Policies for Energy Efficiency

Energising Cleaner Production

Management Course

Session Agenda:

Types of policy instruments Definitions and Examples Evaluation of policy instruments

Step 1: Planning and Organization

But first
In what step(s) of the methodology is lack of policies or enforcement a barrier?

task 1a: Meeting with top management task 1b: Form a Team and inform staff task 1c: Pre-assessment to collect general information task 1d: Select focus areas task 1e: Prepare assessment proposal for top management approval

Step 2: Assessment
task 2a: Staff meeting and training task 2b: Prepare focus area flow charts task 2c: Walkthrough of focus areas task 2d: Quantify inputs and outputs and costs to establish a baseline task 2e: Quantify losses through a material and energy balance

Step 3: Identification of Options

task 3a: Determine causes of losses task 3b: Identify possible options task 3c: Screen options for feasibility analysis

Step 4: Feasibility Analysis of Options

task 4a: Technical, economic and environmental evaluation of options task 4b: Rank feasible options for implementation task 4c: Prepare implementation and monitoring proposal for top management approval

Step 5: Implementation and Monitoring of Options

task 5a: Implement options and monitor results task 5b: Evaluation meeting with top management

Step 6: Continuous Improvement

task 6a: Prepare proposal to continue with energy efficiency for top management approval

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

Policy instruments types

Legislative instruments Laws & regulations

Economic instruments

Voluntary instruments

Standards Codes of practice Fiscal Subsidies Property & tradable rights Bonds & deposit funds Liability systems Voluntary agreements Programs & projects Research & development

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)
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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

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 + 335000 tons CO2 (2003) Keeps NZ manufacturers competitive
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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
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Economic instruments:

Petrol and emission taxes

Denmark Carbon Dioxide Act 1993 Purpose: internalize external costs of energy use in industry CO2 rates based on C content of fuel Tax income recycled back into economy Emission reduction of 13% 1990 - 2002

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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

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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

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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

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Voluntary instruments:

Energy labeling schemes

USA Energy Star since 1992 40 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
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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, 17000 kl fuel oil
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How to evaluate policy instruments:

5 evaluation criteria

Environmental effectiveness

Economic efficiency

Budgetary impact

Policy instrument

Ability to implement & enforce

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Stakeholder support

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
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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!
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How to evaluate policy instruments:

Budgetary impact
Does the government pay or receive?
Legislative: penalties from noncompliance Economic taxes: raise revenue Economic subsidies: high & mostly financed by community Voluntary: revenues in transition phase to mandatory
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How to evaluate policy instruments:

Ability to implement and enforce

Enforce
Legislative Taxes Subsidies Voluntary

Consistent w. other policies

Flexible to changes

+/+/+ -

+/+

+ + +
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How to evaluate policy instruments:

Support from stakeholders

Govt Legislative Taxes Subsidies Voluntary Industry NGOs Public

+ +/+ +

+ +

+ + +/+

+/+/+/+

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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

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Policies for Energy Efficiency

Thank you for your attention!

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Acknowledgements
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 www.energyefficiencyasia.org 24