Demand Reduction, Energy Efficiency and Policy
Effectiveness: What Works?
Nick Eyre, Edinburgh 13th December 2013
UK energy use trends
-
20
40
60
80
100
120
140
160
180
1970 1975 1980 1985 1990 1995 2000 2005 2010
M
toe
Total UK Energy Use 1970-2011
Industry Transport Domestic Other
Drivers of UK carbon emissions Kaya identity values 1971-2008
Based on IEA data
0
0.5
1
1.5
2
2.5
19
71
19
73
19
75
19
77
19
79
19
81
19
83
19
85
19
87
19
89
19
91
19
93
19
95
19
97
19
99
20
01
20
03
20
05
20
07
C/E
E/GDP
GDP/P
P
…and efficiency is likely to make a key contribution to future decarbonisation
IEA ETP, 2010
Gas in power generation
Zero carbon supply
Changes in energy demand
Energy efficiency as a ‘cost reducer’ in carbon abatement
Taken from IEA, 2010
CERT
CESP
ECO
GD
0
10
20
30
40
50
60
70
80
1994-1998 1998-2000 2000-2002 2002-2005 2005-2008 2008-2012 2013-2015
EESoP 1 EESoP 2 EESoP 3 EEC 1 EEC 2 CERT/CESP Green Deal/ECO
Mt
CO
2 (
life
tim
e)
pe
r a
nn
um
…but in buildings energy efficiency we are reducing the level of ambition
Source: Rosenow and Eyre (2013)
Carbon savings from the principal buildings energy efficiency policies
Energy efficiency as a ‘cost reducer’ in carbon abatement
Taken from IEA, 2010
Barriers to energy efficiency
Deficient
information
Incorrect or insufficient knowledge at the point of
decision-making biases decisions against efficiency
Access to
capital
Constraints on borrowing, including higher interest rates
than justified by the risk of the project
Split
incentives
Investors cannot always appropriate the benefits of
energy efficiency investments (e.g. landlords)
Risk Perceived technical and financial uncertainties, including
trust in delivery agents.
Bounded
rationality
Energy consumers do not make the choice identified as
optimal by economic analysis
Based on Sorrell et al, 2004
Energy efficiency is economically and environmentally beneficial, but it still needs strong policy intervention
Two key hypotheses for energy efficiency policy
It is a socio-technical innovation problem – so a package of different policy instruments is needed
It is a multi-level governance problem – so policy action is needed at different levels of government
Market transformation: Innovation stages and polices
Research
Early
adoption
Mass
adoption
Late
adoption
R, D and D
support
Incentives and
engagement
Regulation
Time
Mark
et
penetr
ation
Policies
Innovation stage
An example: UK fridge/freezer sales
Source: EST, 2008
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
1996-97 1997-98 1998-99 1999-00 2000-01 2001-02 2002-03 2003-04 2004-05 2005-6 2006-7 2007-08
G
F
E
D
C
B
A
A+
A++
Incentives
for B
Minimum
standard C
Incentives
for A only
40 years of energy efficiency policy: What have we learnt?
Energy prices make a difference
but pricing policies are constrained by concerns about competitiveness and equity
Regulation works well
but only for ‘mass products’, and where well-signalled and enforced
Investment incentives can be very effective
but they cost money – Government’s or consumers’
People matter
but do not trust, or even expect, Government or energy companies to engage them very effectively
Based on Mallaburn and Eyre, 2013
Energy efficiency as a multi-level governance problem Governance level
Global
EU
National
Country/region
Local govt
Civil society organisations
Households and businesses
Govern
ance
pow
ers
Ability
to e
ngage
Energy efficiency as a multi-level governance problem Governance level Governance levers
Global UNFCCC
EU Carbon markets; product standards; RE/EE targets
National Energy policy; fiscal; spending; energy market regulation
Country/region Housing and fuel poverty policy; building regulations; transport policy; business support
Local govt
Civil society organisations
Housing/ transport services; energy advice; community projects and engagement
Households and businesses
Personal action
Govern
ance
pow
ers
Ability
to e
ngage
UKERC Contact Details
UK Energy Research Centre
+44 (0)20 7594 1574
www.ukerc.ac.uk
Nick Eyre
+44 (0)1865 285129
http://www.eci.ox.ac.uk/people/eyrenick.php