The ups and downs of EU energy efficiency policy

Throw a frog into boiling water, the story goes, and it will jump out. But if it is placed in cold water that is slowly heated it will not perceive the danger and will be boiled to death.

This is just what is happening to the draft Energy Efficiency Directive. Each successive amendment from the European Council weakens the text a little more. Now the Council’s version – a compilation of the most unambitious points from each member state – has almost reached junk status.

Already last year – before the directive’s release in June 2011 – the Council had pressured the Commission into proposing a number of loosely-linked binding measures instead of a binding overall 20% target (which Commission analysis shows would have been the best option).

Since then the Council has been steadily watering down all the main measures in the directive – especially the 3% renovation rate for public buildings and the measure with the highest savings potential: the 1.5% annual savings target.

Council amendments started by specifying that the 3% renovation rate for public buildings should initially only apply to surface areas over 500m2. This excludes, for example, most social housing in the UK. So those most in need of better insulated and cheaper-to-run homes would be left out.

Some weeks later the Council proposed that only ‘Central Government Authorities’ should be covered by the 3% target. In Germany this narrows the scope of the target to around 30 buildings.

Meanwhile, the Council is squeezing the 1.5% annual savings target from all sides. First, by reducing its scope: the 1.5% target covers final energy – the energy used by businesses and consumers after it has been transformed into electricity, or refined into petrol or diesel. The Commission had already excluded the transport sector (the European Parliament, rightly, wants it back in). But now the Council wants to exempt 40% of the industries covered by the EU Emissions Trading System. If allowed, this means only half of the EU’s final energy use would be covered by the 1.5% target.

Second, the Council wishes to revise the 1.5% target downwards. Its latest amendments call for a gradual phase in of “1.0% in 2014 and 2015, 1.25% in 2016 and 2017 and 1.5% in 2018, 2019 and 2020”. This would reduce projected savings over the 2014-2020 period by about 14-15%.

Then there is the quality of the savings. The Council – led by Austria – is pushing for ‘early actions’ to allow member states to credit savings made before the introduction of the directive. Picture the reactions if a government sought to correct a budget deficit by statistically transferring the effects of previous economic measures. Yet this is standard Council practice for energy savings. Based on past experience with the 2006 Energy Services Directive this could slash the 1.5% target to around 1%.

Some member states also wish to credit ‘future actions’. This would allow savings to be credited before they have actually been delivered – meaning that each year’s 1.5% target would actually be delivered over a 5-25 year timeframe. Real annual savings would be just a fraction of the claimed savings.

Finally, there is the strong Council pressure to allow member states to “fulfil up to 20% of the [1.5% target] through energy savings achieved in the energy transformation sector” (i.e. power plants). This is bad for two reasons. The first is that the 1.5% target is intended to reduce energy consumption by businesses and consumers, not to make energy production more efficient. That was the task of other measures in the directive (which have also been watered down).

The second reason is more serious. If this amendment goes through, member states could meet the 20% contribution simply by fulfilling their 2020 renewable energy target obligations. Producing electricity from wind and solar energy is far more efficient than fossil fuel and nuclear generation (there are no thermal conversion losses from wind and solar). But the benefits of switching to renewables are already factored into estimates of the EU’s likely energy savings by 2020. These estimates – which the Council agrees with – show existing legislation is not enough to meet the EU’s 20% by 2020 energy savings target. There is a gap, which the Energy Efficiency Directive must close. It will not do so by counting savings that will happen anyway.

So the frog is slowly being boiled. But the good news is that the boiling frog anecdote is not actually true – frogs will jump out of the water, even when gradually heated. Will EU policymakers be similarly wise?

Alarm bells are starting to be heard. A recent paper from the Commission estimates that “the impact of the Council version would represent 38% of the expected impact of the Commission’s proposal”. And of course the Commission’s own proposal is not tough enough to close the savings gap and meet the 2020 savings target (only the European Parliament’s version would do so).

It is not too late to stop and think. Official negotiations with the European Parliament and Commission on the final text of the directive are still in their early stages. Governments repeatedly insist on the need to cut carbon emissions, save money, create jobs and reduce energy imports. A strong Energy Efficiency Directive is their best chance to do so.

By Brook Riley (Friends of the Earth Europe) and Erica Hope (Climate Action Network Europe)

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