commission floats ideas for an obligation on the public sector to use more efficient vehicles, removing tax on clean vehicles and differentiating road charges or restricting access to cities according to fuel efficiency.

On the housing front, the paper suggests extending the requirements of the energy performance of buildings Directive to cover the renovation of buildings smaller than the current 1,000m2 cut-off point. It also proposes more voluntary agreements with appliance manufacturers on the performance and labelling of their products.

  • At the end of 2003, the Commission proposed a Directive requiring Member States to save 1% of energy per year between 2006 and 2012 (ENDS Report 347, p 56 ). The proposal received a cool response from Energy Ministers (ENDS Report 359, p 58 ), but in June the European Parliament voted for tougher mandatory targets which would lead to 11.5% reduction in energy use over nine years.

    However, Energy Ministers are digging in their heels. At a Council meeting in late June, they backed a weaker package containing only an indicative target for a 6% saving in energy over six years.

    Ministers also reject the idea of setting more stringent targets for the public sector, and want Member States merely to ensure that they play an "exemplary role". The public sector would be expected to take at least one energy efficiency measure. This can be either legislative or a voluntary agreement, but it should focus "on cost-effective measures which generate the largest energy savings in the shortest span of time."

    Energy firms will be expected to offer "competitively priced" energy saving services or energy audits to their customers; or else they should pay into a fund for energy efficiency improvements. Member States will also have the capability to set up market-oriented schemes including tradable certificates and voluntary agreements to promote energy efficiency.

    Whichever route they choose, Member States should ensure that energy audits are widely available. As far as "technically possible, financially reasonable and proportionate", customers should be provided with smart, real-time energy meters.

    The draft Directive also contains provisions to remove laws and rules which impede the use of financial instruments for energy savings, and to do away with transmission or distribution tariffs which offer incentives for increased energy use.

    The Directive now goes back to the Parliament for a second reading. Given the wide gulf between the Ministers and MEPs' original proposals, it is likely to face strong opposition.

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