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Responding to Climate Change 2011

Home | Transport & Construction | Knauf Insulation Spend to save - intelligent mitigation

Spend to save - intelligent mitigation

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After two years of record spending by governments focused on avoiding a financial meltdown, global leaders arrive in México for the climate negotiations with fiscal austerity very much on their minds.

On the surface this is bad news for getting a deal, but it should not be. Investment now means the costs of dealing with climate change later are significantly less. Worldwide, multiple initiatives have been deployed over recent years to boost the economy, protect jobs and keep the recession short, if sharp. Not all worked, but governments say we are past the worst and are now looking to replenish the coffers.

Knauf Insulation CEO, Tony Robson, explains why, for example, spending on energy efficiency in buildings is actually the best way for governments to save money short and long term.

Timing is everything

What is clear is that when it comes to fighting climate change, we don’t actually have many other options other than to stay on course. Yet spending on energy efficiency is widely debated – is it the right thing to do at this precarious point?

It is increasingly clear governments feel they can no longer be as generous on the issue of climate change. In Europe, the German government has dramatically reduced subsidies for renewable power; in Australia, the government has cancelled an entire programme for insulation in buildings. Current spending does not reflect the value of energy efficiency in buildings.

Cutting waste and unnecessary expenditure is fundamental to good business, but cuts to programmes that deliver more back to the economy and government funds than they cost are counter productive.

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The German KfW scheme, supported by the German Government, reduces interest rates on loans for owners to improve the energy efficiency of their buildings. It costs the government EUR2 billion annually in subsidies, and leverages EUR18 billion a year in private spending. The total benefits the state receives (additional VAT, social security payments and avoided costs from climate change) outweigh the costs, providing a net benefit. The programme also keeps construction workers employed and dramatically reduces greenhouse gas emissions and the amount of energy otherwise imported. With such an impressive record, a significant increase in funding would seem the right action, not cutting back.

In the EU, the ELENA facility (European Local Energy Assistance), is having a huge impact. Launched late 2009 by the European Commission with the European Investment Bank, it helps local governments develop large-scale investment for sustainable energy projects within their territories. The facility provides grant finance for technical assistance (project development services). With EUR30 million provided during 2009 and 2010, nearly EUR2 billion is set to be mobilised by the end of 2010; the consequent VAT and labour taxes all go directly to support the government’s balance sheets. The energy saved and improved local infrastructure increases people’s quality of life and fights energy poverty. Furthermore, there are significant emissions reductions.

Energy goldmine

Money spent on energy efficiency has been shown repeatedly to provide excellent returns, for society as well as investors. Energy efficiency in buildings offers a huge opportunity to reduce energy consumption, given that 40% of all energy in Europe is used in buildings, and we have cost-effective measures today that can be deployed. It also provides one of the biggest areas for saving – a recent study showed how the EU could create EUR270 billion a year in energy savings by simply bringing older buildings up to the efficiency levels of new buildings.

Action on climate change and budget cuts are not mutually exclusive, indeed the opposite. Now is not the time to cut back on funding for energy efficiency programmes, but rather it is time to drive funds and resources on boosting smart programmes that give back more than they receive.

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