There are no precise figures available for total EU spending in support of energy efficiency improvements as such.
Energy efficiency is a "horizontal" issue that affects nearly all of the EU's most important policy areas, including transport, energy, product development, buildings, agriculture and information technologies.
EU policy framework
Among the most important EU communications and policies are:
The Commission is also pushing for a Strategic Energy Technology (SET) Plan that would place more emphasis on research into energy-saving technologies such as fuel cells, hydrogen and sustainable coal and gas technologies (EURACTIV 07/03/07).
EU funding instruments
EU funds in support of these policies are spread across a variety of spending programmes and are allocated through grants, financed by the EU budget, in support of specific projects.
The Seventh framework programme (FP7) for research and technological development, for example, provides monies for select research projects during the period 2007-2013 according to different thematic areas, including: information and communication technologies (9.1 bn euros), transport (4.1 bn euros), energy (2.3 bn euros), food, agriculture and biotechnology (1.9 bn euros), and environment, including climate change (1.8 bn euros).
To what extent these funds support energy efficiency improvements depends largely on the nature of the project that is funded - certain grants are given only the condition that the funded project leads to technological advances in energy efficiency.
Complementary to FP7, and more targeted to funding energy efficiency, is the Competitiveness and Innovation Programme (CIP). The CIP, which also runs from 2007-2013, is endowed with a budget of 3.2 bn euros, and contains two important programmes:
The Intelligent Energy Europe (IEE) programme, focused specifically on energy efficiency and renewable energy with a budget line of 730 million euros, and;
The Entrepreneurship and Innovation programme, with 430 million devoted to "eco-innovation".
The EU's budget is relatively small - it is less than the total budget of the UK, for example. But money from the EU budget is not the only source of funding for energy efficiency.
The EU Emissions Trading Scheme (EU ETS) is perhaps the most frequently cited example of a market-based instrument (MBI) for improving energy efficiency, since paying for carbon emissions should, ideally, encourage investments in technological and other improvements to reduce energy waste.
Taxes are a central and controversial issue in the debate. While they can help stimulate energy efficiency improvements, many member states are reluctant to cede national sovereignty on taxation to the EU.
Reducing value-added tax (VAT) rates for energy-efficient products and services, for example, is supported by France and, ironically, the UK. But it remains to be seen whether unanimous agreement can be reached on this issue among 27 EU member states (EURACTIV 23/07/07).
State aids for environmental protection are not ususally mentioned in connection with MBIs, but they play an important role since current EU rules do allow member states to subsidise efficient production of electricity as long as costs for more efficient production exceed the market price of conventionally generated electricity. The rules are currently being revised for 2008, and may contain more allowances for energy efficiency subsidies.
On 28 March 2007, the Commission published a Green Paper on market-based instruments, opening a debate on how best to use taxation and other market-based measures to finance energy efficiency and the "greening" of the EU economy (EURACTIV 20/03/07 and 30/03/07).
Structural funds: a wasted opportunity?
EU Structural Funds are designed to promote development and reduce inequalities between different regions of the EU. They represent over 40% of the EU budget, totaling 308 billion euros for the period 2007-2013.
But structural funds spending priorities were formulated before energy efficiency and related issues, such as climate change and energy security, moved to the top of the EU's political agenda.
As a result, structural funds are spent to support the Lisbon Agenda for "growth and jobs", which can lead to the construction of energy intensive industries and road transport networks, particularly in the 10 new EU member states. Some observers fear this will lead to an increase rather than a reduction of the EU's CO2 emissions by 2020. (Please see EURACTIV's related coverage of this issue for more information.)
Banking on efficiency
During a 05 June 2007 Board of Governors meeting, the European Investment Bank (EIB) committed to a "reinforced" contribution to "clean energy", which includes raising the share of EIB co-financing to 75% of total costs for renewables projects and for "investments contributing significantly to energy efficiency".
The EIB has also introduced a "systematic review of energy efficiency issues when assessing projects to be supported by the Bank."
Private and state banks are also increasingly interested in financing energy efficient projects. The KfW, Europe's largest "promotional" bank, for example, actively backs the construction of energy efficient private housing in Central and Eastern Europe. KfW and partner banks are currently lobbying the Commission to secure financial backing from EU Structural Funds to finance energy efficient construction.
Efficiency pays for itself?
Energy service companies (ESCOs) such as Honeywell and Siemens argue that there is no reason to wait for legislation or an increase in public funds to realise major energy efficiency improvements, particularly in large buildings that consume a great deal of energy.
So-called performance contracting is an arrangement whereby the ESCO's expenses for upgrading the energy performance of a large building are covered entirely by the returns from energy efficiency gains.
The Commission has taken note of the potential offered by performance contracting, and has promised to remove any remaining administrative barriers to companies offering such services.