EU could halt energy demand growth, says study

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Sweeping improvements in the energy productivity of Europe’s economies could prevent the runaway energy demand and consumption currently threatening to undermine the EU’s economic growth, says a new report by the McKinsey Global Institute (MGI).

Europe has “an opportunity to increase energy productivity that would halt energy demand growth in the region completely,” says the new MGI report, entitled ‘Capturing the European energy productivity opportunity’.

Indeed, according to MGI’s findings, as much as twice the amount of electricity consumed by the entire EU 25 in 2003, or eight million barrels of oil per day, could be saved using existing technologies.

“Compared with many of the alternative energy supply solutions, investing in energy productivity is cost-effective and faces less uncertainty,” adds the report, citing estimates by the International Energy Agency (IEA), which predicts that “an additional €1 spent on more efficient electrical equipment, appliances, and buildings avoids more than €2 in investment in electricity supply”.

Energy-efficiency improvements in the residential buildings sector provide the greatest potential for slashing demand, notably through more efficient appliances and heating and cooling systems, the report says. Next in line are the commercial and transportation sectors, followed by heavy industry and refineries.

Improvements in these sectors could result in a reduction of greenhouse gas emissions (GHGs) in the order of one billion tonnes by 2020, equivalent to the GHG emissions of the UK and France put together, according to the report. 

But EU and national policymakers, who are under pressure to create the right framework conditions to drive energy efficiency improvements, have their work cut out.

“A myriad of information barriers, market imperfections and policy distortions today stand in the way of investors taking up economically attractive opportunities to invest in energy productivity and explain why consumers and businesses fail to capture the savings that higher energy productivity offers,” laments the report.

The EU has embarked on an ambitious drive to reduce its GHG emissions by 20% by 2020. But unlike in the area of energy supply, where a legally binding target for increasing renewable energy use by 20% by 2020 is set to be agreed by EU lawmakers, Brussels has been criticised for not pushing to make improvements in energy efficiency legally binding for member states. The EU has only set an ‘indicative’ target of 20% greater energy efficiency by 2020.

Among its recommendations, the report calls on policymakers to set stricter energy-efficiency standards for appliances and equipment. The Commission is proposing to revise and expand existing ‘eco-design‘ and energy-efficiency rules as part of an action plan on Sustainable Consumption and Production (SCP). But the proposals disappointed many stakeholders for not going far enough (EURACTIV 17/07/08).

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