This European Commission famously promised to focus on the big policy picture and avoid petty regulations. But small things can grow into something big, for example on energy efficiency and eco-design rules for electric appliances, writes Ingrid Holmes.
Ingrid Holmes is Director of E3G, a think tank working to accelerate the transition to a low-carbon economy.
President Juncker famously said: This Commission must be big on big things and small on small things. The gist of what he meant by this is that Brussels cannot be seen to ‘interfere’ on the basis of trivial matters in the affairs of members states.
This makes sense. But President Juncker’s words risk being overinterpreted, not least by the man himself, with great losses to Europe as a result. Because sometimes it is by focusing on the small things that you can actually go big.
Imagine a million new engineering solutions delivered by EU workers right across member states. Each intervention helping Europe improve its productivity as businesses become more competitive; improving the air quality in cities and towns; boosting health outcomes for the 54 million EU citizens currently unable to afford their energy bills, and replacing jobs outside the EU bloc with millions of local jobs within the EU.
It’s happening already – through energy efficiency. And it works. Energy demand levels are now at the level they were in 1990 with no negative impact on economic growth. The Ecodesign Directive has designed energy and resource efficiency into products sold in European markets. This has knocked around €490 per year off European household’s energy bills. It is also expected to increase revenues to European industry by €55 billion to 2020 and create two million new high-value jobs by 2030.
And that’s all because we started to think smarter about how we use energy. The EU is already shifting from the ‘old model’ of large centralised energy sources to more decentralised and clean energy solutions and a focus on using demand management and energy savings technology to reduce demand at its source.
As the European Alliance to Save Energy’s recent publication “Strategic Investments for Europe” sets out, innovation across insulation, efficient lighting and heating systems, ICT-driven demand management solutions combined with batteries and renewables have made a whole range of high-tech and cost-effective energy-saving investments possible. They have been driven by regulation and they are happening now.
But more can and should be done – and now is the time to do it.
The Energy Union is the biggest infrastructure investment plan the EU has ever conceived. Its genesis lies in fears about energy security to the East; it will be used as a vehicle to help Europe deliver its 2030 climate and energy goals. If we know energy efficiency can and does deliver and we think it is worth doing more of it, we should build it in right from the start. This makes logical sense: in designing our forward shared energy system we should plan to make it as efficient as possible.
The European Parliament gets this. In June, the Parliament’s own initiative report “calls on the Commission to treat energy efficiency as an infrastructure priority [making it] a priority consideration in future investment decisions on Europe’s energy infrastructure”. Its inclusion in the report was non-contentious, unlike the fierce fight about the level of the energy efficiency target proposed. Opposition to the target was led by the report’s own author: the key argument being that ‘too ambitious’ binding targets and energy-saving obligations will hinder growth creating a needless strain on small businesses. This misunderstands the context in which the discussion is happening.
One way or another we will need to renew our aging energy infrastructure in Europe – and that will have a cost. Big choices need to be made now on where priorities should lie, and which options can help provide the secure, low carbon and competitive energy system the Energy Union pledged to deliver. The logical starting point should be how much energy we can feasibly and cost-effectively save through building in an expectation of energy saving and demand management right from the start. From there we can work back to plan the most appropriate power supply capacity to meet our collective energy service needs. This would minimise the risk of asset stranding and it would ensure the best overall value possible it provided to the EU citizens that will ultimately need to pay for it.
Analysis shows a 40% EE target – the target endorsed by the European Parliament – is both economically and technologically feasible. Given a recent JRC report found the EU met its 2020 energy efficiency target six years ahead of time, saving the equivalent of Finland’s annual energy use, it seems madness not to design our energy system around delivering a strong target.
So what should the European Commission do next? On the 30th November, the new Energy Efficiency Package will be released. That needs to do four things.
- First – put demand and supply side on an equal footing by framing it as an energy infrastructure priority, mirroring the language of the European Parliament.
- Second – provide some certainty around the relative contribution expected from the demand versus the supply side by putting in place an EU binding target of at least 30% and preferably 40%, reflecting the full cost-effective and technical potential.
- Third – commit to bringing forward a full legislative package – revisions to the Energy Efficiency Directive but also the Energy Performance in Buildings Directive, a key piece of the jigsaw if we are to see the demand side deliver its full potential in 2030. It also needs to be bold on the list of appliances it intends to regulate under the Ecodesign Directive, including hairdryers and toasters, for while individually each item may not use much power in total they add up to huge amounts of wasted energy.
- Fourth and finally – delivering the range of structural reforms needed to unlock investment across the economy. This will include market, financial, institutional and economy reforms that can be packaged up under the ‘Efficiency First’ banner that VP Šefčovič has championed and now needs to deliver.
This last piece will need to be a ‘slower burn’ – delivered through an Efficiency First Action Plan, much like the Action Plan developed for the Capital Markets Union initiative is expected to deliver over several years to 2019. The Efficiency First Action Plan should focus in the short term on creating the conditions for a ‘deal’ between member states and the European Commission – for example, reforms on accountancy rules and State Aid to unlock regional level investment in return for EU and national energy efficiency targets to deliver collective benefits on GHG reductions, increased energy security, reduced overall system energy costs and job creation within the EU bloc.
This should not be too big an ask for the Commission to deliver given the benefits it will bring.
For months, much of the EU’s political attention was focused on the TTIP (and then sister CETA) deal – which was touted as key to continued prosperity, delivering a 0.5% boost to increase EU GDP. A 40% energy efficiency target would have 9 times the impact – increasing EU GDP by 4.5% in 2030.
The European Commission holds the key now to unlocking this collective benefit. The question is will it be brave enough to put forward the proposals needed to unlock the potential millions of small things to have big benefits? Here’s hoping they will.