Consultation on the Commission’s Green Paper on Energy Efficiency

Summary
 This document is an answer to the Commission’s consultation on the green paper on energy efficiency. Promoting energy efficiency is the most environmentally friendly way for making alternative energy available. The Bellona Foundation believes that promoting energy efficiency needs to be a top priority as a response to the challenges of global warming, conservation of land and water areas and maintaining biodiversity. Among the actions recommended by Bellona is the implementation of white certificates at EU level, ambitious energy demands for new buildings, implementation of a zero emission program for energy efficient technology, producer responsibility on buildings and a stronger emphasis on funding the use of innovative technology at a commercial scale.

The Bellona Foundation
The Bellona Foundation is a Norwegian environmental organisation, with offices in Oslo, Brussels, St. Petersburg, Murmansk and Washington D.C. Bellona is know as a solution-based organisation with expertise on how political measures and conditions could be used to solve environmental challenges.

Belllona’s points of view on the Green Paper
In the following, Bellona addresses the consultation questions point by point.

1. Research and technological development

The Bellona Foundation believes that a bigger part of EU funds should be used in order to support innovation and commercialisation of energy efficient technology. There is a need, not only to research and develop new technology, but also making the step of making innovative solutions available at commercial scale. This step will often require significant funding, and should be highlighted in the Competitiveness and Innovation Program (CIP) with duration from 2007 to 2013.

As an example, Bellona has an ongoing project with SINTEF, which is the biggest Norwegian research foundation, and several industry actors in Norway. In short, the main goal is to develop and make use of technology that enables the metallurgic industry to use impregnated wood waste to replace the use of coal in the production process. This could reduce CO₂ emissions by around 3 million tons every year and handle hazardous waste in an environmentally sound way thanks to cleaning of the incineration gas. The technology is fully developed but there is a need to examine how it works in a full-scale industrial plant. There are no funding opportunities for such demonstration projects, which is absolutely necessary for bringing this technology into commercial use.

2. Harnessing the emission trading mechanism
 
The Bellona Foundation supports the EU emission trading mechanism as a key tool for reaching the goals of the Kyoto protocol. However this will not be sufficient to meet the challenges of global warming. Unfortunately, the emission trading mechanism does not provide incentives for the radical changes needed to handle the challenges arising from climate change. Its important to remember that Kyoto is only a small step on the way towards stabilising the CO₂ emissions at a sustainable level. The cost of performing the necessary efforts will rise as the cheapest efforts are already performed and further actions for reducing the CO₂ emissions require more radical efforts.

Bellona believes that there is a need for the implementation of a complementary mechanism that gives incentives for commercialisation of zero emission technology. In 1990, California embarked on a plan to reduce vehicle emissions to zero though the introduction of the Zero Emission Vehicle (ZEV) program. At that time, the Air Resource Board required that in 1998, two percent of the vehicles produced for sale in California had to be battery electrical or hydrogen fuel cell vehicles with zero tailpipe emissions. The demand would increase to five percent in 2001 and ten percent in 2003. In 2003 these demands were adjusted, allowing manufacturers to divide their commitments on pure zero emission vehicles and vehicles with extremely low emission levels.

Implementing such a scheme for energy efficiency technology in Europe would imply that Member States are imposed a certain yearly increase in low-emission and energy efficient technology, such as passive houses with an energy demand below 15 kWh/m², electrical cars etc. Performing a radical technology change will normally be expensive at first, and cheaper as the technology becomes more developed and commercialised. Such a scheme will provide incentives to radical changes towards taking new zero emission technology into use.

3) Emphasising the link between a healthy economy and energy efficiency

Bellona believes that there is a strong link between economic competitiveness and energy efficiency. The ability to use energy efficiently is in many cases an indicator of an efficient production process. Bellona believes that this link should result in mandatory goals for reduction of energy use in the member states. Mandatory goals of one percent yearly reduction in energy end use was proposed in the first draft for a new EU-directive on energy end-use efficiency and energy services, presented by the Commission in December 2003.

Bellona supports the suggestion that annual energy efficiency plans should be set for each Member State, but in order to prevent the development of plans that are not actually used, the plans should be backed by mandatory targets for energy end-use reductions.

4) Fiscal policy

Bellona believes that fiscal measures should be used to encourage behavioural changes among consumers. One way of doing this is by ensuring tax credits to environmentally sound products. Tax credits in favour of renewable energies and energy saving products were made part of the French Finance law in 2005. The tax credit is targeted on the energy consuming equipment (15% to 25 % tax credits) and strongly supports solar-fired heaters and other equipment using renewable energies (40 % tax credits).

Bellona also supports green taxation of products that provide a competitive advantage to environmentally sound products. Examples of this are restructuring tax base to include elements directly related to CO₂ emissions or energy use. The approach does not increase the overall tax burden, but makes producers and consumers of energy intensive products pay for the effect they have on the environment.

5) State aid to favour the environment

State aid in favour of energy efficiency is approved by the Commission in accordance with the guidelines on State Aid for environmental protection. Bellona believes that state aid that increases productivity and hence also improves energy end-use efficiency should be allowed after 2007 when the guidelines will be revisited.

6 and 20) Public procurement

Public authorities should be obliged to purchase a certain amount of green products in their public procurement. This could be organised in a way that instruct public authorities to purchase energy- and CO₂ efficient products corresponding to a certain percentage of each product group, for instance vehicles, office installations or buildings.

Greening public procurement is an important measure to build markets for sustainable products and technologies. Bellona believes that the Commission should instruct each Member States to develop routines for greening public procurement. Most cases show that purchasing energy efficient products save money in the long term.

7 and 22) Funding of regional and local energy efficiency projects

Bellona supports local, regional, national and European financing schemes for energy efficiency projects. Funding should be awarded both to research projects, demonstration projects with aim to commercialise new energy efficient technology and projects that increase energy efficiency in the industry and residential sector. Bellona recommends that stronger emphasis be laid on projects that aim at making new technology with great potential for increasing energy efficiency, are highly prioritised in the years to come (see question 1).

8) Energy efficiency in buildings

Council Directive 2002/91/EC on the energy performance in buildings will enter into national legislation on the 4^th of January 2006. The standards used for calculating the energy use in buildings currently being developed by the European Committee for Standardisation (CEN). Bellona wonders whether they will be developed in time for the implementation of the Directive in the Member States.

In addition, the standards are so complicated that the only people who understand how to use them are the same people that develop them. It can not be expected that national authorities, independent experts, constructors and builders acquire the competence of how to use these standards. There is a need for a clarification and a simplification of the CEN standards for calculation of energy use in buildings. Finally, since the standards are developed, Member States should also be bound to use them, in order to achieve a harmonised legislation within the EU.

Bellona also recommends that Member States be instructed to report the results of the implementation of the Directive. Article four of the Directive does not specify what is defined as “minimum energy performance requirements”. Member States that do not set sufficiently high quality demands for new buildings cannot expect a reduction in the energy demand in the real estate sector. This is inconsistent with the intention of the Directive. Member States should be able to demonstrate a decrease in energy use in the real estate sector as a result of the implementation of the Directive.

9) Improving the energy efficiency of rented accommodation

The Commission addresses an important question when pointing out that improving the energy efficiency of rented accommodation is a difficult task because the owner of the building does not have any economic incentives to invest in energy efficiency improvements. Bellona Foundation suggests the development of an extended producer responsibility for buildings as a response to this challenge.

Producer responsibility has been a well-known measure in waste policy for many years and is usually based on collective or individual schemes for different products or industries. For buildings, the scheme should be organised as an individual producer responsibility. This means that the environmental qualities of each new building are reflected in a fee, depending on future energy use, recycling and waste management of materials, use of environmentally hazardous substances etc. The imposed fee shall provide economic incentives to the construction of buildings with higher environmental quality.

10) Encouragement of energy efficient products

Bellona believes that introducing individual producer responsibility for energy consuming products can be used as a strategy to influence producers to develop products with less environmental impact. Normally, the producer responsibility is limited to covering the costs of take-back and recycling of the products. An extended individual producer responsibility would instruct producers to pay for the environmental damage their products cause during their lifetime. This would mean that products with a high need for energy are imposed a higher environmental fee than energy efficient products. Implementing an individual producer responsibility in full scale for energy consuming products, for instance electrical products, cars and buildings, will create a market incentive for producers to create energy efficient products.

Labelling for energy consuming products can function as a good measure to show consumers the environmental and economic impact of the products they are purchasing. However, it’s important that the criteria for are regularly revisited along with the technological development. As an example, a refrigerator that was awarded “A” as an energy mark five years ago should not necessarily be awarded “A” today.

11) Energy efficient vehicles
 
Council Directive 2000/53/EC on end of life vehicles instructs producers (vehicle manufacturers or importers) to pay “a significant part” of the cost of take-back and treatment from January 2007. Bellona believes that producers should also be made responsible for the energy consumption of their products during their lifetime. This would mean implementing an extended individual producer responsibility in its full scale for energy consuming products, hence giving market incentives for the production of energy efficient products (see question 10).

Bellona recommends that taxation on transport be harmonised within the EU. The taxation should be imposed on vehicle use and not on the purchase of vehicles, in order to include the use of older vehicles. Furthermore, the tax should be calculated with regard to CO₂ emissions. This means that cars with high CO₂ emissions per kilometre are imposed a higher tax than energy efficient cars. Such tax schemes will give incentives for the production of energy efficient vehicles.

13) Efficiency of electricity transmission and distribution
 
One way to reduce energy loss is decreasing the pressure on the transmission- and distribution system. Making investments in improving energy infrastructure economically profitable for operators could be an appropriate measure in this context. Bellona recommends that operators should be able to retain a proportion of the net efficiency gain resulting from the investments, in terms of white certificates. After the expiry of the certificates, the operators will receive no further economic compensation for their investment.

Another way of increasing the efficiency of electricity transmission and distribution is by encouraging energy efficiency investments and promoting local energy production from renewable sources. This is particularly interesting concerning building integrated energy production, for instance through solar panels, solar heat, geothermal energy production and heat pumps. Such installations could be encouraged by including them in the list of actions qualifying for white certificates. Use of waste heat from industry plants for replacing use of electricity should also qualify for white certificates, as this will also reduce the pressure on the transmission and distribution system.

14) Encouraging the offer of energy services

Encouraging electricity and gas providers to offer energy services rather than offering energy provides economic interest in investing in energy efficient equipment. However, Bellona is concerned that such an approach will remove the consumer’s interest of saving energy, and consequently lead to careless energy use by leaving lights on, opening windows for cooling etc. The Commission should be careful promoting such schemes without examining the rebound effects. Bellona believes that for instance the implementation of white certificates on EU level is a better way of promoting energy efficiency.

15) White certificates

White certificates are a market-based measure that can be used to ensure that certain goals for reducing energy demand are obtained through the most cost-effective solutions available. One of the main advantages of implementing white certificates is that a certainty of outcome is secured. Traditional energy taxes are usually not linked to a savings target, but set according to fiscal requirements. The mandatory target of yearly energy reductions that must be fulfilled within a scheme for white certificates keeps the certainty of outcome, while the certificates trading gives the flexibility for cost-efficient compliance. The marked forces determine the allocation of activities but not the scale of action.

Modelling work performed under the EU 6th framework programme concluded that the introduction of white certificates could lead to energy savings of up to 15 percent at zero cost. Bellona believes that the introduction of white certificates will make a significant contribution to meet the energy consumption level of 1990. Therefore, Bellona supports the introduction of white certificates at EU level.

16) Encouraging industry to take cost-effective energy efficient technologies in use

Bellona recommends that the emission-trading scheme be complemented with the introduction a zero emission program for energy efficient technology (See question 2). This will help Member States to perform the introduction of the radical technology changes necessary to reduce the CO₂ emissions towards a sustainable level.

Regarding the use of voluntary agreements, Bellona agrees with the Commission that such agreements have worked well in England and the Netherlands. However, Bellona wishes to emphasise the importance of mandatory targets for reducing the end-use of energy within Member States.

In addition Bellona encourages the development of Best available technique reference documents (BREF) on energy efficiency, under Council Directive 96/61/EC on Integrated Pollution Prevention and Control (IPPC).

Best regards