Energy Efficiency Policies

ENERGY EFFICIENCY POLICIES

Governments have developed a variety of policies to overcome the market barriers and failures that slow the implementation of cost-effective, energy-efficient technologies. The main types of policies are:

Ð'* Information, technical assistance and labels.

Ð'* Regulations and standards.

Ð'* Economic instruments.

Ð'* Voluntary agreements.

Ð'* Research, development and dissemination (RD&D).

Ð'* Public infrastructure planning and construction.

Information, Technical Assistance and Labels

Governments can improve energy efficiency by communicating and sharing information with the public. Lack of credible, unbiased information inhibits people from purchasing energy efficient products or using products in an energy efficient manner. This can be remedied. Information and technical assistance can be provided through regional efficiency centres, government offices, utilities or educational channels. Professional organisations and industrial associations also provide information and technical assistance to their members. Associations in a number of countries have established efficiency-improvement targets for industries or plants. Others have set out objectives and benchmarking criteria to enable performance comparisons. Both satisfy the need to motivate managers and provide staff with technical advice. Energy audits, technical information manuals and guidelines for professionals have shown good results. Some information and audit programmes back the rewards of direct efficiency gains with lower tax rates in return for commitments to reduce consumption. Denmark's "green tax" scheme provides a good example of such a policy.

Governments and other organisations can also stimulate efficiency improvements in public buildings and operations through leading by example in their own buildings. Measures include awareness campaigns to creating energy management systems, using alternative energy vehicles and providing direct financial support within government itself. The government would generate success stories that the private sector might emulate, and provide a basis for energy-efficiency service providers to expand sales.

Product labels give purchasers information about equipment performance and energy consumption. With knowledge of relative operating costs as well as the initial price, buyers can more fully weigh the life-time costs of appliances and other energy consuming equipment. Labelling motivates manufacturers to produce more efficient products. Labels are most often applied to appliances and equipment, such as home appliances, office equipment, home electronics and lighting equipment, but can also be applied to buildings and automobiles. At present, energy labels are used in at least 37 countries. Figure 3 shows how labels, along with standards, have transformed the refrigerator market in the European Union. 11

In Denmark, mandatory energy labels for houses and apartments inform potential buyers of a property's annual energy consumption and its environmental impact. Associated energy plans based on consultant reviews show how to save energy and water, and inform the buyers of the associated costs involved.

Regulations and Standards

Regulations and standards apply mainly to household appliances, buildings and automobiles. They are often used in conjunction with labels, but are potentially more powerful. Whereas labels simply inform, standards have the capacity to ban from the market products that do not meet certain minimum efficiency requirements. Design of standards requires considerable technical knowledge. They need to be flexible in order to adapt to technological advances, and they should increase rather than dampen incentives for industry to develop more energy-efficient technology.

Standards are already widely used to improve the efficiency of home appliances, electric motors and lighting equipment, and are in force in at least 34 countries. Figure 4 shows how standards have led to a 75% reduction in energy use in refrigerators in the United States.

National standards may affect traded products beyond national borders. They can help to improve energy efficiency in export-destination countries and act as import barriers against exporting countries with lower or different standards. Thus, international co-operation becomes important to address potential trade and competitiveness policy issues/

Whereas standards usually apply to appliances and equipment, regulations are more generally used in the construction and transportation sectors. Construction regulations focus on the building shell, with codes for insulation, thermal efficiency of windows and other building materials, or overall thermal performance. These codes, developed and implemented locally or regionally in much the same way as health and safety regulations, aim to overcome some of the significant market barriers related to buildings such as: tenant-versusowner issues about the choice of materials and equipment; high operating costs; and requirements for individual metering and invoicing of energy consumption.

In transport, speed limits, set primarily for safety and traffic control, also affect fuel consumption. Many countries mandate periodic technical inspections of vehicles, primarily for safety and emissions levels. Mandatory fuel-economy standards for road vehicles are also an instrument used in this sector.

IEA countries have few industrial standards or regulations because of the wide variety of technologies and processes in manufacturing. Regulations have been used, however, to require industrial plants of a certain size to conduct energy audits and submit energy-efficiency plans to the government, or to mandate the appointment of energy managers in industrial facilities.

Economic Instruments

Accurate energy prices are a necessary foundation for sound energy efficiency policies. Efforts to remove subsidies on energy prices have made considerable progress since the early 1980s, but pricing still remains distorted for certain forms of energy. (See also Making Markets Work background paper.)

Fiscal policies take many different forms. Taxes include excise duties and sales taxes as well as CO2, SO2 and other energy and environment-related taxes. Environmental taxes usually try to apply the "Polluter