HUMAN WRONGS WATCH

By EurActiv*, 24 May 2013 – Progress on energy efficiency was blocked at an EU summit on Wednesday (22 May) by a cocktail of myopic business interests and timid leadership, according to Hans Nilsson, a board member of the European Council for an Energy Efficient Economy (ECEEE).

Source: EurActiv

Background briefing documents for the European Council were heavily skewed towards an agenda of energy price differentials and the promotion of unconventional fuels such as shale gas.

In this context, the three references to energy efficiency – and eight to energy costs – in the conclusions represented a significant result for supporters of energy use reductions.

“Clearly it is a repetition of the ‘nice words’ but at least it shows that energy efficiency – ‘the shale gas of Europe’ – is on the agenda [even if] the ministers in Council were not very action-oriented,” Nilsson said. “It was more like they were walking around in the fog, trying to find their way.”

The text that EU leaders signed off on praised the “significant contribution” that efficiency could make to reducing industry costs and said that implementation of directives on energy efficiency and the energy performance of buildings was crucial.

“Short-sighted Business Interests and Political Cowardice”

However, member states such as Luxembourg, the Czech Republic and Slovenia have still not reported on their energy savings targets for 2020, and the Commission itself does not expect its planned goal of a 20% reduction in projected energy use by the decade’s end to be met.

Clear progress towards addressing such obstacles at the summit was prevented by “short-sighted business interests and political cowardice,” Nilsson told EurActiv.

“Sometimes politicians are looking for simple quick fixes and, when they say ‘natural gas is half the price in the US, why can’t we do that in Europe?’ the rational response would be that in that case, we should use less gas,” he said.

In 2011, European fossil fuels imports amounted to some €420 billion – and these figures are projected to grow 20% by 2035, partly because of factors such as the continued index linking of gas to oil prices.

Yet last year, the International Energy Agency (IEA) said more than half of the EU’s potential energy savings in industry, and 80% of the possible savings in the buildings sector, remained untapped. Buildings make up 40% of Europe’s energy use.

Nilsson said that some of the EU countries most dependent on gas, which currently supported the industrial competitiveness agenda, also suffered from poor quality buildings whose energy output could easily be reduced.

Energy Volumes

One key point noted by the Brussels energy efficiency community – and outlined in an ECEEE briefing paper – is that applied energy savings measures would by definition lower energy costs to industry, as they reduce the volume of energy used.

This was implicitly recognised by the EU leaders in the summit’s final conclusions’ eight references to energy costs – as well as prices – according to Randall Bowie, an efficiency expert who has crafted past EU energy laws.

“The ministers were beginning to understand that if prices go up, you are not forced to buy cheaper energy,” he said. “You can actually reduce your consumption to reduce your cost.”

The end financial savings would be “roughly the same” as for shale gas, Bowie claimed “but it is a better long-term investment as shale gas isn’t going to last forever, and the cost of extracting it will go up much more quickly.”

The IEA says that Europe is likely to remain “a high energy cost region” in the near future, when compared with the US and China.

How to change the energy inefficient behaviour of industry and consumers is thus a conundrum that policy-makers and campaigners continue to grapple with.

Risk Aversion

According to Nilsson, a naturally risk- and loss-averse human nature tends towards maintaining endowments, rather than restructuring them.

“The traditional perspective is to assume that the consumer is rational and will eventually make the choice of energy efficiency,” the ECEEE briefing paper says. “Experience is, however, not encouraging for such beliefs.”

Future energy efficiency information campaigns may thus focus on consumer losses through energy wastage, rather than their savings potential.

Such a perspective could also influence debates on public-sector financing for efficiency improvements. Bowie said that one reference in the EU summit conclusions, calling for work on “innovative financial methods, including for energy efficiency” was important in that regard.

“In buildings, infrastructure is expensive but a good investment and if the public sector comes in and pays a share, then hopefully the private sector will come in too and realise that it’s probably a safer and more reliable investment than the stock market,” he said. “So long as you choose your buildings correctly, and avoid bubbles.”

Financial institutions and intermediaries which were scared of investing because of the economic crisis could be tempted back into the building sector with instruments such as default guarantees, he added.

2013 Human Wrongs Watch