Europe’s energy intensive industries are probably divided on the merits of power savings targets for 2030, but if the right mix of unambiguous and universal targets and measures can be agreed – and explained – opposition could fade away, argues Houchan Shoeibi.
Houchan Shoeibi is the CEO of Saint-Gobain Glass and chairman of Glass for Europe. He was answering a written Q&A from EURACTIV.
It must be galling for you to see that the European Commission so off track on its energy efficiency commitments. What would it do to make up lost ground?
It is indeed a major disappointment to see that the EU is likely to miss its 2020 energy efficiency target. To achieve the scale of savings needed to close the gap, 2020 is a very short-term horizon. The EU must work with its existing legislative instruments and make sure that their implementation throughout Europe is accelerated and robust. For example, the recast Energy Performance of Buildings Directive and the Energy Efficiency Directive must be rapidly implemented to produce tangible changes on the ground. So far, this is only happening in a few countries. The European Commission must also step up its efforts: four years after adopting the revised energy labelling directive and despite broad support from the glazing and window industries, work on an EU labelling scheme for windows is only starting now!
What is nevertheless most striking to me is that in the current debate on 2030, the vast majority of decision-makers praise energy efficiency and highlight its benefits – while at the same time, many of them are reluctant to make it a binding target. There is clearly a contradiction there.
What lessons do you draw from the experience of the 2020 climate and energy targets to date?
Many, but these are only useful if we are courageous enough to try to address the identified pitfalls rather than forcing an old approach which has largely failed. I would list three lessons which have links to the 2030 debate.
First, the 2020 framework clearly shows that non-binding objectives and targets are unlikely to be met. The message sent is: ‘the non-binding objective is only a nice-to-have; if we achieve it good, if not, no worries’. Of course, this fails to stimulate member states to take appropriate measures, to mobilise citizens, industries and investors. If the EU is serious about energy efficiency, then a binding target is needed for the future.
Second, a greenhouse gas (GHG) target is not a tool to achieve energy efficiency in many sectors of the economy – particularly in the buildings and transport sectors. If it were otherwise, the 2020 energy efficiency target would be close to being achieved. This means that constructing a 2030 framework solely around a GHG target, while claiming that this will drive energy efficiency investments, is a mistake.
Finally, targets designed as convenient political headlines make little sense. What matters to actors on the ground is what can realistically be achieved and how much effort is required on buildings, manufacturing processes, transport and so on? That is why sectoral contributions to the targets must be assessed and defined for all energy goals. Such contributions from the different sectors must also be made public.
Would you say that energy intensive sector was divided on the question of energy efficiency targets – and what are the key reasons for this, if so?
Probably yes, but Glass for Europe and the flat glass industry are very strong supporters of energy efficiency. Energy saving is the main rationale behind the purchase of our products. It is also the main R&D focus in our industry. Most importantly, energy efficiency is a necessity for our business to stay competitive vis-à-vis non-EU producers, who enjoy cheaper energy prices. It is therefore the primary concern in the daily operations of our manufacturing facilities.
Many other energy-intensive industrial actors probably face the same situation and could be supportive of energy efficiency if we killed the old myths. Energy efficiency is not about putting a cap on energy use and is therefore not a cap on industrial growth. Energy efficiency is not about requesting that industrial actors achieve unrealistic efficiency gains of 30% or 40% against all evidence of their potential. It is not yet another levy.
Energy efficiency is about ‘sound business management’ of our industrial operations. It is an absolute necessity for Europe’s flat glass industry which faces high energy costs. Energy efficiency is about creating huge markets for European industrial products. It is about building a route to economic recovery and sustainable growth by realising major CO2 emission reductions at the lowest cost. If that is understood and if the right mix of targets and measures is put in place, then I am convinced opposition could fade away.
So what sort of energy savings target – or measures – do you think would be most appropriate for 2030?
An energy efficiency target is needed to send a strong signal to business actors and investors and to stimulate member states to take the appropriate measures. The target must be unambiguous and cover all sectors of the economy. Each sector’s contribution to the general target – whether buildings, transport, energy-intensive industries or light assembly industries – must be quantified and made public so that each economic actor knows how much is expected from them. This is also important to help track progress and focus efforts.
The concrete measures, whether at EU or national level, will then naturally derive from the assessment of sectoral contributions. From available research and evidence, it is likely that most efforts will have to be realised in the building sector, requiring more robust national measures to implement member states’ ‘national renovation road maps’, as defined by the Energy Efficiency Directive, and a proper implementation – if not a possible tightening – of the recast Energy Performance of Buildings Directive.
Where should the ‘bottom-up’ sectoral measures that you favour for 2030 be focused?
Buildings and Transport clearly. According to a recent study from the Fraunhofer Institute, these two sectors have the highest untapped cost-effective energy savings potential, respectively 61% and 41% of end-use savings by 2030 compared to 2005. Additionally, energy efficiency gains will not be realised in these sectors if Europe relies on a single GHG target and the EU ETS. Buildings and transport are not covered by the EU ETS and specific bottlenecks need to be tackled.
Most importantly, in today’s economic context, these are two sectors which can provide tremendous business opportunities for Europe’s industries. A tripling of renovation rates in Europe could create around 2 million jobs, which, due to the nature of the activity, cannot be delocalised. A focus on buildings will also provide many co-benefits to Europe and to all of us who spend 80% of our time in buildings: better air quality, better comfort, better productivity, etc. It is difficult to attach a clear monetary value to these benefits but the positive return on investment for public budgets associated with building renovation is already well documented. In the automotive and transport sector, setting EU minimum energy efficiency standards that equally apply to all car manufacturers willing to market their vehicles in Europe, can help set new world standards and provide a lead to Europe’s carmakers.
If Europe grasps the cost-effective potential in these sectors, it will stimulate economic recovery and growth and will deliver a massive reduction in CO2 emissions. This is how Europe can reconcile its climate and its economic agenda. More energy waste requiring more costly investments in energy infrastructure and more pressure on EU-based industries by way of an ever tighter EU ETS, is just not the right answer.
Would an energy intensity target be preferable for you to an energy efficiency one?
There is no opposition between energy efficiency and energy intensity. The confusion around these concepts needs to be dispelled to get buy-in for energy efficiency. Energy intensity is one indicator, among others, to express improvements in energy efficiency. This indicator is actually the most useful one to quantify energy efficiency gains in glass-making, i.e. how much energy is used to produce 1 kg of glass. Other indicators may be equally valid in other sectors. For example, in buildings, absolute reductions in energy consumption can be achieved even if the building area increases. We have to acknowledge that each sector has its own specificities. For this reason, contributions to the overall energy efficiency target may be expressed in different terms for different sectors.
How would you like to see the ETS reformed so that it works in harmony with energy efficiency objectives for 2030?
The EU ETS will indeed need to evolve and take into account the contributions from energy efficiency gains to reduced GHG emissions. The ETS directly impacts only a few industrial sectors, which are expected to decrease their CO2 emissions. Accordingly, the total amount of CO2 allowances in the EU ETS system need to be set in accordance with the overall amount of cost-effective CO2 emissions reductions expected from these sectors. If we fail to do that, we will ask the ETS sectors to bear the full burden of CO2 emissions reduction efforts, while the potential from non-ETS sectors, such as buildings and cars, is left untapped. That would be ineffective climate-wise and foolish in economic terms.
For these sectors, including flat glass production, the ETS is an additional extra cost that our competitors do not face, regardless of the current or future CO2 price. It therefore affects the competitiveness of EU-based industries. When reforming the ETS, it would be wise to put in place mechanisms so that energy intensive industries exposed to international competition – i.e. benefiting from the carbon leakage status – do not see their amount of free CO2 allowances decrease more than their estimated CO2 savings potential. If this is not ensured, then the EU is simply telling me: ‘We know your industry can only reduce its CO2 emissions by 5% to 10% but we will penalize you, regardless of your efforts and we do not care about international competition.’
The ETS is supposed to support a shift in electricity generation by sending a price signal. But for the price signal to be effective in today’s new energy world, it would require carbon prices at levels that are unsustainable for EU industries. I do not have answers to this difficulty but it may be a sign that the ETS is not the silver bullet for all problems. Other instruments need to be envisaged, certainly in terms of energy efficiency, but also in terms of energy policy and energy mix. We cannot simply do more of the same. The ETS serves a purpose but betting all on this instrument with only a few ‘quick fixes’ is not enough. We need to draw lessons and rethink our approach without any taboos.
Some energy suppliers argue that public acceptance and not targets is the key issue for increasing energy efficiency. Do you see an energy efficiency backlash developing, similar to the renewables backlash?
Public acceptance of energy efficiency will be important indeed, hence the necessity to explain its benefits and rally society behind this objective. Citizens and businesses are worried about rising energy costs. To minimize these, we must act on energy affordability and energy use. Using energy efficiently and not wasting it are parts of the answer. Experts from the International Energy Agency show how, over the mid-term, Europe will become more and more dependent on energy imports and how energy prices are likely to stay high in Europe. If this reality is explained, it will become obvious to all that energy efficiency is one of the only serious routes to address the issues of rising energy costs and energy poverty.
Public acceptance will also come from all co-benefits associated with energy efficiency. The households that enjoy tangible decreases in energy bills and see how their houses have become more comfortable and less damp, while their cars have become more pleasant to drive and less fuel-hungry, are likely to value the change. The backlash would be less likely from them.
The proper insulation of buildings, new windows and energy efficiency in general are not as visible as photovoltaic panels. That is precisely why a target is needed: to send a clear signal to society, to show in an educational way the benefits, to make it ‘worth the investment’ in everyone’s mind and to ensure the subsequent measures are accepted and well implemented.
Would you like to see more regulatory developments across the EU or within member states on the recycling of glass in buildings?
Glass is a fantastic product and it is fully recyclable. Many people simply do not realize that the quantity of glass from old windows or facades that is recycled into new glass products is very limited. Indeed, the vast majority of it is either recovered from other applications only, or goes to landfills. For our industry, helping to reverse that trend is a priority.
The main bottleneck resides in the fact that most glass is not collected and sorted by construction workers before buildings are demolished or after windows have been changed. This leads to impurities in the waste glass that make recycling very difficult. There is no easy solution. Concrete initiatives need to be designed at national if not local level to respond to different local practices, to engage with local construction workers and get the logistics right.
Our industry is already working on the ground to design and test possible solutions and it appears from this experience that EU policy support could greatly help. The EU needs to send a signal to all actors of the construction industry by way of a strategy on building glass recycling and – why not? – a specific target on waste building glass recycling. Additionally, measures to make the landfill route less financially attractive or to generalise demolition audits for large tertiary buildings could help step up changes on the ground.
Using more waste glass for glass melting is also an efficient way for our industry to reduce its CO2 emissions. This issue is therefore worth EU support to move towards a competitive low-carbon and resource-efficient Europe.