Energy efficiency targets: what are they good for?

As European officials consider an energy efficiency target for 2030, two experts look at why and how it could be useful

Energy efficiency

By Megan Darby

Do energy efficiency targets work?

At the current rate of improvement, Europe is on course to miss its goal of a 20% energy efficiency saving by 2020.

All the same, officials are developing plans for a 2030 energy efficiency target.

Tensions in the Ukraine have highlighted the need to reduce Europe’s reliance on fossil fuel imports, but there is still disagreement over how ambitious to be on energy saving.

We asked two experts for their views.

Simon Moore, senior research fellow for environment and energy, Policy Exchange

Energy efficiency has often looked neglected among the options for tackling climate change.

Although efficiency improvements are generally far cheaper as a way of cutting carbon than new generation investments, efficiency has been low in the order of policy priorities.

The ‘aspirational’ energy efficiency portion of the 20-20-20 package contrasts with the fully binding status accorded to the targets on renewable energy and greenhouse gas emissions.

Still, the question policymakers face with the 2030 package is not whether energy efficiency is in principle desirable, but whether a target (binding or not) is the best way to achieve it.

Within the sectors already capped by the emissions trading system (ETS), there’s little extra environmental effect that an energy efficiency target can have. The cap determines emissions.

Where an efficiency target could be of more use is in the remaining parts of the economy – heating, transport and so on. Current carbon pricing arrangements either neglect these areas completely, or treat them in a disjointed and haphazard fashion.

Energy efficiency requirements in these sectors may be less helpful than carbon pricing in finding the optimal mix of improvements in these areas, and if efficiency is as cost effective at cutting carbon as its advocates claim, it should be able to prevail in a carbon priced world without additional target-setting.

But an economy-wide carbon price has proven elusive, and in the near term targets may be more politically attainable and more easily applied. Still, if Europe wants to make energy efficiency a separate priority out to 2030, it should focus on the areas outside the ETS.

Ingrid Holmes, associate director, E3G 

What is the value of targets? Certainly targets on their own won’t deliver the energy efficiency investment needed. To find meaning in targets we need to look wider at issues of communication and motivation.

First: communication.

Targets are important for businesses investing in the energy efficiency goods and services supply chain. Targets signal the potential size of the market: important when considering whether to invest in a skilled workforce and in factories.

They are also important to Europe signalling its ambition on climate action globally. December 2015 is the deadline for a new global deal on climate action with legal force and ambition.

The EU needs to put an ambitious offer on the table if we are to stand a chance of catalysing the shift in country stances on climate action to the point where we can avoid dangerous climate change. Are non-binding targets enough?

To answer this we need to think about my second point: motivation.

Political motivation is needed to develop the new market frameworks that will unlock energy efficiency at scale and delivering the end investment needed.

Tony Robson CEO of Knauf Insulation sums up the issue neatly when he said “Unfortunately, we live in a world where, without legislation, energy efficiency does not ‘just happen’”.

He goes on to state that in the absence of discussion of a binding target for energy efficiency he is looking outside the EU for investment opportunities in areas such as Turkey, the US and Malaysia. Need I say more?

What next?

The European Commission is set to formally adopt a position on the 2030 energy efficiency target later this month. This will combine with goals to cut greenhouse gas emissions and grow the renewable energy sector as part of a 2030 package, which is expected to be signed off in October.

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