Bellona position paper: The EU launches initiative on energy efficiency

Publish date: April 26, 2005

Written by: Gunnar Grini

The Council of the European Union (EU) is currently negotiating the proposition for a new Directive under which Member States will be obliged to reduce their total energy use by at least one percent each year from 2007 until 2012.

The European Commission presented a draft for a Directive on the promotion of End-use efficiency and Energy Services on December 10th 2003. The Luxembourg Presidency of the EU set forth a new version of this proposition for the EU Council on February 8th 2005.

The purpose of the Directive is to enhance cost-effective improvement of energy end-use efficiency by providing the necessary targets, initiatives, and financial and legal framework to remove existing market barriers for the efficient end-use of energy. In addition, it aims to a developed a market for energy services and for the delivery of other energy efficiency improvement measures to end-users.

Energy efficiency as an important means for reaching Kyoto targets

The Bellona Foundation welcomes the Commission’s initiative. Bellona considers that promoting energy efficiency is the cleanest way of making alternative energy available . Indeed, initiatives encouraging energy efficiency contribute neither to increasing global warming potential nor to an increase in pollution to soil, water, or air, or the disturbance of local biotopes.

In addition, initiatives supporting energy efficiency will often be cheaper to implement than the production of new fossil or renewable energy because they do not demand investment in new infrastructure or in delivery networks. Increasing energy efficiency is essential to comply with the Kyoto protocol and meet the challenges of safety of energy supply in Europe.

The proposed Directive contains a proposal instructing Member States to achieve a one percent energy reduction each year over five years, but allows Member States to account for energy efficiency improvements initiated in previous years that that were achieved since 1995 in the calculations of the annual emissions reductions.

The Bellona Foundation disagrees with this approach, and believes that the same demands should be imposed on all Member States regardless of their pre-1995 energy reduction efforts, meaning the proposed directive would start all Member States with a clean slate. All Member States have a large potential for developing energy efficiency irrespective of what they have, or have not, accomplished before. A proposition allowing previous efforts to be accounted for will be less of an incentive to promote energy efficiency investments, and allow certain Member States to maintain the status quo in their effort toward sustainable use of energy.

New financial and political instruments necessary

In the proposed Directive as revised by the Council, the target of a one percent annual reduction is presented as an indicator rather than an absolute. This contrasts with the original proposal that was presented by the Commission in December 2003. The Bellona Foundation believes that the target of at least a one percent energy end-use reduction should be made mandatory in order to push the implementation of new financial and political instruments necessary to realise the full potential of the energy efficiency initiative.

Making the targets mandatory would clearly instruct Member States to undertake the necessary measures—such as the implementation of new political and legislative instruments—if the goals of energy saving are not reached via the existing measures.

White Certificates

The promotion of investments supporting energy efficiency initiatives might be accomplished through the implementation of national funding programmes, tax rebates, encouragement of third party financing, or introduction of a market of white certificates, that is, a tradable proof of a reduction in energy end-use.

A white certificate market would work as follows: Producers and distributors of electricity, gas, and oil must purchase a certain amount of white certificates each year, corresponding to a pre-defined percentage of their total energy deliverance. A white certificate might be obtained by investment in certain technologies that reduce the need for energy end-use compared to the need for energy that does not require the investment. Such technologies could take the form of solar panels, energy efficient equipment, increased use of insulation in buildings, an other energy saving measures.

A market for white certificates was introduced in Italy in March of 2005, making it mandatory for electricity and gas distributors and producers to purchase certificates. In Great Britain, energy suppliers are obligated to help end-users to reduce their need for delivered energy by making direct investments promoting energy savings. This initiative, referred to as the Energy Efficiency Commitment (EEC) programme, began in April 2002.

By the end of the second year, UK suppliers had met more than three quarters of the overall 62 TWh energy efficiency target.

The Bellona Foundation supports introducing measures into the proposed Directive that would underpin a long-term market for energy efficient alternatives. Furthermore, if targets for energy efficiency are to be met under the proposed Directive, they should be represented in the Directive’s language as absolutes rather than indicators. Should the current language remain, Bellona forecasts that the need to advise Member States on how to introduce specific market-based energy reduction measures will arise.

Download Bellona’s new position paper here.