Policies for Energy Efficiency 1 Policies for Energy Efficiency Energising Cleaner Production Management Course

Policies for Energy Efficiency 2 Session Agenda: Types of policy instruments Definitions and Examples Evaluation of policy instruments

Policies for Energy Efficiency 3 But first… In what step(s) of the methodology is lack of policies or enforcement a barrier?

Policies for Energy Efficiency 4 What are energy efficiency policies? All public interventions (policy instruments) aiming at improving energy efficiency of a country, through adequate pricing, institutional setting regulations and economic or fiscal instruments - World Energy Council

Policies for Energy Efficiency 5 Policy instruments types Legislative instruments Economic instruments Voluntary instruments Laws & regulations Standards Codes of practice Fiscal Subsidies Property & tradable rights Bonds & deposit funds Liability systems Voluntary agreements Programs & projects Research & development

Policies for Energy Efficiency 6 Legislative instruments: Definitions Laws & regulations: –Law: legal rules that govern a specific action, process, product etc. –Regulation: outlines how the law should be implemented Standards: provide technical and design guidance notes (e.g. for equipment) Codes of practice: give practical advice / guidance on how to comply with legislation (e.g. Building Code)

Policies for Energy Efficiency 7 Legislative instruments: Energy Conservation Laws India Energy Conservation Act requires large industry to: Commit to energy conservation Adhere to energy standards & equipment labels Appoint energy managers Carry out annual energy audits

Policies for Energy Efficiency 8 Legislative instruments: Minimum energy performance standards (MEPS) New Zealand MEPS Combined with mandatory labeling Appliances and products e.g. distribution transformers, 3-phase electric motors, heat pumps, air conditioners, fluorescent lamps Benefits: –1% EE improvement tons CO 2 (2003) –Keeps NZ manufacturers competitive

Policies for Energy Efficiency 9 Economic instruments: Definitions Fiscal instruments: –Taxes, fees, charges levied to producers and consumers Subsidies: –Grants, soft loans, tax allowances Property & tradable rights: –Licenses, rights (e.g. water, emissions) Bonds & deposit funds: –Money returned when environmental behavior is met

Policies for Energy Efficiency 10 Economic instruments: Petrol and emission taxes Denmark Carbon Dioxide Act 1993 Purpose: internalize external costs of energy use in industry CO 2 rates based on C content of fuel Tax income recycled back into economy Emission reduction of 13%

Policies for Energy Efficiency 11 Economic instruments: Subsidies on EE technologies Thailand Several subsidies: –Favorable loans: <1.2 million, 4% interest, 7 years repayment –25% tax break for EE projects –Energy savings 100% tax deductible –Import duty & corporate tax exemption on new investments in EE and renewable energy Combined with petrol tax

Policies for Energy Efficiency 12 Voluntary instruments: Definitions Voluntary agreements: commitment from business to protect the environment Programs & projects: to increase awareness, skills and knowledge, e.g. –Information –Demonstration projects –Development of CP centers Research & development: new technologies, processes, products

Policies for Energy Efficiency 13 Voluntary instruments: Energy programs and projects GERIAP project (Greenhouse Gas Emission Reduction from Industry in Asia and the Pacific) 9 countries, 5 sectors Capacity building, demonstration, survey of barriers Energy Efficiency Guide for Industry in Asia

Policies for Energy Efficiency 14 Voluntary instruments: Energy labeling schemes USA Energy Star since product categories Industrial appliances: heat pumps, lighting, office equipment, ceiling fans, boilers, air conditioners, furnaces Partnership with >8000 organizations to deliver information and tools to consumers 2001 savings: 560 trillion EJ $4.1 billion

Policies for Energy Efficiency 15 Voluntary instruments: Energy efficiency R&D Taiwan Financed with 0.5% from sales of petrol and electricity Development, research and training Industry e.g.: cogeneration, heat recovery, electric heating 2005: 140 GW electricity, kl fuel oil

Policies for Energy Efficiency 16 How to evaluate policy instruments: 5 evaluation criteria Policy instrument Environmental effectiveness Economic efficiency Budgetary impact Ability to implement & enforce Stakeholder support

Policies for Energy Efficiency 17 How to evaluate policy instruments: Environmental effectiveness Has instrument reduced energy / emissions? Legislative: depends on resources and enforcement Taxes / subsidies: if high enough Voluntary: if commitment is real, otherwise highly uncertain

Policies for Energy Efficiency 18 How to evaluate policy instruments: Economic efficiency Is this instrument the most cost effective? Legislative: higher cost than economic Economic taxes: yes Economic subsidies: yes, but distort market forces Voluntary: varies a lot!

Policies for Energy Efficiency 19 How to evaluate policy instruments: Budgetary impact Does the government pay or receive? Legislative: penalties from non- compliance Economic taxes: raise revenue Economic subsidies: high & mostly financed by community Voluntary: revenues in transition phase to mandatory

Policies for Energy Efficiency 20 How to evaluate policy instruments: Ability to implement and enforce EnforceConsistent w. other policies Flexible to changes Legislative +/- - Taxes +/--+ Subsidies +-+ Voluntary -++

Policies for Energy Efficiency 21 How to evaluate policy instruments: Support from stakeholders GovtIndustryNGOsPublic Legislative +-++/- Taxes +/--+ Subsidies +++/- Voluntary ++++

Policies for Energy Efficiency 22 Conclusions There is a wide range of policy instruments No policy instrument is perfect Most likely a mix of instruments is needed to really improve energy efficiency

Policies for Energy Efficiency 23 Policies for Energy Efficiency Thank you for your attention!

Policies for Energy Efficiency 24 This training session was prepared as part of the development and delivery of the course Energising Cleaner Production funded by InWent, Internationale Weiterbildung und Entwicklung (Capacity Building International, Germany) and carried out by the United Nations Environment Programme (UNEP) The session is based on the report Improving Energy Efficiency in Industry in Asia – a policy review from the Energy Efficiency Guide for Industry in Asia developed as part of the GERIAP project that was funded by the Swedish International Development Cooperation Agency (Sida) While reasonable efforts have been made to ensure that the contents of this publication are factually correct and properly referenced, UNEP does not accept responsibility for the accuracy or completeness of the contents, and shall not be liable for any loss or damage that may be occasioned directly or indirectly through the use of, or reliance on, the contents of this publication. The report and references are available on Acknowledgements