Fatih Birol, the chief economist of the International Energy Agency, has warned EU countries about the "absurd" strategies they use to subsidise fossil fuels. In an exclusive interview with EurActiv, he urged EU leaders to make the Energy Efficiency Directive, currently in its final negotiation stage, “a must”.
“Not to push the energy efficiency measures is another way of asking for higher emissions, higher energy import bills and higher energy insecurity," Birol said.
"So, therefore I think it is a must that we all have to push the energy efficiency measures throughout the energy supply chain,” he said. “Europe being a champion of climate change [policies], it needs also to be a champion of energy efficiency.”
Fossil fuel subsidies 'absurd'
Energy imports cost the EU €84 billion in 1999 and rose rose nearly sixfold in the past decade, hitting €488 billion last year, figures from the EU's statistical office Eurostat show.
“On the one hand, not to use energy efficiently and on the other hand to – in some countries – subsidise fossil fuel energy is an absurd strategy,” the IEA economist said.
“It is something like at the end of the meal when you want to eat the crème brulée, putting a handful of salt [on it] and mixing it together and eating it like that: on the one hand pushing energy efficiency and on the other subsiding fossil fuel energy systems. So therefore I think we have to get the right regulatory and the right market approach,” Birol said, commenting on the importance of the Energy Efficiency Directive.
Green MEP Claude Turmes (Luxembourg), the chief negotiator on the energy efficiency bill for the European Parliament, could not agree more. He said the cost for the EU’s energy imports in 2011 is equivalent to the cost of creating 17 million jobs, whilst the EU has 23 million unemployed people at the moment.
“Energy efficiency and building renovations will be an important part of the growth [initiative]" due to be launched at the next EU summit on 28 June, Turmes said. He was referring to the European growth agenda championed by the new French President François Hollande and the fact that energy efficiency in buildings in particular will lead to the creation of millions of jobs.
Connie Hedegaard, European climate commissioner, added on Monday (11 June) that energy efficiency should be the first option on the table for EU leaders seeking to boost growth and create more jobs.
"All the governments of Europe say they want growth and they want something that can create jobs in the short term. No matter how hard they think about it, it will be very difficult to think of better ideas," Hedegaard said, cited by Reuters.
Settling for less to achieve a deal
An ambitious deal on energy efficiency would put the EU on track to reach an overall cut in carbon emissions of 80%-95% by 2050, the minimum that scientists say is necessary to avoid global warming of more than 2 degrees Celsius.
“Energy efficiency is much bigger than renewables to help combat the rise in degrees Celsius,” Turmes said.
The draft Energy Efficiency Directive, tabled in June 2011, asked EU member states to cut their energy consumption by 20% by 2020 – a target that EU countries have signed up to in 2007 but did not follow up with binding legislation.
But, in the current economic climate, countries have effectively abandoned the idea of a binding target.
EurActiv understands that the Danish presidency was ready to settle for a deal that would make a “sufficiently significant contribution”.
"We have made serious progress, but we are still not there," Danish Energy Minister Martin Lidegaard told reporters after a meeting of the EU's environment Council on 11 June.
“I think member states still have their heads in the sand, the Parliament is doing what they can to oblige member states to face reality and recognise the benefits. But I think the Council will move,” Brook Riley of green group Friends of the Earth Europe said.
Market or EU regulations?
Under the EU's energy efficiency proposal, energy companies would have to achieve annual energy savings among their clients equal to at least 1.5% of their energy sales averaged over the most recent three-year period.
Energy companies are reluctant to accept binding targets and highlight their own efforts to promote energy saving – through home energy audits, technology and training.
“A competitive market is much better than a regulated market, it is faster and cheaper,” Claus Fest of RWE Effizienz GmbH in Germany told a workshop organised by industry group Eurelectric. “We don’t need anyone to tell us to do energy efficiency, we are doing it right now.”
Many European energy retailers resist a mandatory 1.5% annual efficiency target and prefer finding their own way to improve productivity – through higher electricity prices or subsidies from the public sector.
But the industry’s existing voluntary efforts have not pleased everyone and activists claim they are unreliable.
“The only problem is that we have tried this approach before with the Energy Services Directive, but it didn't work,” Riley said.
Current projections tend to strengthen that worry, showing that the EU is not even halfway to reaching its 20% energy efficiency target, lagging behind at 9%.
However, IEA's Birol believes the right approach is a combination of both market regulation and binding EU measures.
“I think we need both the regulatory measures and market measures and the market measures can depend on the country and the context, but we need both of them,” Birol said.
National specificities of each of the 27 EU energy markets make it harder to reach a common denominator.
“But for each country and for each sector we need certain standards and the regulatory measures regardless of which country it is” Birol said.
“Otherwise it would be rather unwise because a lot of energy would be lost”.
The publication of a proposal for the Energy Efficiency Directive in June 2011 sparked great controversy amongst industry players. Employers' group BusinessEurope criticised it at the time for harming economic growth.
Since then, other voices among the industry have made themselves heard, which argue the opposite.
The Prince of Wales's EU Corporate Leaders Group on Climate Change (EU CLG) represents several companies, including Alstom, Tesco, Unilever, Philips, Kingfisher and United Technologies. It argues: “The Energy Efficiency Directive strikes the right balance: it does not place unnecessary or burdensome regulations on businesses, especially where those measures already exist at the national level. It also allows businesses to continue to build on their existing efforts.”
“Those countries that question the rationale for the Energy Efficiency Directive should think about the impact of doing nothing. Indeed, to do nothing in the area of energy efficiency would deprive the EU of the chance of making an impact on GHG emissions in the short term,” industry group EUCLG added.
EU regulation on energy efficiency is crucial also in order to trigger the creation of certain related markets, such as the demand-response market, Jessica Stromback, executive director of Smart Energy Demand Coalition, told EurActiv in an interview.
"Regulation is decisive to the successful deployment of demand response. The regulatory barriers are certainly obstacles given that in some markets demand is not even allowed to participate. This has to change and the EED can go some way towards opening up these markets for consumers," Stromback said.
- 1 July 2012: Danish presidency ends.
- 12 Nov. 2012: IEA due to release report on energy efficiency.