DOING MORE WITH LESS - Termolan · DOING MORE WITH LESS INTRODUCTION (1) See also Annex 1. (2) The...

Green Paper on energy ef f ic ienc y

DOING MORE WITH LESS

EUROPEANCOMMISSION

Directorate-General for Energy and Transport

Cover photos courtesy of: European Communities, Wärtsilä

DOING MORE WITH LESSGreen Paper on energy efficiency

EUROPEANCOMMISSION

Cataloguing data can be found at the end of this publication.

Luxembourg: Office for Official Publications of the European Communities, 2005

ISBN 92-894-9819-6

© European Communities, 2005Reproduction is authorised provided the source is acknowledged.

Printed in Belgium

A great deal of additional information on the European Union is available on the Internet.

It can be accessed through the Europa server(http://europa.eu.int).

In addition to consulting the Council, the European Parliament, industry and the NGO’s on thisdocument (COM(2005) 265 final of 22 June 2005), the Commission considers it vital to have awide-ranging public consultation.

All interested parties are welcome to send us their comments and suggestions through theCommission’s website at http://europa.eu.int/comm/energy/efficiency/index_en.htm

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Introduction 5

A – Identifying the obstacles 11

1. The need to adopt specific measures to improve energy efficiency 12

1.1. Financial obstacles in the way of proper market reaction 12

1.2. The need for energy services 13

2. The need for action by public authorities 13

3. The external costs and the transparency of prices 14

4. Information and education: two under-used tools 14

B – A European Initiative 15

1. Action at Community level 16

1.1. Integrating energy in other Community policies 16

1.1.1. Research and Technological Development 16

1.1.2. Promoting best practices and technology 16

1.1.3. Establishing and promoting best practice at all levels through national action plans 16

1.1.4. Better use of taxation 17

1.1.5. Better targeted State aid 18

1.1.6. Opening up public purchasing 18

1.1.7. Finding European financing 18

1.2. Specific energy policy measures 19

1.2.1. Buildings 19

1.2.2. Domestic appliances 20

1.2.3. Limiting the fuel consumption of vehicles 20

1.2.4. Informing and protecting the consumer 21

2. National level 22

2.1. Regulation of network activities 22

2.2. Regulation of supply activities 23

2.3. Electricity generation 23

2.4. White certificates, a market-based instrument 25

3. Industry 25

4. Transport 26

4.1. Organising air traffic management 26

4.2. Optimising traffic management 26

4.3. Developing a market for clean vehicles 26

4.4. Charging of infrastructure to induce changes in behaviour 27

4.5. Tyres 27

4.6. Aviation 27

5. Regional and local level 28

5.1. Specific financing instruments 28

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D O I N G M O R E W I T H L E S S

CONTENTS

6. A strategy open to the world 29

6.1. Integrating energy efficiency in international cooperation 30

6.2. Integrating energy efficiency in the neighbourhood policy and EU-Russia co-operation 30

6.3. Integrating energy efficiency into development policy 30

6.4. Reinforcing the role of international financing institutions 31

Conclusion 32

Annex 1 35

Annex 2 41

Annex 3 42

Annex 4 43

Annex 5 44

Even without high and volatile oil prices, which haveled to a downgrading of the prospects of economicgrowth in Europe, there would be very good reasonsfor the European Union to make a strong push towardsa re-invigorated programme promoting energyefficiency at all levels of European society (1):

• Competitiveness and the Lisbon agenda.According to numerous studies (2), the EU could saveat least 20 % of its present energy consumption in acost-effective manner, equivalent to EUR 60 billionper year, or the present combined energyconsumption of Germany and Finland. Althoughconsiderable investment is needed to harness thesepotential savings, in terms of new energy-efficientequipment and energy services, Europe is a world-leader in this area and energy services are largelylocal in character.This means the creation of manynew high-quality jobs in Europe. Indeed, on the basisof several studies (3), it could be estimated that suchan initiative could potentially create directly andindirectly as many as a million new jobs in Europe.Furthermore, as the measures targeted in thisinitiative are only cost-effective energy-efficiencymeasures – ones that result in a net saving even oncethe necessary investment is taken into account – asuccessful energy-efficiency scheme means thatsome of the EUR 60 billion not spent on energytranslates as a net saving, resulting in increasedcompetitiveness and better living conditions for EUcitizens.The same studies mentioned aboveconclude that an average EU household could savebetween EUR 200 and EUR 1 000 per year in a cost-effective manner, depending on its energyconsumption.

An effective energy-efficiency policy could thereforemake a major contribution to EU competitivenessand employment, which are central objectives of theLisbon agenda. By addressing energy demand, thispolicy is part of the EU policies on energy supplyincluding its efforts to promote renewable energiesand is, as such, part of the set of priorities firstoutlined in the 2000 Green Paper ‘Towards aEuropean strategy for the security of energy supply’. Inaddition, energy-efficiency equipment, services andtechnology are becoming increasingly importantworldwide. If Europe maintains its prominentposition in this area, resulting in the developmentand introduction of new energy-efficiencytechnologies in Europe first, this represents animportant trade opportunity.

• Environmental protection and the EU’s Kyotoobligations. Energy saving is without doubt thequickest, most effective and most cost-effectivemanner for reducing greenhouse gas emissions, aswell as improving air quality, in particular in denselypopulated areas. It will therefore help Member Statesin meeting their Kyoto commitments. Secondly, it willconstitute a major contribution to the longer term EUefforts in combating climate change through furtheremissions reductions, as part of a future post 2012regime within the United Nations FrameworkConvention on Climate Change. Many developingcountries fully recognise the essential role of energyefficiency in addressing these multiple challenges.Europe therefore needs to set an example in thisrespect, leading to the development of new policies,cooperation and technologies that can assist thedeveloping world to address this challenge.

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INTRODUCTION

(1) See also Annex 1.

(2) The mid-term potential for demand-side energy efficiency inthe EU, Lechtenböhmer and Thomas, Wuppertal Institute, 2005:‘Our recent policies and measures (P&M) scenario for the EU-25sketches a so-called “ambitious strategy” in order to achievesubstantial reductions of GHG-emissions until 2020. Thisstrategy uses about 80 % of the currently available economicsavings potentials. It is assumed though that decision-makersare better informed by active policies and measures andchange their attitudes towards the best available technologiesin case of energy efficiency. The results shown in the tablemake it clear that energy efficiency of the EU-25 economy willincrease in this P&M scenario by 29 %.’ Explanatorymemorandum to the proposed directive on energy end-useefficiency and energy services – COM(2003) 739. MUREDatabase Simulation 2000, SOS Italy; Economic evaluation of

sectoral emissions reduction objectives for climate change,Blok and Joosen, ECOFYS, Utrecht, 2000; Energy efficiencyindicators, ODYSSEE, ADEME, Paris, 2004; Powering profits: howcompanies turn energy efficiency into shareholder value, GreenBusiness Letter, April 2005; Improving energy efficiency by 5 %and more per year, K. Blok, to be published in Journal ofIndustrial Ecology; The potential for more efficient electricityuse in Italy, F. Krause; The energy efficiency challenge, WWF,2005; World energy assessment 2000 and 2004 update, UNDPwebsite; European Council for an Energy Efficient Economy,Proceedings 2005 Summer study: Energy savings, What worksand who delivers?, www.eceee.org

(3) Rat für Nachhaltige Entwicklung, 2003,http://www.nachhaltigkeitsrat.de/service/download/publikationen/broschueren/Broschuere_Kohleempfehlung.pdf,Ecofys

• Security of supply. By 2030, on the basis of presenttrends, the EU will be 90 % dependent on imports forits requirements of oil and 80 % dependentregarding gas. It is impossible to predict the price ofoil and gas in 2020, particularly if demand from thedeveloping world continues to increase as rapidly astoday. As indicated on the 2 May 2005 in the contextof the International Energy Agency’s (IEA) ministerialmeeting, energy efficiency is one of the key methodsto deal with this challenge. Making a real effort to, atfirst, cap EU energy demand at present levels andsubsequently reduce it, would represent animportant contribution in developing a coherent andbalanced policy to promote the security of energysupplies for the European Union.

This Green Paper therefore seeks to identify thebottlenecks presently preventing these cost-effectiveefficiencies from being captured – lack of appropriateincentives, lack of information, lack of availablefinancing mechanisms for example.

The Green Paper then seeks to identify options howthese bottlenecks can be overcome, suggesting anumber of key actions that might be taken. Examplesinclude:

• establishing annual energy-efficiency action plans atnational level. Such plans might identify measures tobe taken at national, regional and local levels andsubsequently monitor their success both in terms ofimproving energy efficiency and their cost-effectiveness.The plans could be complemented by a‘benchmarking’ and ‘peer review’ process atEuropean level, so that Member States can easilylearn from the successes and mistakes of others andto ensure the rapid spread of best practicethroughout the EU;

• giving citizens better information, for examplethrough better targeted publicity campaigns andimproved product labelling;

• improving taxation, to ensure that the polluter reallypays without, however, increasing overall tax levels;

• better targeting State aid where public support isjustified, proportionate and necessary to provide anincentive to the efficient use of energy;

• using public procurement to ‘kick-start’ new energyefficient technologies, such as more energy efficientcars and IT equipment;

• using new or improved financing instruments, bothat Community and national levels, to give incentives,but not aid, to both companies and householders tointroduce cost-effective improvements;

• going further regarding buildings, where an existingCommunity directive applies, and possibly extendingit to smaller premises in a manner that ensures cost-effectiveness and minimum additional bureaucracy;

• using the CARS 21 Commission initiative to speed upthe development of a new generation of more fuel-efficient vehicles.

This Green Paper seeks to act as a catalyst, leading to arenewed energy-efficiency initiative at all levels ofEuropean society – EU, national, regional and local. Inaddition, this Green Paper seeks to make a significantcontribution, by way of example and leadership, tokick-start an international effort to contribute toaddressing climate change through energy efficiency.China presently uses more than five times as muchenergy as the EU to produce one unit of GDP, the USAuses approximately 50 % more than the EU (4).Withexploding energy demand in particular in China andIndia, energy efficiency must be one of the key policiesto try to reconcile, on the one hand, the increasedenergy needs of the developing world to powergrowth and improve living conditions for their citizensand, on the other hand, combat global warming.ThisGreen Paper, and the momentum created in followingit up, should put the EU at the forefront of efforts tomake energy efficiency a global priority. Finally, high oilprices hit the poorest the hardest, particularly in ACPcountries. Attention should be given during the follow-up to the Green Paper as to how technology which isdeveloped in Europe can be used or adapted to meetthe needs of these countries and how best it can bedeployed.

The concrete examples cited above to meet thischallenge, which are examined in more detail below,are not proposals; they are ideas for discussion. Nor arethey exhaustive. Following the publication of thisGreen Paper, the Commission shall, until the end of thisyear, undertake an intensive public consultation.

To stimulate debate and effective input, theCommission puts forward the 25 non-exhaustivequestions figuring below.

(4) This comparison would change if we take into account thedifference in the purchasing power of citizens. See Annex 1 formore details.

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The Commission has decided to set up the ‘EuropeanSustainable Energy Forum’. This forum, based on themodels of the ‘Florence’ and ‘Madrid’ forums, whichwere used very successfully to develop consensus onhow to proceed with energy market liberalisation, willbring together the Commission, Member States, theEuropean Parliament, national energy regulators andrepresentatives of European industry and NGO’s. It willmeet twice a year. The first meeting, scheduled forOctober 2005, will discuss in depth this Green Paper.

However, in addition to consulting the Council, theEuropean Parliament, industry and the NGO’s on thedocument, the Commission considers it vital to have awide-ranging public consultation. All interested partiesare welcome to put forward comments andsuggestions in the following manners:

• by Internet, through the Commission’s website athttp://europa.eu.int/comm/energy/efficiency/index_en.htm;

• the Commission will involve each of its officessituated in EU cities. Information and possible eventswill be advertised on:http://europa.eu.int/comm/represent_en.htm;

• the Commission has a network of energy agencies, inmany European cities.These agencies will be taskedwith widely spreading information on the GreenPaper and seeking comments.

Where the person submitting comments agrees, allsubmissions will be placed on the Commission’sInternet site for consultation.

It is important that this Green Paper rapidly leads toconcrete action.Thus, following the consultationprocess, the Commission believes that a concreteaction plan should be drawn up in 2006, outlining thespecific action to be taken at EU and national levels,accompanied by necessary cost-benefit analyses.

QUESTIONS FOR DEBATE

General remarks

The following questions seek to further analyse theoptions identified in this paper, in terms of their cost-effectiveness and their contribution to energy saving,to environmental protection, to job creation and to thereduction of imports of oil and gas.

In replying to these questions, the Commission wouldbe grateful if as much detail as possible is provided onthese specific issues, as well as the question of at whichlevel the proposed measure could be best addressed:at international, EU, national, regional or local level?Furthermore, would the measure in question be bestaddressed through recommendations, voluntarymeasures, binding objectives or measures in legislativeproposals? Finally, how could the measures underconsideration be implemented in practice? Whatwould be the timescale, the costs, and where amonitoring or similar function would be necessary,which body would be best placed to do this?

This will enable the Commission, in 2006, to reach solid,practical and implementable proposals in its actionplan that will make a real difference.

In addition, one of the main objectives of the GreenPaper and the consultation which follows it is tostimulate additional ideas that are not yet identified.Suggestions and examples, where possible giving thedetails mentioned above in terms, for example, of costof implementation, benefits in terms of energy savingsand ease of implementation would be welcomed bythe Commission.

Questions regarding the options identifiedin the Green Paper

1. How could the Community and the Commission in particular,better stimulate European investment in energy-efficiencytechnologies? How could funds spent supporting research in thisarea be better targeted?

Section 1.1

2. The emission trading mechanism is a key tool in developing amarket-based response to meeting the goals of Kyoto and climatechange. Could this policy be better harnessed to promote energyefficiency? If so, how?

Section 1.1

3. In the context of the Lisbon strategy aiming to revitalise theEuropean economy, what link should be made between economiccompetitiveness and a greater emphasis on energy efficiency? In this context, would it be useful to require each Member State toset annual energy-efficiency plans, and subsequently tobenchmark the plans at community level to ensure a continuedspread of best practice? Could such an approach be usedinternationally? If so, how?

Section 1.1.3

4. Fiscal policy is an important way to encourage changes inbehaviour and the use of new products that use less energy.Should such measures play a greater role in European energy-efficiency policy? If so, which sort of measures would be best suitedto achieve this goal? How could they be implemented in a mannerthat does not result in an overall increase in the tax burden? How to really make the polluter pay?

Section 1.1.4

5. Would it be possible to develop State aid rules that are morefavourable to the environment, in particular by encouraging eco-innovation and productivity improvements? What form couldthese rules take?

Section 1.1.5

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6. Public authorities are often looked to for an example. Shouldlegislation place specific obligations on public authorities, forexample to apply in public buildings the measures that have beenrecommended at Community or national level? Could or shouldpublic authorities take account of energy efficiency in publicprocurement? Would this help build viable markets for certainproducts and new technologies? How could this be implementedin practice in a way that would promote the development of newtechnologies and provide incentives to industry to research newenergy efficient products and processes? How could this be donein a manner that would save money for public authorities? Asregards vehicles, please see question 20.

Section 1.1.6

7. Energy-efficiency funds have in the past been used effectively.How can the experience be repeated and improved? Whichmeasures can be adopted usefully at:

– international level

– EU level

– national level

– regional and local levels?

Section 1.1.7. See also question 22

8. Energy efficiency in buildings is an area where important savingscan be made. Which practical measures could be taken at EU,national, regional or local level to ensure that the existingCommunity buildings directive is a success in practice? Should theCommunity go further than the existing directive, for exampleextending it to smaller premises? If so, how could the appropriatebalance be achieved between the need to generate energy-efficiency gains and the objective of limiting new administrativeburdens to the minimum possible?

Section 1.2.1

9. Giving incentives to improve the energy efficiency of rentedaccommodation is a difficult task because the owner of thebuilding does not normally pay the energy bill and thus has noeconomic interest in investing in energy-efficiency improvementssuch as insulation or double glazing. How could this challenge bebest addressed?

Section 1.2.1

10. How can the impact of legislation on the performance of energy-consuming products for household use be reinforced? What are thebest ways to encourage the production and consumption of theseproducts? Could, for instance, present rules on labelling beimproved? How could the EU kick-start research into and thesubsequent production of the next generation of energy efficientproducts? What other measures could be taken at:


– EU level

– national level

– regional and local level?

Section 1.2.2

11. A major challenge is to ensure that the vehicle industry producesever more energy efficient vehicles. How can this best be done?What measures should be taken to continue to improve energyefficiency in vehicles and at which level? To what extent shouldsuch measures be voluntary in nature and to what extentmandatory?

Section 1.2.3

12. Public information campaigns on energy efficiency have shownsuccess in certain Member States. What more could and should bedone in this area at:


– EU level

– national level

– regional and local level?

Section 1.2.4

13. What can be done to improve the efficiency of electricitytransmission and distribution? How to implement such initiativesin practice? What can be done to improve the efficiency of fuel usein electricity production? How to further promote distributedgeneration and cogeneration?

Sections 2.1-2.3

14. Encouraging electricity and gas providers to offer an energyservice (i.e. agreeing to heat a house to an agreed temperatureand to provide lighting services) rather than simply providingenergy is a good way to promote energy efficiency. Under sucharrangements the energy provider has an economic interest thatthe property is energy efficient and that necessary investments aremade. Otherwise, electricity and gas companies have an economicinterest that such investments are not made, because they sellmore energy. How could such practices be promoted? Is avoluntary code or agreement necessary or adequate?

15. In a number of Member States, white (energy-efficiency)certificates have been or are being introduced. Should these beintroduced at Community level? Is this necessary given the carbontrading mechanism? If they should be introduced, how could thisbe done with the least possible bureaucracy? How could they belinked with carbon trading mechanism?

Section 2.4

16. Encouraging industry to take advantage of new technologies andequipment that generate cost-effective energy efficienciesrepresents one of the major challenges in this area. In addition tothe carbon trading mechanism, what more could and should bedone? How effective have been the steps taken so far throughvoluntary commitments, non-binding measures adopted byindustry, or information campaigns?

Section 3

17. A new balance between modes of transport – a major theme ofthe strategy set out in the White Paper that the Commissionadopted in 2001 on a European transport policy for 2010 – is stilla top priority. What more could be done to increase the marketshare of rail, maritime and inland waterway transport?

Section 4.2

18. In order to improve energy efficiency, it is necessary to completecertain infrastructure projects from the trans-European transportnetwork. How should the investments needed for infrastructureprojects be developed, using what sources of financing?

Section 4.2

19. Among the measures that could be adopted in the transportsector, which have the greatest potential? Should priority be givento technological innovations (tyres, engines…), particularlythrough standards defined jointly with the industry, or toregulatory measures such as a limit on fuel consumption of cars?

Sections 4.3-4.5

20. Should public authorities (State, administrations, regional andlocal authorities) be obliged in their public procurement to buy apercentage of energy efficient vehicles for their fleets? If so, howcould this be organised in a manner that is technology neutral (i.e.it does not result in distorting the market towards one particulartechnology)?

Section 4.3

21. Infrastructure charging, notably paying to use roads, has started tobe introduced in Europe. A first proposal was made in 2003 tostrengthen the charging of professional road transport. Localcongestion charges have now been introduced in some cities. Whatshould be the next steps in infrastructure charging? How farshould ‘external costs’ such as pollution, congestion and accidentsbe directly charged to those causing them in this manner?

Section 4.4

22. In certain Member States, local or regional energy-efficiencyproject financing schemes, managed by energy-efficiencycompanies, have proven very successful. Should this be extended.If so, how?

Section 5.1

23. Should energy-efficiency issues be more integrated in the Union’srelationships with third countries, especially its neighbours? If so,how? How can energy efficiency become a key part of theintegration of regional markets? Is it necessary to encourage theinternational financial institutions to pay more attention todemand management issues in their technical and financialassistance to third countries? If so, what could be the mosteffective mechanisms or investments?

Section 6

24. How could advances in energy-efficiency technology and processesin Europe be put to effective use in developing countries?

Section 6.3

25. Should the Union negotiate tariff or non-tariff advantages withinthe World Trade Organisation (WTO) for energy efficient productsand encourage other members of WTO to do the same?

Section 6

The oil embargoes at the beginning of the 1970s ledcountries of the EU to re-think their energyconsumption to become less dependent on oil.Progress to this end in all Member States broke thehitherto inseparable link between growth in GDP andin energy demand already halfway through the 1970s.Energy intensity has come down by 40 % in Germanyand Denmark, and in France it is 30 % less than it wasin the 1970s.This decoupling of GDP and energydemand is illustrated in the figure in Annex 3.

Fuel efficiency of cars dramatically increased (5).Awareness of the importance of rational energy use inbuildings has given rise to better insulation. France, forinstance embarked on an ambitious energy-savingprogramme, with the slogan ‘We don’t have oil, but wehave ideas,’ accelerating the shift in electricityproduction from oil-fired power plants to nuclearreactors, and increasing taxes on diesel.

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3 000

2 500

2 000

1 500

1 000

500

0

1971

1972

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2001

2002

2003

Development of primary energy demand and of “negajoules” (EU-25)

NegajoulesBiomassOther electricityNuclearGasOilCoal

“Negajoules”: Energy savings calculated on the basis of 1971 energy intensity.

Source: Enerdata (calculations based on Eurostat data).

Mto

e

A – IDENTIFYING THE OBSTACLES

The oil shocks were a short-term boost to quick energyefficiency measures, but the absence of in-depthstructural measures meant that demand could not bestabilised. In more recent years the new energy pricerise on world markets and especially oil prices, hasstimulated renewed interest in demand management.

Effective action to bring down energy consumptionsubstantially is impossible without first identifying thefactors underlying waste in order to come to grips withthem in future.

( 5) In contrast to the United States, where oil consumption initiallyfell but then ended up rising by a total of 16 % from 1973 to2003, in France, despite some increase in recent years, oil use isstill 10 % lower today than it was three decades ago and itsenergy intensity is 30 % lower than in 1973.

1. THE NEED TO ADOPT SPECIFICMEASURES TO IMPROVEENERGY EFFICIENCY

In theory, market forces would in time produce themost efficient outcome without interference. However,given the technical characteristics of the energymarkets, there appears to be a need to promote andaccompany such market- induced change byimproving energy efficiency more rapidly and thusreducing the demand for energy. Market forces willalso continue to be essential when matching demandwith supply.

The most important barrier to increased energyefficiency is a lack of information (on costs andavailability of new technology; lack of information oncosts of own energy consumption; lack of training oftechnicians on proper maintenance and the fact thatthese aspects are not properly taken into account bymarket participants).This can be a particular problemwhen making investments which are often long term.Investment decisions can also be influenced by thesplit-incentive problem (e.g. between the landlord(who installs the boiler) and the tenant (who pays theheating bill); or where a corporate investment budgetis not coordinated with the energy budget.There canalso be misleading prices (due to exclusion ofexternalities, lack of transparency).Technical barrierssuch as the lack of standardisation of energy-usingequipment and components can also make it moredifficult for new energy efficient technologies to have arapid impact on the market. In the past, regulatoryfailures in the monopoly sectors created in some casesinadvertent consumption-incentives in energy tariffstructures.The improvement in the regulatory regimein the EU and the introduction of more transparentmarket forces through liberalisation should addressthis concern, but the effects of previous investmentdecisions will be with us for many years.

1. 1. FINANCIAL OBSTACLES IN THE WAY OF PROPER MARKET REACTION

The lack of information and training on the latesttechnologies and their economic and financial impacton the rate of return from investment, combined insome cases with an aversion to the risk associated withearly adoption of new technologies and techniques,can encourage investors such as banks to continue tosupport outdated technology even when they are notthe most efficient or offering the best return.Thepromoters of energy-saving technologies obviouslyneed to make their case when seeking support frompotential investors such as banks or venture capitalfunds. Energy service companies (ESCO’s) will also havea role to play here. Industry, investors, and consumers ingeneral should also be encouraged to include theenergy-saving alternative in their financial planning.Players should be made aware of the very positivecost-benefit ratio, and sometimes, very short pay-backperiods – even less than a year in certain cases – forinvestments in energy efficiency. Simple tools could bedeveloped for risk-assessment of projects such as life-cycle analysis handbooks and computer programmesand investment grade energy audits.

There is, moreover, a lack of access to adequatefinancial instruments supporting measures whichbolster energy efficiency, such measures beingpredominantly small in scale. Experience shows thatthe traditional intermediaries, in particular banks, areoften reluctant to support energy-efficiency projects.One avenue to explore is the idea of ‘global’ loans (6),where the funds are subsequently redistributed via anintermediary or a ‘clearing house’ with more technicaland economic expertise in the field of energyefficiency. Another opportunity is the financing modelsbased on shared savings currently used in someMember States, such as third-party financing andperformance contracting.

( 6) The European Investment Bank, e.g., enters partnerships withintermediaries (usually national or local banks) to provideglobal loans, which are then loaned out through theseintermediaries to finance smaller projects.

1. 2. THE NEED FOR ENERGY SERVICES

The opening up of markets has had a positive effect onenergy efficiency. Competitive pressure has drivenelectricity companies to produce in the most efficientway, particularly through technology investments,(e.g. combined-cycle gas turbines).

The opening up of markets has had an impact onelectricity prices. Hence, for large industrial users,electricity prices fell in real terms by an average of10–15 % between 1995 and 2005. However, moreremains to be done to ensure real and effectivecompetition in all areas of the EU.To this end, theCommission at the end of the year will adopt a fullreport on the state of the market, and has also recentlylaunched a sectorial competition enquiry.

In themselves, falling prices for energy do notencourage either careful consumption or investmentsin energy efficiency.There are a number of companiesthat supply efficiency solutions and that are gettingpaid by the energy savings (‘ESCO’).These companiesstill need policy support in the form of help for thedissemination of their activities, quality standards, andaccess to finance, as they are still in their infancy stage.The further development of the ESCO industry couldgreatly contribute to the implementation of manyadditional cost-effective projects, and can play animportant role in bridging the gap between differentactors on the energy and technology supply side andamong energy consumers.

The Commission is well aware of the dilemma ofincreased consumption resulting from lower pricescaused by the greater efficiency secured by theintroduction of market forces. For this reason, inDecember 2003, it proposed a directive on energy end-use efficiency and services.

2. THE NEED FOR ACTION BY PUBLIC AUTHORITIES

Public authorities, national or European, have a role toplay in compensating for inadequacies of the market.However, this is not always within their capacity.Several reasons explain this shortcoming.

Member States have recognised that more has to bedone to ensure greater energy efficiency.They hesitateto commit themselves to the mandatory annualreduction in energy consumption by 1 % in theproposed directive on energy services.

Furthermore, State aid and tax measures are two toolswhich are often misused. State aid is granted not onlyin favour of energy efficiency but also for electricitygeneration using fuels which do not give the highestenergy yield.There is also the effect of a plethora ofdisparate small subsidies which have only a verylimited overall impact.The same is true for taxinstruments. Levels of tax should in principle be easedon specific products with low energy consumption,and raised on those with high demand.

Finally, there is the need for continued, careful scrutinyof further mergers of companies in the energy andtransport sectors, which can lead to increased scope forthe abuse of market power, and not necessarily togreater energy efficiency.

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3. THE EXTERNAL COSTS AND THETRANSPARENCY OF PRICES

The current pricing system for energy products doesnot point consumers towards patterns of consumptionwhich offer a more economical and rational use ofenergy.

Moreover, it does not take account of the relativeenergy value of products, nor of the environmentalimpact of their use.The current pricing system doesnot guarantee that external costs are included. Clearly,this is not an incentive to consume less, or to produceenergy from more environmentally friendly sources.This problem is particularly acute in the transportsector. In the White Paper on transport ‘Europeantransport policy for 2010: time to decide’, published inSeptember 2001 (7), the Commission took the viewthat as long as the prices fail to reflect the entire socialcosts of transport, demand will continue to beartificially excessive. If appropriate infrastructurecharging policies were applied, these inefficiencieswould largely disappear.

The current pricing structure and low prices could evenlead to higher consumption.There is a lack of effort toallow for consumers to understand the price of theirconsumption. A real-time metering system (so-called‘smart meters’) could bring down consumption attimes when the electricity price is high.

4. INFORMATION ANDEDUCATION:TWO UNDER-USED TOOLS

While it is regarded as normal to launch publicinformation campaigns to encourage people to drinkless alcohol, less attention has hitherto been given topublicity campaigns on energy efficiency.

Publicity campaigns providing clear information onhow to make cost-effective energy savings, as well asproviding stimulus for consumers to act, can beeffective in changing perceptions and encouragingaction. Action at three levels in this respect can beidentified:

• information to citizens on issues such as how toreduce energy consumption in homes, through, forexample, efficient lighting and heating and sensiblepurchasing decisions;

• information to industrial customers; and

• information to energy-efficiency experts and serviceproviders to ensure that a network of such well-trained experts exists and functions well in allMember States.

It should not be difficult to convince consumers of thefact that by relatively simple measures, the averageEuropean household can save a significant amount inits spending, which is especially important for house-holds spending a large share of their budget onenergy.

Education and training can play a major role instrengthening a culture of energy efficiency. Examplescould be certain aspects of civic education in someMember States or specific training courses to be set upon how to improve energy efficiency in enterprises.The European programmes in the field of educationand training could contribute to spread good practicesamong Member States as well as encouragecooperation projects on these topics along the wholespectrum of lifelong learning.

Furthermore, national regulatory authorities have beencreated in all Member States with the opening up ofthe energy markets to competition. Their role is toguarantee fair competition, but Community legislationequally provides that they shall oversee sustainabletrends in energy consumption.This role of regulatorsshould be strengthened in future.

The annual improvement in energy efficiency in the 1990’swas 1.4 % per year, but this rate has declined since and isnow stationary at 0.5 %, showing current efforts are provinginsufficient.

( 7) http://europa.eu.int/comm/energy_transport/wp_en.html

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B – A EUROPEAN INITIATIVE

Setting out an energy policy for the EU is a complextask. On the one hand, pending entry into force of theTreaty establishing a Constitution for Europe, theresponsibility of the Union in this area is not clearlydefined. For this reason, energy measures inCommunity policy have had to be adopted using otherlegal bases in the existing Treaties. On the other hand,energy is an area with a large number of players:governments, national regulators, large enterprises,local authorities, etc.Therefore, to mobilise all playersand transform energy-efficiency policy over the long-term, a strong political message is essential.

Forceful action in the field of energy efficiency indeedrequires a general structuring framework. It is thenational, regional and local authorities, as well asindustry, which will be responsible for implementing

this framework, in line with the subsidiarity principle.Only a combination of measures at the various levels(EU, Member States, regions, local level, industry) willallow the whole potential to be exploited.

The EU will continue to develop market instruments asmuch as possible, particularly voluntary agreementswith industry and information campaigns to increaseconsumer awareness. But whereas these instrumentscan prove highly effective, they cannot always be asubstitute for adopting regulatory measures designedto correct market inadequacies and to provide propersignals for consumers when necessary.

(8) Explanatory memorandum to the proposed directive on energyend-use efficiency and energy services – COM(2003) 739. MUREDatabase Simulation 2000, SOS Italy; Economic evaluation ofsectoral emissions reduction objectives for climate change, Blokand Joosen, ECOFYS, Utrecht, 2000; Energy efficiency indicators,ODYSSEE, ADEME, Paris, 2004; The mid-term potential fordemand-side energy efficiency in the EU, Lechtenböhmer andThomas,Wuppertal Institute, 2005: Powering profits: howcompanies turn energy efficiency into shareholder value, GreenBusiness Letter, April 2005; Improving energy efficiency by 5 %and more per year, K. Blok, to be published in Journal of IndustrialEcology; The potential for more efficient electricity use in Italy, F.Krause; The energy efficiency challenge,WWF, 2005; EuropeanCouncil for an Energy Efficient Economy, Proceedings 2005Summer study: Energy savings,What works and who delivers?,www.eceee.org

According to available studies (8), the EU could save 20 % ofits current energy use in a cost-effective manner. Thesestudies indicate that around half of this could result from thefull application of existing measures, notably Communitydirectives already in force or tabled. This Green Paper seeksto launch a process to harness the potential in practice andto identify and subsequently implement as many cost-effective measures as possible, to achieve as much as 20 %.To do this, the Union must rapidly work towards a concreteaction plan, which will be formulated after a widespread

consultation of interested parties following this Green Paper,and, where necessary, after cost-benefit analyses. Such anaction plan should mobilise all players: nationalgovernments, regions, municipalities, industries, andindividuals – and cover all the energy producing andconsuming sectors. In such an action plan, all types of cost-effective actions must be considered, including taxation,public subsidies, economic incentives, partnerships withindustry, etc.

1. ACTION AT COMMUNITY LEVEL

1. 1. INTEGRATING ENERGY IN OTHER COMMUNITYPOLICIES

Beyond those measures which can be proposed forimproving sectoral energy efficiency, the EU and itsMember States have ‘horizontal’ powers which arecurrently underutilised.The EU must therefore putenergy efficiency at the centre of its concerns, with thetools that have proven their value in other policy areas.

1. 1. 1. Research and Technological Development

In this respect, it is important to mention theimportance of research. Several promising end-usetechnologies still require R & D support. Communityand industry investments in R & D for more energy-efficient emerging technologies will allow the EU tokeep the technological leadership in this field andfurther improve energy efficiency beyond the 2020horizon.

In particular, a number of concerns highlighted in thisdocument (an increased share of renewable energy,the efficiency of fossil fuel-based power production,more efficient electricity networks, vehicleefficiency,…) can only be alleviated through efficientresearch and demonstration activities in connectionwith other regulatory and economy-based measures.

On 6 April 2005, the Commission adopted a proposalfor the seventh framework programme for researchand development. For energy, it is proposed toconcentrate on a limited number of key prioritieswhich reflect the policy priorities of the newCommission, among which are renewables for powergeneration and fuel production, clean coaltechnologies, smart energy networks and energyefficiency (9) within the main ‘cooperation programme’.The ‘clean safe car’ is a good example for which, on theenergy side, demonstration projects for alternativemotor fuels (biofuels) are planned.

Considerable research efforts are also being focused onpower management for computer systems and energy‘scavenging’ techniques where electronic devices drawtheir power from ambient sources such as the motionof the user, body heat or sunlight.

1. 1. 2. Promoting best practices and technology

The Commission has also proposed extending theprogramme ‘Intelligent Energy–Europe’ for the period2007–13, and with a (greatly increased) budget of EUR780 million.The programme will support a broad rangeof promotional activities and address non-technological barriers (legal, financial, institutional,cultural, social) in the fields of energy efficiency andrenewable energy sources.

1. 1. 3. Establishing and promoting best practice at alllevels through national action plans

The integrated guidelines for growth and employment,which as from 2005 bring together the main guidelinesfor the economic and employment policies of theMember States, will provide the EU and its MemberStates with a stable and coherent framework forimplementing the priority actions identified by theEuropean Council under the Lisbon strategy.They willbe the basis for national programmes which MemberStates will be required to implement.

These guidelines, adopted by the Commission on12 April 2005 for the period 2005–08, point out thatrecent and forecasted trends for oil prices make actionin favour of energy efficiency a priority. Delaying ourefforts to face these challenges could increase theeconomic cost of the measures taken.To this end, theMember States should give priority to promotion ofenergy efficiency ‘in line with current Europeanobligations’.

Member States should as appropriate give dueconsideration to the objective of improving energyefficiency in the context of their national action plansfor growth and employment.

In this context, one of the key measures that will beconsidered during the consultation period followingthe adoption of this Green Paper is the possibility ofagreeing that, for example on an annual basis, eachMember State could adopt an energy-efficiency actionplan, citing the specific measures that it has decided toundertake, either as a result of Community legislationor on its own initiative, to achieve a given target forenergy efficiency in the year to come. Such a planmight be adopted on an annual basis, reviewing thesuccess of the measures taken during the previousyear, both in terms of energy savings and cost-effectiveness, and setting out new measures and,

(9) This includes topics such as fuel cells, distributed generation andsmart energy networks, better efficiency of fossil power plantsand co-firing and biofuels in transportation.

possibly a new target, for the subsequent period.Theseplans could be accompanied by a peer review processat Community level through a high level group onenergy efficiency, as well as the Sustainable EnergyForum, followed by an annual benchmarking by theCommission.This review and benchmarking processwould compare best practices with a view to theirbecoming widespread across the Community.

1. 1. 4. Better use of taxation

More than is the case today, the EU could promote taxmeasures that either encourage or discourage certainforms of behaviour. At the moment, Community taxpolicy still remains too often a simple tool at theservice of budgets, without much coherence with theaims of other policies, and full of exceptions demandedby Member States for all manners of consideration.Nevertheless, it must be recognised that serious effortshave been made at Community level, as instanced bythe adoption of Directive 2003/96/EC on energytaxation, which sets out a favourable context forcogeneration (CHP), development of renewables, railand river transport, etc. Substantial proposals are onthe Council’s table, especially regarding diesel fuel forbusiness use. In-depth reform is also in progress asregards passenger vehicles.

The taxation of energy products, in the form of duties,falls under EU competence.This tool could be used tomove towards harmonising tax regimes, forexample for supporting development of vehiclesthat use cleaner fuels and that are more energy-efficient.

At Community level, the coherence of the whole areaof vehicle taxation must be reviewed. A new frameworkshould be considered allowing mechanisms to beintroduced to be able to differentiate taxes – e.g. roadand registration taxes – according to energyconsumption, which will also allow the CO2 emissionlevel to be taken into account. It would encourage lowconsumption vehicles and penalise ’gas guzzlers’. Sucha policy, which can de designed so as not to have anybudgetary impact on Member States, would makevehicle taxation ’greener’ by encouraging purchase oflow consumption vehicles. It would also help newmarkets to emerge for industry by speeding up therate of vehicle replacement.

In 2002, the Commission presented a communicationon vehicle taxation (10) containing a number ofrecommendations and future actions. On this basis, theCommission considers a proposal centring on twomajor objectives:

• improved functioning of the internal market in thisarea;

• restructuring of the tax base to include elementsdirectly related to CO2 emissions, particularly forhighly-powered cars.This would imply parallelchanges in both registration taxes and those leviedwhen a car is first put on the road.

Further opportunities need to be analysed with a viewto strengthening the positive impact of taxation ofpolicies in favour of greater energy efficiency. In thatcontext, the debate could focus on ideas such as:

• concentrating efforts as regards excise taxes on a fewessential political areas (for instance, harmonise rateswhere substantial problems involving distortion ofcompetition arise, use differentiated tax measures inorder to promote renewables);

• bringing excise rates on energy products andelectricity consumed in production activities closertogether, but at the higher end of the scale, andintroduce automatic indexing of all excise rates inorder to avoid erosion by inflation;

• the tax treatment of transport, both as regardsexcises and VAT;

• the conditions for application of border tradeadjustments;

• the tax treatment of inputs for heat production, inparticular for large housing developments;

• rationalising tax exemptions and exceptions.

If it proves impossible to make progress due to therequirement for unanimous decision in the field ofindirect taxation, enhanced cooperation in the field ofenergy efficiency could be envisaged as a last recourse.Enhanced cooperation, introduced by the AmsterdamTreaty, permits a group of Member States to deepencooperation between them while leaving the dooropen for other Member States who may wish to join inlater. Among the various conditions imposed by theTreaty, enhanced cooperation must not constitute anobstacle to trade between Member States nor distortcompetition. In this respect, it would not appear thatsuch a group of Member States deciding together onmeasures designed to improve energy efficiency coulddo either of these things.

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(10) COM(2002) 431.

1.1.5. Better targeted State aid

State aid in favour of energy efficiency is approved bythe Commission in accordance with the Communityguidelines on State aid for environmental protection.The current ones expire at the end of 2007.The revision of these guidelines, for whichpreparatory work must begin during 2005, will bethe opportunity to put more stress on measuresdesigned to encourage eco-innovation andproductivity gains resulting from increased energyefficiency.

This revision could also be the occasion to provide anexemption to notifying aid below a certain level, whichwould give a wider margin for manoeuvre to MemberStates to finance energy-efficiency measures.

1.1.6. Opening up public purchasing

Many technologies exist for improving energyefficiency.The problem is that, for some of new energyefficient technologies, the market is not significantenough to allow offsetting a greater development andproduction cost through increased numbers of sales.

Public procurement could constitute an incentive forachieving this objective. It accounts for some 16 % ofthe Union’s GDP (11).The number of vehicles purchasedby public bodies has been estimated at 100 000 cars,100 000 vans, 30 000 lorries and 15 000 buses eachyear in the EU-15 alone. If the public authorities(States, administrations, local authorities) couldcollectively acquire less-polluting and more energy-efficient vehicles, this would clearly encouragemotor manufacturers by helping to build up marketcredibility of these types of vehicles. This topic ispart of the discussions currently underway in theCARS 21 group. For example, if the urban localauthorities, where pollution has exceeded a certainlevel, reserved 25 % of their purchases for cleaner andmore efficient vehicles, this would represent nearly60 000 vehicles each year.

Cars are just one example among many which couldbe mentioned. In general, the Commission is seeking topromote ‘green’ public procurement and to stimulateEuropean public purchasers (at federal orregional/local levels) to include environmental criteriain their contracting (12). Purchasing by all publicauthorities should be concerned, by nationalauthorities but also European institutions, because thelatter should point the way by example and open upnew markets for products which use less energy.

1.1.7. Finding European financing

Financing is one of the major problems to be resolved,bearing in mind that some industries claim that theycurrently expect a return on investment in about twoyears. Member States have already put in placedifferent support mechanisms at national level, notablyinvestment aid as well as fiscal reductions orexonerations. In order to increase the efficiency ofthese schemes and to gain the confidence of investors,it is important to consider establishing a morefavourable framework for investments in this sector.This framework could be further strengthened if it washarmonised at Community level, implying notably theEuropean Investment Bank (especially under theheading of ‘risk facilities’).

For the EU cohesion policy in the forthcomingprogramming period 2007–13, the Commission hassuggested that the increased energy efficiency and thepromotion of clean urban transport should constituteexplicit targets for the activity of the EuropeanRegional Development Fund in both the convergenceregions and in the regions that are runningprogrammes for regional competitiveness.

Furthermore, the Commission has suggested openingup the Cohesion Fund in the current programmingperiod, which originally was to be used only fortransport and environmental projects, to other areas ofimportance such as sustainable development andenvironmental benefits, which would include energy

(11) http://europa.eu.int/comm/internal_market/publicprocurement/studies_en.htm

(12) http://europa.eu.int/comm/environment/GPP

efficiency, clean urban transport and public transport.Such projects, however, need to be fully integrated intothe regional development concepts and theCommission intends to provide further guidance onthis aspect by Community strategic guidelines for thecohesion policy 2007–13 which will link cohesionpolicy more effectively to the Lisbon process.Theimportance and potential of the synergies betweencohesion policy and energy efficiency is furtherunderlined by the fact that a large part of the financialresources of the cohesion policy will be devoted toregions in the 10 new Member States where thepotential for increasing energy efficiency is high.

1.2. SPECIFIC ENERGY POLICY MEASURES

1.2.1. Buildings

The implementation of the Directive on the energyperformance of buildings (2002/91/EC), as from 2006,will permit a gain estimated at some 40 Mtoe(Megatons of oil equivalent) between now and2020 (13).The Commission must therefore monitor therigorous application of the directive.

It will be the task for the Commission to provideMember States with the necessary tools for developingthe framework for an integrated calculationmethodology of the energy performance of buildings.Around 30 European (CEN) standards have beendeveloped. Member States have indicated that theywill, on a voluntary basis, apply these standards. Shouldvoluntary compliance with these standards not beforthcoming, or equivalence not proven, thenmandatory standards should be considered in a futureamended version of the buildings directive.

Article 7 of this directive requires the energyperformance certification of buildings of more than50 m2 when they are constructed, sold or rented out.The certificates must be accompanied byrecommendations for the cost-effective improvementof the building’s energy performance.The MemberStates are responsible for facilitating the financingnecessary for following up on these recommendations.

An option is to propose an extension of the directive inorder to improve the energy performance of buildingswhen they are being renovated.The current directiveonly applies to buildings under renovation of morethan 1 000 m2. A study (14) arrived at the conclusionthat the technical potential of this directive could beenormous if its rules were applied to all renovations. Ineconomic terms, the biggest opportunity is in couplingmeasures for energy-efficiency improvement withretrofitting.This must not only be cost-effective, butalso workable, and it remains to be discussed how thiscan be achieved in practice.

The Ecofys study, as mentioned in footnote 14,estimates that the net job effects of the existing and apossible new directive on buildings are important.Withcost-effective gains conservatively estimated at morethan 70 Mtoe, this sector alone could create at least

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(13) See the explanatory memorandum of the directive.

(14) Ecofys, DM 70067,‘Cost effective retrofit in buildings’, 2005.

250 000 full time jobs.The gains in employment are forhighly qualified personnel and for the buildingprofession in general.The employment is mostlycreated at local level, in places where the changes tobuildings have to be made.

Around a third of the energy used by a building goesinto lighting. Potential savings can run to 50 % or evenmore, as shown by several projects carried out underthe framework of the ‘European GreenLightProgramme’. To realise this potential and to meetincreasing demand, Europe could show the way bypromoting the use and further development of moremodern and intelligent lighting (15).

An energy-saving electric bulb uses five times less currentthan a standard one. Replacing bulbs can easily save EUR 100annually for an average household.

1.2.2. Domestic appliances

Since 1992, a framework directive allows MemberStates to oblige the provision of information toconsumers on the energy efficiency of a whole rangeof electrical appliances via labelling. During the lastfour years, the Commission has striven for an increasein the number of covered appliances.The Commissionhas to continue in this direction while involvingindustry in the definition of these consumerinformation activities.

This is an area where major improvements could bemade with a combination of measures taken to informthe consumer on minimum efficiency levels and byvoluntary agreements (16). However, a new approachhas been proposed by the newly adopted directive oneco-design, setting requirements for eco-designapplicable to consumer electrical appliances.TheCouncil and the European Parliament have recentlyreached an agreement on this objective. One of theaims of the directive is to apply the requirements forenergy efficiency while, at the same time, avoidingnegative consequences of other aspects of theenvironment or other stages in the life cycle of theappliances.

To the extent that energy consumption has asignificant impact on the environment, which is oftenthe case for household appliances, it should now bepossible to establish energy-efficiency requirementsfor a large range of appliances and applications. Forexample, the stand-by control for lighting, heating,cooling and electric motors (17). Special measures needto address the concerns over the the stand-byfunction. In fact, this type of energy waste is increasingall the time, because more and more appliances offerthis feature.Whilst this was an early form of energymanagement for some appliances, it can also result insignificant energy loss. Electricity used in stand-bymode can reach between 5 and 10 % of total electricityconsumption in the residential sector (18).The technicaldevelopment has now produced more efficient sleepmodes than the ones currently used, and there is astrong need to encourage the rapid implementation ofthis technology.

The United States and Japan have already takeninitiatives to reach a maximum consumption figure ofone watt for several types of appliance. In Europe, andstill in the context of the ’eco-design’ directive, it isforeseen to:

• encourage and promote voluntary agreements;

• introduce, if necessary, implementing measures toreduce standby losses for certain groups ofappliances (19);

• stimulate the development at international level oftechnologies and measures aiming to limit electricityloss in stand-by mode.

1.2.3. Limiting the fuel consumption of vehicles

The consumption in 2005 of private cars andmotorcycles in the EU is around 170 Mtoe which isnear to 10 % of our gross consumption.

Average consumption has improved over the lastdecade, but this improvement has been offset by theincrease in the number of cars and car use, and thereare now tendencies for heavier high performance carsthat could lead to a further deterioration of the energysituation.

(15) Further savings could be achieved by the introduction of solidState LED (light emitting diodes)-based lighting for whichestimates of reductions in Europe by 2015 are of the order of40 GW of peak demand or two billion barrels of oil per year(ref: cited in Photonics for the 21st Century, VDI, 2005).

(16) See Annex 2.

(17) The directive has the potential to generate efficiency gains ofat least 20 Mtoe, at the same time making European industrymore competitive on a global scale.

(18) Sources: IEA ‘Things that go blip in the night’, IEA 2005 ‘Savingelectricity in a hurry’, Fraunhofer Institute ‘Study on options ona standby label for Federal Ministery of Economics and Labour,February 2005’.

(19) As for ‘codes of conduct’ for power supplies and digitaladaptors for televisions.

In order to limit this consumption, the Union hasimplemented until now voluntary agreements with thecar industry and labelling of cars on energy efficiency.

In the framework of CARS 21, recommendations shouldbe developed on how best to proceed. In deciding howand whether to proceed regarding this option, it needsto be defined how best the qualification as ‘clean’ and‘efficient’ might be set, taking into account the need topromote the objective in a technology neutral andcost-effective manner, so that any initiative allowsindustry to develop the appropriate technology tomeet the objective in question. Some of the measuresto be discussed are as follows:

• With the automotive industry voluntary agreement,the EU’s aim is to reach an average CO2 emissionfigure of 120 g/km for all new passenger carsmarketed in the EU.This objective, adopted by theEuropean Parliament and by the Council, is to beachieved by agreements committing European,Japanese, and Korean car manufacturers to reduceCO2 emissions to 140 gm/km by 2008/09, to takesteps aiming at the market to influence consumerchoice towards lower fuel-consuming cars, and finallyto improve the quality of consumer information onfuel consumption.

This means that the fleet of new passenger cars puton the market in 2008/09 will consume on averageabout 5.8 l petrol/100 km or 5.25 l diesel/100 km.Thistranslates into a reduction of fuel consumption ofaround 25 % compared to 1998.

However, the trend for bigger size, weight and powerposes a risk that the target will not be met. Reflectionis necessary on how to move from 140 g/km in2008/09 to 120 g/km in 2012. In this context, theCommission is aware of the great challengeassociated with the achievement of the 120 g/kmtarget. Reaching the 120 g/km target will not bepossible without costs but it offers further benefitsfor consumers and society as a whole. For example,consumers will benefit from fuel savings and thisbenefit will increase with higher fuel prices.

• Car labelling: the European car labelling systemobliges Member States to ensure that information onfuel consumption and CO2 emissions of new privatecars is available to consumers.This enablesconsumers to make an informed choice.Theobligation entails the placing of a sticker with this

information either on or nearby every new car beingoffered for sale. On the basis of reports on theimplementation of the directive, the Commission iscurrently studying measures that could be proposedto improve its effectiveness.

It should be pointed out that for energy consumingproducts other than cars, apart from voluntaryagreements and labelling provisions, minimumefficiency requirements are also imposed, but onlywhere this is justified by the market conditions.

Experience with the European white-goods industry,which is the world leader as a result of best technologydeveloped in accordance with minimum standards anda serious labelling programme, proves that in thelonger term our car industry also could actually benefit,rather than suffer, from efficiency requirements in theirhome market.

1.2.4. Informing and protecting the consumer

This Green Paper has identified the shortcomings ininformation and training of consumers and the generalpublic. Many of the actions to remedy this situationhave to be taken at national, regional and local levels.The EU supports these initiatives, for example throughthe ManagEnergy Programme. ManagEnergy supportsplayers at local and regional levels who work in thefield of renewable energy sources and energy demand.

A broad public awareness campaign on sustainableenergy across the EU, EEA countries and EU candidatecountries has recently been launched: SustainableEnergy Europe 2005–08. It is designed to bring about agenuine change in behaviour by the main playersconcerned, so that they commit themselves to movetowards efficient, clean and sustainable energyproduction and consumption schemes based onrenewable energy sources and energy efficiency,including in transport.The new campaign is financedunder the Intelligent Energy–Europe Programme, witha budget of EUR 3.6 million.

The campaign addresses all main sustainable energysectors that contribute to the Community strategy onsustainable development and aims at fosteringimplementation of Community legislation onsustainable energy, as well as national and localmeasures, by supporting industry, energy agencies,associations and consumers’ activities (20).

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(20) The campaign will support promotional activities by the mainstakeholders, such as national governments, regions,municipalities, energy agencies, energy production but alsoenergy service companies, utilities, industrial manufacturers,building developers, agricultural and forest industry,consumer, industry, and farming associations, financialinstitutions, domestic and foreign trade associations, NGOsand development cooperation institutions. Other initiatives ofthis type should be launched in future.

Informing the public is the first goal, informing andtraining those working in the energy sector thesecond.When designing buildings, architects need tohave enough knowledge about the latest technologiesto make energy-savings possible.The same goes forheating system installers who have to advise theirclients.These actions could be initiated at Europeanlevel, but obviously have to be taken up and carriedout by national, regional and local authorities.

In addition, under the second electricity directive, theMember States must ensure that consumers benefitfrom so-called universal service, in other words thatthey have the right to be supplied on their territorywith electricity of a given quality, and at reasonable,transparent, and easily comparable prices. Consumersmust also be able to change supplier under non-discriminatory conditions. Furthermore, the samedirective requires electricity companies to inform theiractual and potential clients regarding the energy mixin their generation portfolio.

2. NATIONAL LEVEL

The national level is in many ways more appropriate forputting measures to encourage energy efficiency intoeffect. National authorities’ actions will reinforceCommunity efforts which would not be as effective ontheir own in the long term. National authorities shouldbe encouraged to use the large range of measuresavailable to them, through regulators, better control ofthe electricity supply chain, introduction of certificationmechanism and optimisation of road transport. Itshould be remembered that there are excellent goodpractice examples to be found in every Member Statewhich deserve to be made widespread.

2.1. REGULATION OF NETWORK ACTIVITIES

The transport of electricity involves losses of up to10 % of the electricity produced (up to 2 % bytransmission, 8 % in distribution). In many cases, cost-effective measures can be taken to significantly reducethese figures. However, transmission or distributionsystem operators may not always have the incentive toundertake the necessary investments to make thesavings. As the efficiencies result in reduced losses, thiswill normally mean a reduction in transmission fees,and in a system of regulated third-party access, a lossof money for the company making the investment.Therefore, unless a system of incentive-basedregulation is provided for in this respect – i.e.transmission and distribution system operators beingable to retain an appropriate proportion of the netefficiency gains resulting from the improvement – thenecessary investments are unlikely to be made.

The transport network operators could include theirpractices for loss management (informationtransparency measures and compensating energypurchasing conditions) in their commitmentprogramme drawn up in pursuance of Directive2003/54/EC.The European Regulators’ Group for gasand electricity might be invited to propose guidelineson good regulatory practice for transmission anddistribution tariff regulation and energy efficiency.These guidelines might start from the principle thattransmission and distribution system operators shouldbe placed under a positive obligation to carry out allinvestments that are cost-beneficial (i.e. will result in anet reduction of tariffs), and be permitted to retain afair proportion of the resulting net benefits. Moreover,the group of network regulators and the other playersconcerned could look into the possibility of an energyefficiency certificate system.

2.2. REGULATION OF SUPPLY ACTIVITIES

In December 2003, the Commission proposed adirective on energy efficiency in end-use and energyservices.This directive will oblige distributors andsuppliers of energy to offer consumers not onlyelectricity, gas or oil products, but to diversify by alsooffering consumers the opportunity to opt for energyservices.These would comprise an integrated package,such as thermal and lighting comfort, and warm waterproduction in building, transport, and so forth. Pricecompetition between energy service suppliers will leadto a reduction in the quantity of energy consumed bythese services, since the cost of the energy wouldnormally be a large part (sometimes the mostimportant one) of the total cost of the service. Offeringthis kind of integrated service allows market forces toplay an important role in improving energy efficiencyat the point of supply of the energy services.

The current pricing structure for energy products couldbe re-examined, as it does not encourage consumerstowards more rational use. Promotion of lowerconsumption at peak times and in times of shortagecould also be an issue for consideration.This wouldimply that regulators at national level promotemetering to enable users to be informed of theirconsumption in real time.

2.3. ELECTRICITY GENERATION

With energy ‘waste’ levels in the process of electricitygeneration running at 66 %, this sector possesses greatpotential. Using standard technology, only between 25and 60 % of the fuel used is converted into electricalpower. Combined-cycle gas turbines (‘CCGT’) areamong the most efficient plant now available ascompared with the old thermal solid fuel ones, some ofwhich were commissioned in the 1950’s.

Liberalisation and stringent emission standards havebrought significant benefits in terms of fuel efficiencyto European electricity generation. Many old inefficientand surplus plants have been taken off the market andin most cases, it is the more fuel-efficient CCGTtechnology (efficiency ranging between 50 and 60 %)which is preferred as replacement.

With predicted growth of 1.5 % per year, Eurelectric –the European association representing the electricityindustry – projects that around 520 GW of newgeneration capacity must be installed up to 2030 in theEU-15.This means huge investment costs running intobillions of euro.

Therefore, the EU is presented with a uniqueopportunity to radically improve fuel efficiency acrossits electricity generation capacity.The EU emissionstrading system is an effective means to incite electricityproducers to reduce emissions and improve efficiencyin the most cost-effective way.The Commission isplanning a review of the system in mid 2006.Throughthe establishment of the national allocation plan andthe creation of an overall scarcity in the market,Member States can continue to use the EU ETS as aninstrument to incentivise more efficient powerproduction.

Some major issues will require careful consideration inthe context of developing the energy-efficiency actionplan for 2006:

• to ensure that only the most fuel-efficient (CCGT)technology for electricity production is beingused in Europe. The most efficient technologycurrently available has a yield close to 60 %, and ismostly manufactured by European companies.However, competitors from other parts of the worldnow also offer CCGT technology, with lower up-frontinvestment costs, but with significantly lower fuelefficiency of around 40 %. It needs to be consideredwhat action might be taken to ensure that ourgeneration in the EU is highly energy efficient.

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• promotion of distributed generation. The biggestwaste in the electricity supply chain (generation –transmission, distribution – supply) is the unusedheat which escapes in the form of steam, mostly byheating the water needed for cooling in thegeneration process.The supply chain is still largelycharacterised by central generation of electricity inlarge power plants, followed by costly transport ofthe electricity to final consumers via cables.Thistransport generates further losses, mainly indistribution.Thus, centralised generation hasadvantages in the shape of economies of scale, butalso wastes energy.

The current investment needs in electricitygeneration could be used to Europe’s advantage if itwas to use the opportunity to facilitate a shift inelectricity generation away from the big powerstations to cleaner, more efficiently distributed,on-site generation. Distributed generation isnormally much closer to useful outlets, also for theheat which is lost in conventional generation,so increasing heat recovery opportunities, whichdramatically improves fuel efficiency.This change will be a gradual process which can befacilitated at national level by using the rightincentives for industry.

The second electricity directive, 2003/54/EC, alreadycontains an incentive for Member States and nationalregulatory authorities to promote distributedgeneration by taking account of its benefits for thetransmission and distribution networks in the form oflong-term avoided investment costs. Furthermore,Member States are obliged to ensure thatauthorisation procedures for this type of generationtake account of its small-scale nature and thereforepotentially limited impact. Streamlining andreduction of the regulatory load of authorisationprocedures for distributed generation is thereforerequired: national authorities, regulators and localand regional authorities need to make this happen.The Commission will see to it that the measuresprovided for by the directive are enforced. In anyevent, to conform to the Community rules onfreedom of establishment and of provision ofservices, authorisation procedures for energyproduction must be based on objective and non-discriminatory criteria, made known in advance tothe undertakings concerned, so as to ensure that thediscretionary power of the national authorities shall

not be used in an arbitrary fashion.The nature andscope of public service obligations to be imposed bya system of administrative authorisations must bemade clear in advance to such undertakings. In caseswhere the number of available permits for aparticular activity is subject to a limit, the validity ofthe permit must not exceed the time necessary towrite off the investment and to allow for equitablepayback on the capital. Furthermore, any personaffected by a restrictive measure based on such aderogation must have the opportunity to enter anappeal.

• Cogeneration also offers a substantial potential gainin efficiency.To date, only around 13 % of theelectricity consumed in the EU is generated usingthis technology.The Member States have toimplement the directive promoting the use of high-efficiency cogeneration by February 2006.Theyshould ensure that the best possible use is made ofthis technology. In addition, they could stimulatefurther progress in developing cogenerationtechnologies not only in respect of energy efficiencyand fuel flexibility but also with the aim of reducingconstruction costs. Member States could equallyfurther explore and develop cogenerationtechnologies which can increase the use ofrenewable sources.

• Most Member States of the EU-25 have districtheating systems, and especially in the new ones incentral Europe with transition economies.This is avery common means of providing heat, especially tohouseholds. District heating, if managed well, can beenvironmentally friendly. It is estimated that eventhose district heating and cogeneration facilities,including industrial applications, already existing,may save 3–4 % in primary energy use as comparedwith separate production.

However, the main problem to be solved is how tofinance the upgrading of old systems.To this end, thefinancial institutions such as the EuropeanInvestment Bank need to be further mobilised toenable financing for energy-efficiency measures indistrict heating. Finally, it needs to be determinedhow to support the improvement in the energyyield of coal-fired plants beyond 50 % as soon aspossible. Community-supported research is likely toplay an important role.

2.4. WHITE CERTIFICATES, A MARKET-BASEDINSTRUMENT

Policies based on incentives have the disadvantagethat they don’t always galvanise market forces towardsthe most cost-effective solution.White certificatesystems have been partially implemented in Italy andthe United Kingdom, are under preparation in France,and are being considered in the Netherlands.These aresystems where suppliers or distributors are obliged toundertake energy-efficiency measures for final users.Certificates corroborate the amount saved, giving bothenergy value and lifetime. Such certificates can, inprinciple, be exchanged and traded. If the contractedparties cannot then submit their allocated share ofcertificates, they can be required to pay fines that mayexceed the estimated market value.

Modelling work carried out under the ‘White andGreen’ SAVE project has concluded that by theintroduction of this system in the tertiary and servicessector, savings of 15 % can be obtained at zero cost,and that when ‘externalities’ such as the environmentalconsequences are taken into account this savingpotential would go up to 35 %.The Commission iscurrently preparing for the possible creation of an EU-wide scheme for white certificates, in order to allowreal trade in energy efficiency between Member States.A measurement system for this purpose is expected tobe developed under the current Commission proposalfor a directive on energy end-use and energy services.

3. INDUSTRY

Industry has already moved in the direction of energyefficiency. Furthermore, driven by economic incentives,it is to be expected that industry will make additionalsignificant improvements in its processes and themachines it uses (electric motors, compressors, etc.)European and national legislation impacts on theenergy consumption of industry, and in thatconnection industry itself must take the necessarymeasures to fulfil the cap on greenhouse gas emissionsimposed by the national allocation plans as foreseen inthe emissions trading directive. It is in this respect thatenergy efficiency is a necessary tool. In addition, theCommission is currently preparing a general BREF (21)on energy efficiency in the context of the IPPCdirective (22) that will provide information which canbe used for developing best practice for energysystems that are used in a large number of industrialprocesses (motor systems, pump systems, approachesto energy efficiency, etc.).

A large number of voluntary agreements in industrialsectors have already been taken (for instance in thepaper industry, the horticultural sector and thechemical industry). Such voluntary agreements byindustry reinforce energy-efficiency measures. Amongthese examples, one can quote:

• United Kingdom: the ‘Energy-efficiency commitment’(2002–05) obliges electricity and gas suppliers toachieve targets for installing energy-efficiencymeasures in households.This programme has provento be extremely cost-effective in reducing energyconsumption and has been extended from 2005 to2008.

• The Netherlands: thanks to the tradition of voluntaryagreements with industry, the Netherlands hasbecome one of the best performing economies inthe world in terms of energy efficiency. In July 1999,the Dutch government signed a benchmarkingagreement on energy efficiency with industry (23).In return for a commitment by industry to reach theabsolute top in energy efficiency by 2012, thegovernment agreed to refrain from imposingadditional national energy-efficiency measures.Thefirst review of measures taken and planned by thesecompanies indicated that they will save 82 000 TJ in2012 (2 Mtoe), thus avoiding emissions of around5.7 million tonnes of CO2.

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(21) BAT (Best available technology) reference documents.

(22) Directive 96/61/EC concerning integrated pollution preventionand control.

(23) Companies representing around 90 % of industrial energydemand have signed up to the agreement.

In addition, two voluntary environmental programmes,the Community eco-label award scheme (24) and theCommunity eco-management and audit scheme(EMAS) (25) could also contribute to enhanced energyefficiency.The eco-label can be awarded to consumerproducts under the condition that they comply with aset of environmental performance criteria, consideringthe whole life cycle of the product. Energy-efficiencyrequirements are part of these criteria, in particularconcerning product groups such as touristaccommodation and campsites.

Under EMAS, organisations must engage in thecontinuous improvement of their environmentalperformance. Here too, energy efficiency is part of thisimprovement and has to be addressed in theenvironmental review and the environmentalstatements to be performed under the scheme.

4. TRANSPORT

4.1. ORGANISING AIR- TRAFFIC MANAGEMENT

An ambitious plan to reorganise European airspacewas launched under the ‘Single Sky’ initiative. Inparticular, it provides for the development of a singleEurope-wide system for air-traffic control.This project,which will give rise to a large industrial initiative to beknown as ‘SESAME’, will lead to substantial savings(around 6 to 12 %) of kerosene aviation fuel, simply byreducing air congestion around Europe’s airports.

4.2. OPTIMISING TRAFFIC MANAGEMENT

Intelligent transport systems such as navigationsystems, congestion charging and cooperative driverassistance are being developed which can increase thesafety and energy efficiency and driving behaviour.Notably, the exploitation of the satellite navigationsystem following the programme ‘GALILEO’ by 2008will open the door to a new generation of applicationsand services in various fields.Transport will be the userpar excellence of this radio navigation system bysatellite.The satellite navigation system will offerreliable and precise positioning systems for cars andwill enable information systems to be developed forroad users and assistance to drivers. In aviation, it will

assist at different stages of the flight. In the maritimefield, it will be used on the high seas as well as forcoastal navigation.The development of the satellitenavigation system will thus also help development ofsustainable transport, thanks to traffic flowoptimisation in road transport, aviation, maritime andrail transport. By pushing back the limits ofinfrastructure saturation, it will diminish the exorbitantcosts of congestion and will help to reduce energyconsumption and underpin better protection of theenvironment.

The promotion of intermodality is another measurethat will contribute to substantial energy-savings.Alternatives to road transport have already beenencouraged by a number of measures, notably thecreation of a Community programme – MARCO POLO –dedicated to stimulation of alternative solutions: rail,inland and maritime navigation for short distances.TheCommission proposed a budget of EUR 740 million forthis programme in July 2004 under the financialperspectives for 2007–13. Numerous industrial projectshave already benefited from its programme: the‘Kombiverkehr’ project which served to introduce amultimodal train-ferry service between Italy andSweden,‘Lokomotiv’, which has linked Germany andItaly by intermodal rail services run by private railcompanies,‘Oy Langh Ship’, which introduced anintermodal service combining maritime, rail and rivertransport between Finland and central Europe, etc.

4.3. DEVELOPING A MARKET FOR CLEAN VEHICLES

Community research programmes have invested largebudgets in the development of electric vehicles, intesting those running on alternative fuels such asnatural gas, as well as in advancing longer-termprospects for technologies such as fuel cells andhydrogen.The seventh framework programme forresearch and development will continue such support.

Possible options that are being discussed, amongstothers, in the context of CARS 21 are

• de-taxing clean vehicles;

• as mentioned above, placing an obligation on publicadministrations to spend a part of their vehicle-purchasing budget on clean vehicles;

• cities to introduce restricted access to central areasfor polluting and high fuel-consuming vehicles, eitherby tolls or actual prohibition;

(24) Regulation (EC) No 1980/2000.

(25) Regulation (EC) No 761/2001.

• specific certification and technical standards for cleanvehicles.

Such measures could prove to be more efficient thandirect aid to industry and contribute furthermore totechnological development in European industry.Thisis no small benefit in a globalising economy.

4.4. CHARGING OF INFRASTRUCTURE TO INDUCECHANGES IN BEHAVIOUR

Half of all road transport fuel is burnt in built-up areas,despite the fact that half of all journeys in such areasare less than five kilometres in length.

The Union has already embarked on a road-pricingpolicy for heavy goods vehicles on the trans-Europeanroad network. Future satellite location techniques,based on the satellite navigation system following theprogramme ‘GALILEO’, will make it easier to put roadcharging systems in place without causing longqueues at entry points to the charging zones.

The Community directive on air quality obliges themost polluted large conurbations to draw up plans forcombating air pollution. In most cases, this has meanteither radical restriction on polluting transport in citycentres, or else charges which are sufficientlydifferentiated to take account of the emission andconsumption levels of individual vehicles. In theconsultation period following the adoption of thisGreen Paper, the question of the need andeffectiveness of such schemes needs to be considered.

The experience of London since introducing‘congestion charging’ in 2003 has been that fuelconsumption has gone down by 20 % and CO2emissions by 19 % in the charging zone. For its part, thecity of Madrid has installed a system for rapid transit forbuses and cars with a minimum of two passengers ona section of 20 kilometres of the A6 highway into thecity.The Commission is making an effort by means ofits intelligent energy programme to promote thesebest practices on a larger scale.

However, it should be noted that the exchange of bestpractices is rather limited. One could question if andhow such good examples of best practices can begeneralised and expanded throughout the EU.

4.5. TYRES

Friction between tyres and the road accounts for up to20 % of a vehicle’s consumption. Properly performingtyres can reduce the latter by 5 % and sales of suchtyres should be encouraged not only on new cars butalso for subsequent replacements

Better pressure checks also lead to lower consumption.Estimates suggest that between 45 and 70 % ofvehicles are driven with at least one tyre below theprescribed pressure, which causes 4 % over-consumption, not to mention the increased risk ofaccidents. So why not consider developing systems toencourage service stations to better inform and assistdrivers as regards tyre checks? Another option wouldbe to consider a voluntary agreement with industry toinstall tyre pressure sensors on the dashboard of cars.

In addition to the substantial gains to be made by using theright tyres at the right pressure, an average driver can easilysave EUR 100 on the annual fuel bill by driving in a moreecological way (26).

4.6. AVIATION

The Commission plans shortly to present a commu-nication on climate change and aviation.The com-munication will focus, in particular, on the use ofeconomic instruments (such as fuel taxation, emissionscharges or emissions trading) which would promoteenergy efficiency and greenhouse gas reductions inthe sector.

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(26) International Energy Agency ‘Saving oil in a hurry’, 2005.

5. REGIONAL AND LOCAL LEVEL

Many measures can be taken at regional and locallevels, close to the citizen. Action on energy efficiencywill only produce all its potential gains if operations tobe undertaken at Community and national levels arereflected locally.The EU has already taken numerousinitiatives in this area. An example is the CIVITASprogramme, launched in 2000, which has helped36 European cities with urban mobility projects.Support programmes have also been put in place toencourage public and private investment in rationalenergy use (pilot actions, creation of local agencynetworks, etc.). Indeed the Union has recently adopteda new programme called ‘Intelligent Energy – Europe’which brings all these actions under one roof thusstrengthening the synergies between them.

Furthermore, the specific activities for energy efficiencythat are integrated into the operational developmentprogrammes for the EU cohesion policy, notably inthose regions lagging behind in development, give theregions strong instruments which could be used for awide range of different projects. Support for increasedenergy efficiency of public buildings, investments inclean urban transport, support to small and medium-sized enterprises (SME) in improving their energyefficiency as well as related research and developmentare options to be mentioned.When this potential forenergy efficiency is mobilised, one has, however, torespect the specific provisions of cohesion policyprogramming, partnership and management.

As already mentioned, it should also be discussed howto find solutions for the growing problems caused bycity centre congestion. City transport is above all amatter for local and national authorities, the EU shouldcontribute to find solutions in the face of thedeterioration in the quality of life which this problemcauses, and which goes hand-in-hand with a trulyenormous waste of energy. Local authorities have animportant role to play by providing and promotingsustainable construction in their cities, in particular inrelation to energy efficient buildings.Then again, thereis the eternal problem of financing. Regulatorymeasures are certainly needed, but we must also beable to back them up with investments. Currentlyavailable financing products as developed by banks arenot always suitable for the small scale of many energy-efficiency projects, whereas the aggregate benefit suchsmaller projects can provide as a whole is substantial.

5.1. SPECIFIC FINANCING INSTRUMENTS

There is a huge ‘win-win’ potential for investments insmall-scale sustainable energy projects throughoutEurope.They will often be highly feasible, especiallywhen including the aspects of energy security andenvironmental benefits. But financing of such projects,especially in the less developed regions of Europe,needs ‘facilitation’ to happen. Financial instrumentscould be devised along the lines of the clearinghousefacilities used in other sectors.These would includeproject preparation facilities and risk managementfunds.

But given the small scale and dispersed nature of theprojects to be funded, it would seem that action is inany event best initiated at local or regional level.

It may be appropriate that local and regionalauthorities should take the lead in setting up an EUworking group with stakeholders, involving financinginstitutions like the European Investment Bank andother commercial banks, regional funds, and MemberStates’ representatives.They could develop proposalsas soon as possible on how to rearrange existingfinancing mechanisms, including focused organisationof clearinghouse-type instruments, to review theinvestment potential in small-scale sustainable energyprojects, and consider ways to overcome barriers toinvestment, including the role of energy companies,recovery of energy bill savings, pricing, etc.

Funds to support the projects for the improvement ofenergy efficiency have been very successful in manyMember States, and it should be considered how bestpractices in this area can be repeated and improved.

6. A STRATEGY OPEN TO THE WORLD

The energy-efficiency performance of countries varieswidely.The EU and Japan are for instance three to fourtimes more energy-efficient in terms of energyintensity than the countries of the former Soviet Unionor the Middle East.

Energy efficiency already forms part of the internationalcooperation activities of the EU with its partners,including industrial partners (such as the United States),countries in transition (such as Russia), and developingcountries (such as China and India). Furthermore,energy- efficiency projects, albeit limited in size, are partof the lending portfolio of international and Europeanfinancing institutions. However, huge scope remains formuch closer and vigorous cooperation on energyefficiency with the majority of countries.

The principal reasons for strengthening energy-efficiency cooperation with third countries are closelylinked to the geopolitical and strategic interests of theEU and the business opportunities arising from theEU’s leading role in this area. In particular, Europecould be actively engaged in establishing andadopting standards on energy efficiency that can beinternationally compatible. A further reason is thecontribution energy efficiency can make to economicand social development.

The recent increase in oil prices highlighted the impactof increased energy demand resulting from rapidgrowth in energy consumption in a number ofcountries, including China. Given the scarcity of energyresources and the limited spare production capacity,especially for hydrocarbons, it is obvious that energy-importing countries increasingly become competitorsfor the same energy resources, for example in Russia,the Middle East and the Caspian region.

Therefore, energy efficiency is an issue in the interest ofall energy importing countries, including the Union,and should be integrated into their global strategy forsecurity of energy supply.

From a climate perspective, the recent communicationon climate change has highlighted the importance ofbroad participation as an essential element of a mid-and long-term strategy. Cooperation with developed,

and in particular, developing countries could be a usefultool for engaging countries in climate action, whileproviding local benefits for insurance in terms of airquality and energy security, which are key concerns fora large number of developing countries. As the energysector has to provide the lion’s share of the reductiontargets, global climate change mitigation dependsgreatly on increased use of energy efficiency, renewableenergy and other cleaner energy technologies in allcountries. Due to the fact that the EU, since the firstenergy crisis in the early 1970’s, has put in placecoherent policies and programmes for energy-efficiency promotion, the EU’s energy-efficiencymanufacturing industry is now well placed to make themost of new opportunities and to gain new markets inthird countries. European industry is at the forefront intechnology, and occupies the strategic high ground inthe global competition on energy-efficiency technologyin most sectors, including turbines, combined heat andpower and district heating technologies, householdappliances and building materials. Renewed efforts foran international drive on energy efficiency could play akey role in consolidating the European industry’s role asworld leader in this field and could contribute toboosting Europe’s competitive edge in the energysector.

The export potential for energy efficient products andservices has not been systematically assessed, but it isestimated that the business opportunities derivingfrom stronger efforts on energy efficiency are not lesssignificant than those related to renewable energy.TheChinese market, for example, is expected to developrapidly in accordance with the long and medium-termenergy conservation plan drawn up by the NationalDevelopment and Reform Commission, according towhich residential and public buildings are supposed tohalve their energy consumption during the 11th five-year plan (2006–10) as compared with current levels. Inthis context, it should be mentioned that the EUconstruction industry has the world leadership in low-energy consumption buildings and by furtherupdating the requirements in the EU, the export of thisknow-how will give new opportunities to our industry.

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6.1. INTEGRATING ENERGY EFFICIENCY ININTERNATIONAL COOPERATION

The first part of increased international cooperation onthis issue will consist of working with the EU’s industrialpartners, particularly the OECD countries within theInternational Energy Agency (IEA), to establish energy-efficiency plans. As developing countries are now ableto join the implementing agreement of IEA, they couldbe encouraged to participate in these forums.

This international forum could, for instance, be thestarting point for launching the idea of taking betteraccount of external effects of the aviation sector on theenvironment.

European trade policy can assist in the cause of energyefficiency, for instance by negotiating favourable tarifftreatment for goods on the basis of their energy-efficiency performance.This was proposed in WTOcontext by the European Commission in February2005 (27).This policy furthers the Doha DevelopmentAgenda. At Doha, ministers agreed to negotiations onthe reduction, or even elimination, of tariff and non-tariff barriers to environmental goods and services tofurther sustainable development.

Finally, the EU should renew its efforts to arrive at acommon understanding with industrialised thirdcountries, in particular the United States, to the effectthat serious efforts to improve global energy efficiencyare indispensable; the recommendations contained inthe recent consensus report from the US NationalCommission on Energy Policy (28), which forcefullyaddresses demand-side policies, may be a positivestarting point for such a renewed EU-US dialogue onenergy efficiency.

6.2. INTEGRATING ENERGY EFFICIENCY IN THENEIGHBOURHOOD POLICY AND EU-RUSSIA CO-OPERATION

Energy efficiency is also, as a second feature, part ofthe EU’s neighbourhood policy. The Commissionwill ensure that it continues to feature in the actionplans for this policy.

Furthermore, the Commission is currently negotiating atreaty establishing an Energy Community with thecountries of south-east Europe. It has equally initiatedcooperation actions in the Caspian and Mediterraneanregions.The potential in these countries is significantbut, as yet, largely unexploited.They are conscious ofthe fact that their steep increase in energyconsumption not only causes environmental andpublic health problems, but will also serve as a brake toeconomic development, sooner rather than later.

A third feature must be to promote energyefficiency in the process of energy cooperation withRussia which has emerged since the year 2000.Russia is becoming increasingly conscious of the needto improve its energy efficiency.

6.3. INTEGRATING ENERGY EFFICIENCY INTODEVELOPMENT POLICY

European development policy is the fourth feature ofincreased international cooperation.The EU energyinitiative launched at the WSSD in Johannesburg in2002 sets the political framework for EU cooperationwith developing countries on energy issues, whereenergy efficiency is, of course, an importantcomponent.The need to ensure coherence of EUpolicies with development objectives was underlinedin the recent communication on policy coherence fordevelopment, in which energy was one of the11 policies specifically highlighted.With theircomparatively weak economies, developing countriesare extremely vulnerable to increases in energy prices.In countries of sub-Saharan Africa, increased oil pricescan have a significantly stronger negative impact thanon OECD countries. At the same time, developingcountries often face high losses in power production,transmission and distribution as well as intransportation and different end-uses of energy.In addition, up to 95 % of the population depends onthe use of traditional biomass for cooking and heating

(27) WTO submission TN/TE/W/47 of 17 February 2005.

(28) ‘Ending the energy stalemate: a bipartisan strategy to meetAmerica’s energy challenges’ .

that is used with low- energy efficiency and createshealth problems. In the island States of the Pacific andCaribbean, the high price of imported oil is exacer-bated by the small markets and long transportationdistances.The potential for increased energy efficiencyfor economic and social development in developingcountries is significant and should be given moreattention in the cooperation with these countries.

European development policy can and should help takethese issues into account. Action can support capacitybuilding, awareness raising, policy development, as wellas deployment of efficient applications and end-usetechnologies.

Finally, European environment policy should helpdevelop the capacity to value efficient projectsimplemented in these countries through climatechange mechanisms such as the CDM.

6.4. REINFORCING THE ROLE OF INTERNATIONALFINANCING INSTITUTIONS

As a fifth feature, the EU and the Member Statesmust incite the IFIs (international financinginstitutions) to give more attention to energy-efficiency measures in their future financial andtechnical assistance operations to third countries.Ways and means need to be explored on howinternational financial institutions can integrateenergy-efficiency considerations in all majorinvestment projects.The upcoming evaluation of theenergy policy of the European Bank for Reconstructionand Development (EBRD) will be a good opportunityto raise this point.The fact that promotion of energyefficiency often passes through support for micro-projects should not be an argument for theseinstitutions not to engage themselves fully. Globallending facilities should be developed, and there is aneed for more lending through intermediaries, forexample national agencies.

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This Green Paper aims at identifying options and atopening a wide-ranging discussion on how to realisethe cost-effective savings and to start the processtowards rapidly establishing a concrete action plan,involving action at Community, national, regional, localand international levels and at the level of industry andof individual consumers, to harness the identifiedpotential energy-efficiency savings.

Implementation of this framework will involve allactors. Firstly the national, regional and local publicauthorities, to be supported by local energy agencies,which will take care of dissemination of best practices,right through to the general public. Industry is anotherpartner which should be brought on board to driveforward this policy. Energy efficiency also constitutesopportunities for industry to develop newtechnologies for export. Discussions should also beopened with financial institutions in order to increasetheir investments in energy efficiency in the future.Without investments, many measures will not takeplace. In particular, financing tools have to be devisedwhich are more suitable for smaller projects.

An energy-efficiency initiative has wider implicationsthan for energy policy alone. It constitutes a majorcontribution to reduction of our energy dependencyon third countries, in a setting of high and volatile oilprices.This initiative will also contribute to theattainment of the Lisbon strategy goals, aiming torelaunch the European economy, and to the fightagainst climate change.

The key to promoting energy efficiency is to giveMember States, regions, citizens, and industry theincentives and tools necessary to go forward to thenecessary action and investments to achieve energysavings with a positive cost-benefit ratio.This can bedone without any lowering of comfort levels or of thestandard of living. It simply means to avoid wastingenergy when simple steps can be taken to reduceconsumption. According to studies carried out by theCommission (29), the following table gives a generalindication of the potential cost-effective savings in thedifferent sectors that could be harnessed.Whilst onlyindicative, they represent a picture of the opportunitiesthat this Green Paper seeks to exploit.

This Green Paper therefore is a starting point fromwhich to launch the debate and to prompt new ideas,whether these come from industry, public authorities,consumer groups or consumers themselves. Thisconsultation process has already begun. To preparethis Green Paper, a high level group composed ofrepresentatives of all Member States was put in placeand met in April 2005. It has already confirmed thatprogress can only be made if the EU takes a proactiveapproach, and concrete targets are adopted.Additionally, the Commission is creating a sustainableenergy forum, which will include representatives notonly of Member States but also of all those interestgroups which must be considered as partners in orderto make sure that the energy-efficiency drive shallsucceed.

CONCLUSION

(29) See i.a. ‘European energy and transport – Scenarios on keydrivers’, Ecofys studies etc.

Potential savings in Mtoe 2020 2020+Rigorous implementation Implementation of

of adopted measures additional measures

Buildings: heating/cooling 41 70

Electrical appliances 15 35

Industry 16 30

Transport 45 90

CHP 40 60

Other energy transformation, etc. 33 75

Total energy savings 190 360

The initiatives to be launched by the EU must be madeknown and implemented at national, regional and locallevels. Obviously, consumers themselves will also haveto be mobilised in order to develop and spread habitswhich will incorporate more energy efficiency ineveryday life.

Of course, ideas are required in order to achieve thewhole potential for energy savings, but also a goodmethod for putting them into practice across the EU.If, following the debate on the Green Paper, it isdecided to set overall binding targets and ensure aminimum of harmonisation, the so-called ‘Communitymethod’ must be used. Under this, the Commission,armed with its right of initiative confirmed by theTreaty, makes proposals which are discussed andadopted by the European Parliament and the Councilof Ministers.The Community method has been the

keystone for the success of the EU. Furthermore, energyefficiency is included in the integrated guidelinesunder the Lisbon process. It is therefore part of the neweconomic governance structure. As was done in the2000 Green Paper on the security of energy supply, theCommission now puts down a number of questions inorder to set out a structure for public debate, andfacilitate putting the results to good use.

In December 2005, the Commission will lay a firstanalysis of the results of the public debate to belaunched on this Green Paper on energy efficiencybefore the Council of Ministers.The report will beaccompanied by an action plan containing thepractical action which will be proposed as from 2006.

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ENERGY EFFICIENCY:THE NEED FOR ACTION

The 25 Member States of the EU currently consumearound 1 725 Mtoe (Megatons of oil equivalent) ofenergy per year.This has a high price tag in the regionof EUR 500 billion, or more than EUR 1000 per personper year. Of this EUR 500 billion, about one half falls onthe trade bill of the EU (around EUR 240 billion). Energyis expensive. It is also beginning to be scarce.According to many experts, known oil reserves are onlyenough to cover today’s needs for about 40 years.

However, in Europe, a large proportion of this energycontinues to be wasted, whether by inefficientequipment or through lack of awareness of energyusers.This represents a cost with no benefit, whetherthe waste occurs at the point of production or use.Thisenormous loss of capital could be put to other uses,including developing new energy-efficient practices,technologies and investments.

Energy consumption is also a major contributor toclimate change, which is the cause of increasingconcern over recent years. Energy is the source of 4/5(78 %) of total greenhouse gas emissions in the EU.Of these, the transport sector contributes around onethird.

The cost-effective saving of energy means, for the EU,lower dependence on imports from third countries,greater respect for the environment and reduced costsfor the EU economy at a time of trailingcompetitiveness. Reducing energy needs is hence apolicy objective which would contribute to theobjectives of the Lisbon agenda by boosting theEuropean economy and creating new jobs. Energy-efficiency policy also brings significant savings onhousehold energy bills and thus has a direct impacton the everyday lives of all European citizens.

The role of public authorities, particularly the EU, is tomake individuals and their political representativesaware of the urgency of improving energy efficiency. Itis imperative for the environment, for the economy andfor our health.

Improving energy efficiency is a broad term. In thisGreen Paper it covers firstly, a better use of energythrough improvements in energy efficiency, and,secondly, energy saving through changes in behaviour.

• Energy efficiency essentially depends on thetechnologies used. Improving energy efficiencyhence means using the best technologies toconsume less, whether at the final consumption orenergy-production stage.This means, for example,replacing an old household boiler with a new onewhich consumes one-third less; or putting in placesystems which avoid the energy consumption ofstandby mode on numerous household appliances(TV, electric oven, etc.); or using light bulbs which, forthe same brightness, use less energy thanks to newtechnologies.

• Energy saving in the overall sense also derives from achange in consumer behaviour.This means, forexample, a policy of making public transport moreattractive and thereby encouraging car users to takethe bus or train instead; or educating people on howto reduce heat losses from their house, notablythrough correct use of thermostats.

This Green Paper intends to open a discussion on howthe EU promotes an overall policy in order toencourage the more widespread use of newtechnology to improve energy efficiency and tostimulate a change in European consumer behaviour.

Research is particularly vital to further improvementsof the energy-efficiency potential which will continueto grow as economies develop further. Research anddevelopment in the area of energy efficiency as carriedout under the framework programmes and under theIntelligent Energy for European programme thuscomplement policy in this field and work towards thesame goals: less fossil fuel use, better jobs created inthe European Union and higher added value for theEuropean economy.

1. FOSSIL FUELS DOMINATE IN EUROPE’S ENERGYCONSUMPTION

From the early 1970s until 2002, energy consumptionin the EU-25 rose by almost 40 % – or 1 % per year –while GDP doubled, growing at an average rate of2.4 % per year. Energy intensity, the ratio of GDP toenergy consumption, therefore decreased by a third.However, since 2000, the improvement in energyintensity has been less substantial, reaching only 1 %over two years (see Annex 3).

ANNEX 1

This Community average does not reflect the consider-able differences between Member States caused bythe differing economic structures (e.g. more or lessenergy intensive industry), the national currencyexchange rate compared to the euro and the level of

energy efficiency that, by and large, is obviously muchbetter in the EU-15.

The following diagram demonstrates the great poten-tial for improvements in most new Member States.

2 000

1 750

1 500

1 250

1 000

750

500

250

0

100

75

50

25

0

1990 2000 2010 2020

1 600

1 400

1 200

1 000

800

600

400

200

0DK IE AT IT DE FR SE NL LU UK EU ES BE PT EL CY MT FI SI HU PL LV SK CZ LT EE

Figure 1. Total energy consumption by fuel and energy intensity 1990–2020 (EU-25)

mtoe Energy intensity 1990 = 100

RenewablesNuclearNatural gasOilSolids

Energy intensity

Figure 2. Energy intensity in 2003 (in toe/million EUR of GDP at 1995 market prices) in EU-25

Source: PRIMES baseline, ‘European energy and transport – Scenarios on key drivers.’ European Commission 2004.


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If the current trend continues, gross energy demandcould increase by 10 % by 2020. Growth in electricitydemand could also reach 1.5 % per year.

Today’s consumption in the EU could reach 1 900Mtoe within 15 years (2020), compared with 1 725Mtoe in 2005 (30).

250

200

150

100

50

0

In the following diagram, this comparison is correctedfor the differences in the purchasing power of incomes

in the Member States.

Figure 3. Energy intensity adjusted at 2002 purchasing power parities (EU-25=100)

EU25

=10

0

Source: Enerdata (based on Eurostat data).

Source: Estimate based on Eurostat energy balances

Malta Ita

ly

Ireland

Denmark

Austria

Portugal

Greece

United

Kingdom

Spain

Germany

Netherla

nds

Cyprus

France

Luxem

bourg

Slovenia

Hungary

Poland

Sweden

Latvia

Finland

Lithuania

Belgiu

m

Czech

Republic

Slovak Republic

Estonia

Figure 4. Estimated gross energy consumption (1 725 Mtoe) by sector in 2005 (EU-25) (see Annex 4)

(30) These predictions are made under the assumption of anaverage growth of GDP as foreseen to be 2.4 % per year.

Households 17 %

Tertiary 10 %

Transport 20 %

Industry 18 %

Non-energy use 6 %

Transformation losses etc. 29 %

Meanwhile energy demand continues to increase inthe EU, while its hydrocarbon production slows down.Thus, oil production reached a maximum in 1999 with170 Mtoe; and it should decrease to 85 Mtoe by2030 (31).The contribution of renewable energiesremains relatively low – 6 % in 2000 and between 8and 10 % of the total consumption in 2010 and theexpected decrease in production of nuclear electricitypredicts a fall of around 240 Mtoe.This means thatdomestic primary production could fall to 660 Mtoe in2030, whereas it still represents 900 Mtoe in 2005.

2. THE BENEFITS OF INCREASED ENERGY EFFICIENCYFOR THE EUROPEAN ECONOMY

The absence of convincing action to thwart the trendstowards increased energy consumption also has anegative effect on the efforts of the EU in the contextof the Lisbon strategy, which aims to make theeconomy of the Union the most competitive in theworld.

Higher oil prices impact negatively on GDP growth. Alesser dependency on oil would thus benefit theeconomy immediately. But even without higher oilprices, there are sound economic reasons to make astrong push towards more efficient use of energy inEurope. In this context, a discussion should belaunched on how EU business and citizens could makea financial gain in the short, medium and long term by,for example, installing new energy-efficiencyequipment or refurbishing buildings. Furthermore, asenergy efficiency requires services and technology inan area where Europe is a world leader, an effectiveenergy policy means that instead of paying forimported hydrocarbons, new, quality jobs are createdin the EU.

According to estimations made by the German Councilfor Sustainable Development (32), more than 2 000full-time jobs could be created for each milliontonnes of oil equivalent that will be saved as a resultof measures and/or investments specially taken toimprove energy efficiency as compared to investingin energy production. This is shown to be the case incalculations done in several other studies on thesubject. It should be noted here that this figure doesnot include jobs created as a result of increased exportsof European technologies, but does include job lossesdue to the lower demand of energy (see Annex 5).

The economic potential of energy efficiency dependsboth on technological developments and on currentand forecast energy prices. Consumers will benefitfrom energy-efficiency measures when the cost-benefitratio is positive.The general economy could alsobenefit thanks to transfers of the resources saved toother economic activities. Research is also at the centreof progress in energy efficiency, and is one of the twomain goals of the Lisbon strategy to revitalise theEuropean economy, together with job creation, towhich it is also directly linked.

Furthermore, the European Union is one of the worldeconomic zones best placed to help developingeconomies reduce their own energy intensity andrender their economic growth more sustainable (33),thanks to its exports of state-of-the-art technology.

3. ENERGY USE – A CAUSE OF ENVIRONMENTAL DAMAGE

Growth in consumption has a direct impact on thedeterioration of the environment and on climatechange. Air quality is a major environmental concernfor the EU.The Commission is currently elaborating theEU Clean Air Programme (CAFE), where the harmfuleffects of ozone and especially particulates arerevealed for human health, the ecosystems andagricultural crops (34).This situation will be improvedby 2020 in the first place by the implementation ofcurrent emission standards, but increased energyefficiency could equally improve air qualitydramatically by avoiding burning of fossil fuels. Effectsof reduced energy consumption have been estimatedin environmental models (35) to be in the order ofthousands of avoided premature deaths and billions ofeuro.

Burning fossil fuels cause greenhouse gas emissions.CO2 emissions, rather than evening out, could, ifprevailing trends persist, actually exceed 1990 levels by14 % by 2030 under a ‘business as usual’ scenario.At the current rate of increase of energy consumption,the tensions between our pattern of energy demand –80 % based on fossil fuels – and the struggle toadvance a sustainable environment could be felt moststrongly from 2012 onwards.

(31) EU-25 baseline scenario.‘European energy and transport –Scenarios on key drivers’.

(32) Rat für Nachhaltige Entwicklung, 2003,http://www.nachhaltigkeitsrat.de/service/download/publikationen/broschueren/Broschuere_Kohleempfehlung.pdf

(33) UNDP, World Energy Assessment 2000, and update of 2004,http://www.undp.org/energy

(34) For example in 2000, three million life years were lost in the EUdue to particulate concentrations in the air we breathe. This isequivalent to about 288 000 premature deaths.

(35) Study made for the CAFE.

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In its recent communication on climate change (36), theCommission concluded that 50 % of future reductionsof greenhouse gas emissions would be achieved byimproved energy efficiency.

All Member States are committed to developing formsof energy, which do not emit greenhouse gases: ‘green’electricity, biofuels, etc. They have already developedplans for energy savings in certain sectors. However,Europe has still not demonstrated its ability to reducecurrent trends or its capacity to reverse the spirallinggrowth in energy consumption.

4. THE INTERNATIONAL RESPONSE

Energy concerns were for a long time merely a matterof satisfying demand by supply-side policies. It wasonly in the year 2000 that the European Commission’sGreen Paper on energy supply security put forward aclear strategy based on demand management.TheGreen Paper on security of supply proposed a clearstrategy anchored in demand.The Green Paper cameto the conclusion that the EU had just too little roomfor manoeuvre on energy supply and that it was in thearea of energy demand that it could act. So theCommission has started a first series of regulatory actsin the field of energy efficiency, notably the directiveon the energy performance of buildings and thecogeneration directive.

The same can be said regarding the internationalintergovernmental organisations like the InternationalEnergy Agency (IEA) which have very recently startedto consider energy efficiency as a priority, pushed byrecord oil prices. Bilaterally, there has not been a properenergy dialogue between producing and consumingcountries. Such a structured and lasting dialoguewould have enabled the introduction of a minimum oftransparency in the market and would havecontributed to stable prices.The partnership withRussia launched in 2000 and the upcoming relaunch ofthe dialogue with OPEC will allow for this gap in theenergy policy of the Union gradually to be overcome.

This new awareness is also reinforced by theinternational economic effect of the strong economicgrowth in certain countries – China, Brazil, and India –which has led to energy consumption racing ahead.However, it must be stated that these countries are

conscious of the fact that they have to reduce theirenergy intensity, if only because these growth rates inenergy consumption can put their economies at risk.

Moreover, there is also a lack of a structured dialoguebetween consumer countries, which could lead to ademand-based strategy at world level, and would helpthem to become less dependent on fossil fuels, thusreducing the negative impact of their consumption onthe environment.

The following graph shows the big differences inenergy intensity between the large zones ofconsumption in 2003 (37).

In the following diagram, this comparison is correctedfor the differences in the purchasing power of theincomes of these economic areas.

5. OPENING THE DEBATE ON AN AMBITIOUS GOAL FORTHE EU

Without proactive measures to avoid a further drift ofenergy consumption, all these preoccupations linkedto the security of supply, European competitiveness,climate change and atmospheric pollution will only getworse.The EU cannot allow such negative predictionsto come true.

This Green Paper on energy efficiency envisageslaunching the debate on how the EU could achieve areduction of the energy consumption of the EU by20 % compared to the projections for 2020 on acost-effective basis.

With today’s most advanced technology, it is certainlypossible to save around 20 % of the energyconsumption of the Member States of the EU.Totalconsumption is currently around 1 725 Mtoe.Estimations indicate that, if current trends continue,consumption will reach 1 900 Mtoe in 2020.Theobjective is thus to arrive, thanks to energy savings of20 % at the consumption level of 1990, i.e. 1 520 Mtoe.

This would mean that rigorous implementation of allmeasures taken after 2001, for instance the directiveson the energy performance of buildings and oncombined heat and power generation, combined withnew measures, could lead to annual savings of anaverage of 1.5 % per year, which in turn would allowthe EU-25 to return to its 1990 consumption (38).

(36) COM(2005) 35. The communication stresses the importance ofenergy efficiency for reaching greenhouse gas-emission levelswhich are compatible with maintaining the climate. It isestimated that 50 % of the necessary reduction, i.e. to achievea level of such gases in the air of 550 ppm, could come fromgreater energy efficiency.

(37) Although other less energy-efficient regions are at themoment more competitive than the EU, this is not a reasonwhy the EU should not increase its energy efficiency and thusits own competitiveness.

(38) This is calculated on the basis of existing EU predictions onGDP development, indicating a yearly growth of 2.4 %, see‘European energy and transport – Scenarios on key drivers’,Commission, 2004.

2 000

1 800

1 600

1 400

1 200

1 000

800

600

400

200

0

800

700

600

500

400

300

200

100

0

Figure 5. Energy intensity in 2003 (in toe/million EUR of GDP at 1995 market prices)

Japan EU-25 USA China Russia

800

700

600

500

400

300

200

100

0

Figure 6. Energy intensity in 2003 (in toe/million EUR of GDP at 1995 market prices) GDP adjusted for purchasing power parity

Japan EU-25 USA China Russia



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ANNEX 2

Electricity savings Consumption in 2003 Consumption in 2010 Consumption in 2010achieved in the period [TWh/year] (with current policies) Available potential

1992–2003 [TWh/year] to 2010 [TWh/year] (with additional policies)

[TWh/year]

Washing machines 10–11 26 23 14

Refrigerators and freezers 12–13 103 96 80

Electric ovens – 17 17 15.5

Standby 1–2 44 66 46

Lighting 1–5 85 94 79

Dryers – 13.8 15 12

DESWH (40) – 67 66 64

Air-conditioners 5.8 8.4 6.9

Dishwashers 0.5 16.2 16.5 15.7

Total 24.5–31.5 377.8 401.9 333.1

Sources: Wai 2004, Kem 2004 (39)

Electricity consumption savings and trends in the residential sector EU-15

(39) Status report 2004, Joint Research Center IES.

(40) Domestic electric storage water heaters (DESWH), the savingpotential indicated is only related to the reduction of thethermal standby losses due to thicker insulation. Additionalsaving will come from control strategy (thermostat and timer).Larger electricity saving will be achieved by introducing solarthermal panels.

ANNEX 3

Long-term development of GDP, energy demand and energy intensity (baseline) for EU-25(Year 2000 = 100)

1971 1975 1980 1985 1990 2010 2015 2020 2025 20301995 2000 200550

75

100

125

150

175

200

GDP

Energy demand

Energy intensity

Average decrease of energy intensity is 1.6 % per year.

Source: IEA statistics and baseline projections from ‘European energy and transport – Scenarios on key drivers’. European Commission 2004.

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ANNEX 4

2002 Buildings Industry Transport All final demand sectors

(residential and tertiary

Mtoe % of final Mtoe % of final Mtoe % of final Mtoe % of finaldemand demand demand demand

Solid fuels 12.2 1.1 38.7 3.6 0.0 0.0 50.9 4.7

Oil 96.8 8.9 46.9 4.3 331.5 30.6 475.2 43.9

Gas 155.6 14.4 105.4 9.7 0.4 0.0 261.5 24.2

Electricity 121.3 11.2 91.2 8.4 6.0 0.6 218.5 20.2(incl. 14 % from RES)

Derived heat 22.8 2.1 7.5 0.7 0.0 0.0 30.3 2.8

Renewables 29.0 2.7 16.2 1.5 1.0 0.1 46.2 4.3

Total 437.8 40.4 306.0 28.3 338.9 31.3 1082.6 100.0

Final energy demand

THE EMPLOYMENT EFFECTS OF ENERGY-EFFICIENCYIMPROVEMENTS

Investments in cost-effective energy-efficiencyimprovement will almost always have a positive impacton employment (41). In all cases, the number of jobscreated is greater than those created from comparablealternative investments, including investments for theextraction, transformation and distribution ofenergy (42).

The strong employment impact deriving from energy-efficiency investments is due to the combined result oftwo separate effects. One effect is the so-called ‘re-deployment effect’ of energy savings investment.Thiseffect is due to the indirect effects of reinvesting thefinancial savings generated by energy-efficiencymeasures. It accounts for fully two-thirds of the totalimpact on employment (43).The other effect is thedirect effect of such investments and comes from thelabour required to implement the original energy-efficiency investment. A good example of this isinvestments such as retrofitting of existing buildings.Many such investments have the added advantage ofbeing labour-intensive, of having impacts that are feltlocally and regionally and of having a relatively lowimport content.This demand for labour often includesunskilled labour as well as semi-skilled and highlytrained craftsmen, making it a versatile instrument forreaching regional policy objectives.

Many other direct investments in energy efficiency,such as energy-efficient process lines in industry, theinstallation of energy-efficient boilers, improvedbuilding maintenance service will generate as much ormore employment per invested euro than comparablealternatives such as road, bridge and energytransmission infrastructural investments.

Numerous studies have been carried out to comparethe relative employment-creating effects of energy-efficiency investment with alternative investments.One such study identified 12–16 job-years of directemployment created for every USD 1 million investedin energy efficiency, compared with only 4.1 job-yearsfor an investment in a coal-fired power plant and only4.5 job-years for a nuclear power plant.That is to say,energy end-use efficiency investments create three tofour times the number of jobs created by comparableenergy supply investments (44).

It has also been commonly thought that power plantconstruction has a very large impact on the localeconomy.This impression arises from viewing theimpact in a local area where construction expendituresand employment are highly concentrated. For theregion as a whole, however, the impact is not nearly aslarge as that of a comparable energy-efficiencyimprovement programme. In addition, because of thelarge share of capital investment required for energyproduction facilities, the total cost of producing a kWhof electricity is about twice the cost of saving a kWh.

Some jobs are actually lost due to increasedenvironmental regulation and market deregulation inthe energy sector.The opening of the electricity andgas markets, for example, has led to job losses in theshort term, mainly because increased competition hasforced rationalisation of energy production/generation,transmission and distribution facilities.These net joblosses do not take account of the redeployment effectsof lower electricity prices for big industrial users. It isclear, however, that if increased investments in energyefficiency are coordinated with environmentallegislation and market liberalisation, net employmentgains can still be achieved (45).

There are many estimates on the possible number ofjobs that can be created in the EU through increasedenergy efficiency.These estimates vary greatly,according to the size, length and types of investments

ANNEX 5

(41) ‘National and local employment impacts of energy efficiencyinvestment programmes’, 2000. SAVE study, ACE, UK.

(42) ‘Employment effects of electric energy conservation’, 2002.Charles River Associates.

(43) Ibid.

(44) Ibid.

(45) European Parliament study of 2004.

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that are made. A rough calculation based on the valueof the energy saved from an energy-efficiency increaseof 1 % per year for a 10-year period, shows that thiscould lead to over 2 000 000 man-years of employmentif these investments are undertaken, for example,under proper conditions in the buildings retrofittingsector (46).These estimates are corroborated by otherstudies (47).The large savings potential and the factthat the buildings sector is responsible for 40 % of EUfinal energy consumption, make energy-efficiencyinvestments in this sector particularly interesting.Theincreased possibility to finance some of theseinvestments from the Structural Funds and thepossibility for Member States to apply reduced VAT andother taxes and charges can add to this interest (48).

It should also be mentioned in this context that newrequirements in Member States for the certification ofthe energy performance of buildings are expected toimpact very positively on employment in the buildingsector. At the same time, this requirement will provideinformation and advice on future cost-effective energy-efficiency investments, many of which should beundertaken.The requirement for the inspection ofheating and air-conditioning systems is also expectedto increase employment. Although EU-level estimatesof the direct employment effects of these require-ments are not yet available, indications are thatMember States together will need around 30 000 newexperts for certification and inspection when nationallegislation has been fully entered.

(46) SAVE study.

(47) UNDP, World Energy Assessment, p. 185. Rat für NachhaltigeEntwicklung: ‘Perspectives for coal in a sustainable energyindustry’, October 2003.

(48) It is estimated that lowering income taxes and employercharges while raising them compensatorily on energy couldcreate half a million new jobs in Denmark.

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European Commission

Doing more with less — Green Paper on energy efficiency

Luxembourg: Office for Official Publications of the European Communities

2005 — 45 pp. — 21 x 29.7 cm

ISBN 92-894-9819-6

KO-68-05-632-EN

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