Voluntary agreements with white certificates for energy efficiency improvement as a hybrid policy instrument

In this paper we examine the implementation of a combined policy scheme that consists of a traditional instrument, the voluntary agreements (VAs), and an innovative one, the white certificates (WhC). The basic structure of this scheme is that energy suppliers who undertake an energy efficiency obligation under a white certificate scheme can make use of voluntary actions to enhance investments in innovative energy savings projects. Energy suppliers and other market parties can additionally or in parallel participate in voluntary agreements and set energy efficiency targets. For fulfilling their voluntary agreement target, these market parties can receive tax exemptions or receive white certificates that they can sell in the market. Transaction costs and baseline definition for demonstrating energy efficiency improvement deserve special attention. This policy can assist a country to enhance energy efficiency improvement while it stimulates innovation. Cost effectiveness can be higher than the case of stand-alone policy instruments, since more financing options are available for more expensive projects. Nevertheless, the added value of the scheme lies more in the implementation of innovative measures for enhanced energy efficiency. Furthermore, market parties can discover more business opportunities in energy efficiency and establish a green image; hence an integrated scheme should achieve higher political acceptability.     

White Certificates for energy efficiency improvement with energy taxes: A theoretical economic model

In this paper we analyze interactions of two energy policy instruments, namely a White Certificates (WhC) scheme as an innovative policy instrument for energy efficiency improvement and energy taxation. These policy instruments differ in terms of objectives and final impacts on the price of electricity. We examine the effect of these policy instruments in the electricity sector, focusing on electricity producers and suppliers in a competitive market. Using microeconomic theory, we identify synergies between market players and demonstrate the total effect on the electricity price when suppliers internalize the behaviour of producers in their decisions. This model refers to an ideal market situation of full liberalization. The cases we examine consist of electricity producers with and without a carbon tax, electricity suppliers with and without an electricity tax, and with WhC obligations. Furthermore, we present a parallel implementation of WhC for electricity suppliers with carbon tax on electricity producers and an electricity tax with WhC obligations to electricity suppliers. We demonstrate differences in optimization behaviour of producers and suppliers. Based on a couple of cases of WhC with carbon and electricity taxes, various positive and negative effects of both schemes in terms of target achievement and efficiency are present, which can lead to an added value of such schemes in the policy mix, although uncertainties of outcomes are quite high. A basic finding is that in a merit order several parameters can increase final electricity price after the implementation of different policies: demand for electricity and electricity supply cost at a large scale and then follow the level of level of obligation for energy saving, level of penalty, and price of WhC (representing the marginal costs of energy saving projects). The impact magnitude of parameters depends on the values chosen and on the initial position of suppliers (i.e. if their actual behaviour deviates from full compliance with targets).     

A critical analysis of energy efficiency improvement potentials in Taiwan's cement industry

The cement industry is the second most energy-intensive sector in Taiwan, which underlines the need to understand its potential for energy efficiency improvement. A bottom-up model-based assessment is utilized to conduct a scenario analysis of energy saving opportunities up to the year 2035. The analysis is supported by detailed expert interviews in all cement plants of Taiwan. The simulation results reveal that by 2035, eighteen energy efficient technologies could result in 25% savings for electricity and 9% savings for fuels under the technical diffusion scenario. This potential totally amounts to about 5000 TJ/year, of which 91% can be implemented cost-effectively assuming a discount rate of 10%. Policy makers should support a fast diffusion of these technologies. Additionally, policy makers can tap further saving potentials. First, by decreasing the clinker share, which is currently regulated to a minimum of 95%. Second, by extending the prohibition to build new cement plants by allowing for replacement of existing capacity with new innovative plants in the coming years. Third, by supporting the use of alternative fuels, which is currently still a niche in Taiwan.     

Domestic offset projects in the built environment

Emission reduction activities in the European Union (EU) in- and outside the European Trading System (ETS) thus far have largely taken place separately. One possibility to combine the two is through linking Non-ETS offset project-based crediting schemes in the form of Joint Implementation or domestic offset (DO) projects with the EU ETS. Linking would allow non-ETS offset project-based CO₂ credits to be traded within the ETS market. This paper discusses the merits and drawbacks of the implementation of a DO scheme in the built environment in the Netherlands. The built environment can be characterised as a sector with a great diversity and significant energy savings potential. Emphasis is paid on the modalities for estimating energy savings under DO projects. The authors discuss if next to existing EU, national or regional policies in the Netherlands, DO could spur initiatives in sub-sectors or market areas that are difficult to reach with conventional policy instruments. Thus, despite the existing policy framework in this sector, there could be still space for DO to reach the untapped energy savings potential. DO can support activities and technologies that are not covered by other policy instruments, either because they are not part of the instruments focus or are above the minimum requirements of the incumbent policy targets. It is expected that some lessons from this study in the Netherlands can be taken into account also by other countries facing similar market circumstances, which have implemented several policy instruments and are considering DO schemes as an alternative for capturing part of the untapped energy saving potential in their end use sectors. Another possible advantage of DO is that is has the potential to reduce public spending on existing policy goals, when it is considered in conjunction with existing public financing instruments. In order to tap into this potential, there are a series of hurdles in place, like additionality and the current CO₂ price levels, while transaction and administration costs must be kept low.     

Saving energy is not easy: An impact assessment of Dutch policy to reduce the energy requirements of buildings

The Dutch Government stimulates the application of energy efficiency measures to reduce the energy requirements of buildings, which are responsible for about 20% of the Dutch CO₂ emissions. For our assessment, we followed a qualitative approach, due to a lack of data. We reviewed the mix of policy instruments and used stakeholder surveys and interviews. We found that energy use is not very likely to decline fast enough to achieve the Dutch policy targets for 2020. For new buildings, the policy mix works well, but its contribution to the policy targets is limited. For non-residential buildings the current Act, which obliges enterprises to take cost-effective measures, could be enforced to a greater degree. For privately owned homes a more compelling policy is needed. An alternative policy option would be to make taxation dependent on the energy label of residential houses. This would stimulate residents to take action while retaining the desired autonomy. For rental housing, binding agreements between municipalities and housing corporations may lead to more energy saving measures. Finally, we conclude that the Dutch energy tax is an important pillar of the current policy. It provides higher cost-effectiveness of energy saving measures and legitimates more strict energy efficiency standards.     

Energy conservation potential in Taiwanese textile industry

Since Taiwan lacks sufficient self-produced energy, increasing energy efficiency and energy savings are essential aspects of Taiwan’s energy policy. This work summarizes the energy savings implemented by 303 firms in Taiwan’s textile industry from the on-line Energy Declaration System in 2008. It was found that the total implemented energy savings amounted to 46,074 ton of oil equivalent (TOE). The energy saving was equivalent to 94,614 MWh of electricity, 23,686 kl of fuel oil and 4887 ton of fuel coal. It represented a potential reduction of 143,669 ton in carbon dioxide emissions, equivalent to the annual carbon dioxide absorption capacity of a 3848 ha plantation forest. This study summarizes energy-saving measures for energy users and identifies the areas for making energy saving to provide an energy efficiency baseline.     

Effectiveness of policy measures in transforming the energy system

The effectiveness of public policy measures in creating energy impacts were investigated through 20 policy cases on renewable energy and efficient energy use. The policies were grouped into subsidy-type and catalyzing measures based on the use of the public financial resources. The policy cost of subsidies ranged from 1 €/MWh up to over 100 €/MWh, the feed-in tariffs being clearly the most expensive choice. The public measures that strive for catalyzing market breakthroughs lie in the range 0.1–1 €/MWh, but some business driven and procurement type measures could come down to even 0.01 €/MWh. The policy costs observed could decrease by 25–60% if accounting for lagging energy impacts. The better policy efficiency of catalytic measures is most likely due to a stronger market and business sensitiveness, understanding of market needs, and focusing more on the end-use sector with active stakeholder involvement. The magnitude of the energy impacts were in average larger from the subsidy instruments but a few end-use technologies linked to catalytic measures reached even higher effects due to the strong market penetration achieved.     

Implications of an energy efficiency obligation scheme for the Swedish energy-intensive industries: an evaluation of costs and benefits

The EU Energy Efficiency Directive (EED) aims at improving energy efficiency by implementing actions in all sectors of the economy in the EU. Article 7 of the EED sets the target of 1.5 % cumulative annual energy end-use savings. An energy efficiency obligation scheme (EEO) is one of the policy mechanisms proposed to reach this target. This paper assesses the impact of implementing a Swedish EEO and the implications that such a scheme may have for Swedish energy-intensive industries. The assessment was based on cost-benefit analysis (CBA) methodology. The benefit-to-cost ratio (BCR) ranges from 1.56 to 2.17 and the break-even cost ranges from 83.3 to 86.9 €/MWh with sensitivity analyses performed for the emission allowance prices and eventual costs of the EEO. The annual energy savings potential is estimated to be 1.25 TWh/year. A Swedish EEO could motivate investments in energy efficiency measures and thus help Sweden reach the energy efficiency targets set in the EED.     

Assessing the value of pulp mill biomass savings in a climate change conscious economy

Pulp mills use significant amounts of biofuels, both internal and purchased. Biofuels could contribute to reach greenhouse gas emission targets at competitive costs. Implementing process integration measures at a pulp mill in order to achieve pulp production with less use of energy (biofuels) has not only on-site consequences but also off-site consequences, such as substitution of fossil fuels elsewhere by the saved pulp mill biofuels, and less on-site electric power generation. In this paper a method, a linking model, is suggested to analyse pulp mill biofuel saving measures when carbon dioxide (CO₂) external costs are internalised. The linking model is based on equilibrium economics and links information from CO₂ constrained energy market future scenarios with process integration measures. Pulp mill economics and marginal energy market CO₂ response are identified. In an applied study, four process integration measures at a Swedish pulp mill were analysed using five energy market future scenarios emanating from a Nordic energy model. The investigated investment alternatives for biofuel savings all result in positive net annual savings, irrespectively of the scenario used. However, CO₂ emissions may increase or decrease depending on the future development of the Nordic energy market.     

The value of retrofitting carbon-saving measures into fuel poor social housing

With current fuel poverty and carbon-saving policies continuing to miss their targets in the UK, the synergy between the two problems is investigated to highlight an approach that could be mutually beneficial. Focussing on the 550,000 fuel poor socially housed dwellings in the UK, costs of between £3.9 and £17.5 bn are estimated as the required capital investment for achieving deep-cut carbon savings (defined as at least 50%) across this section of the housing stock, with a potential total annual carbon saving of 1.7 MtCO₂. It is assumed that such costs would be largely (or totally) state-funded, though additional private investment could clearly increase the possible carbon savings across this section of the stock. The use of these socially housed fuel poor dwellings as low-carbon exemplars is discussed, and benefits for the private housing sector are postulated. The study also focuses on the problem of installing non-cost effective measures, i.e. technologies that would not currently be encouraged by existing subsidy schemes, but which might be necessary for achieving large carbon-saving targets.     

Life cycle costing,government policies and the diffusion of energy-conserving technology

Energy conservation has become a major goal of State and Federal policy. Governments are called on to play an active role in identifying promising energy-conserving technologies, and in encouraging their timely and widespread adoption.For their role to be effective, governments must have available—and be willing to use—some economic tools that permit estimation of the costs and benefits of their actions. Costs may consist of funds spent on research, development and public education, of tax revenues foregone, of administrative expenses, or of outright subsidies to producers or consumers. Benefits arise mainly through the earlier adoption of energy-conserving technologies with their attendant economic savings.In evaluating these savings, governments may assign “shadow prices” different from observed market prices to certain energy forms, to reflect more correctly their perceived value to society. They may also want to use discount rates different from those of private businesses or individuals in their benefit-cost calculus, to better take into account the claims of future generations on earth's remaining resources.The main purpose of this paper is to show what special economic tools are required in this evaluation, to develop some of them, and to demonstrate their application. Specifically, the aim is to explain and illustrate the usefulness to public policy makers of the techniques of life cycle costing and of market acceptance estimation.In order to highlight the basic principles without getting embroiled in excessive algebraic details, certain simplifications are introduced (and clearly stated) in the course of the paper. Although the tools are general, the development is made concrete by focussing the discussion on consumer durables that use and/or deliver energy in the performance of their service, and that are ready for application without further research and development effort.     

Linking historic developments and future scenarios of industrial energy use in the Netherlands between 1993 and 2040

Monitoring energy efficiency improvements is essential for policy evaluation and for future policy making. We estimate the annual energy efficiency improvements achieved in six Dutch industry sectors between 1993 and 2008 by using a bottom-up model. This model incorporates the production data and specific energy consumption values of 122 products. We estimate annual energy efficiency improvements of 1.0 % per annum (p.a.) for the total industry (excluding non-energy use); even though the results are subject to uncertainties due to errors in the energy statistics, we consider them as strong indication that Dutch industry needs to reinforce its efforts in energy efficiency. Based on historical achievements between 1989 and 2008, Business as Usual (BaU) scenarios project annual improvement potentials of 0.6–1.8 % p.a. until 2040. Based on literature review, this study estimates that implementing energy saving technologies can accelerate energy efficiency improvements to 2 % p.a. and beyond. Efficient combined heat and power technologies could increase these potentials further. These are beyond the historical achievements and BaU scenario projections. New policies will be required for technology development which ensures continuous energy efficiency improvements. The findings of this paper need to be extended by continuous monitoring and more scenario analyses with improved data.     

Effects of climate and energy policy related measures and targets on the future structure of the European energy system in 2020 and beyond

Stabilising the concentration of CO₂ in the atmosphere at a level of 450 ppm in order to keep global temperature increase below 2 °C requires an ambitious climate policy. This study analyses the role of different technologies in the EU-27 with regard to efficiency improvements, fuel switching and energy saving measures under such a climate policy target. The analysis is carried out using the regionalised Pan-European TIMES energy system model, a technology oriented, linear optimisation model. Thereby limited resources and import potentials of various energy carriers, competition among different sectors and the country-specific differences in energy demand are taken into account. As a result, it turns out that the structure of energy use inside the EU-27 is much stronger, influenced by political targets and positions regarding climate protection, energy security and the use of nuclear energy than by available technologies. In the case of climate protection polices and limited use of nuclear energy, the most important measures for the reduction of greenhouse gases are an increased use of renewables, carbon capture and storage, fuel switching and the intensified application of electricity in the end use sectors. Efficiency improvements play an additional role when security of supply is taken into account.     

Tradable white certificate schemes: fundamental concepts

A number of European countries have introduced market-based instruments to encourage investment in energy efficiency improvement and achieve national energy savings targets. Some of these schemes are based on quantified energy savings obligations imposed on energy distributors or suppliers, coupled with a certification of the energy savings (via white certificates), and a possibility to trade certificates. The paper describes the concept and the main elements of a tradable white certificate scheme, where appropriate giving examples from existing schemes in Europe. It discusses design and operational features that are key to achieve the overall savings targets, such as delineation of the scheme in terms of obliged parties, eligible projects and technologies, institutional structure, and processes to support the scheme, such as measurement and verification. Finally, the paper looks at a number of open issues, most importantly the possibility of creating a voluntary market for white certificates via integration into the carbon market.

Energy savings potential of uninterruptible power supplies in European Union

Uninterruptible power supplies (UPS) are key components of information and communications technologies (ICT) systems, ensuring reliability by maintaining the continuity and quality of the systems’ power supply. The energy consumption of UPS should be an important consideration due to its high impact on the lifecycle costs, but in most applications of UPS, energy efficiency is not the most important issue, since the operational reliability of the ICT systems and the related security of data processing and storage are the major concerns. However, the conversion efficiency of UPS systems has been improving in recent years and high energy savings can be achieved with the adoption of new technologies without a reduction of the reliability levels. The Ecodesign Preparatory Study for UPS (Lot 27) aimed to identify and recommend ways to improve, at their design phase, the environmental performance of UPS in the European Union throughout their lifetime. This paper presents the work developed during the Preparatory Study for UPS focused on the technical analysis of the best available and not yet available technologies, as well as the potential energy savings that can be achieved. Several technologies were considered at component and product level. The main design options were then modelled, and the potential energy savings achievable with policy options focused on minimum efficiency performance standards and energy labelling were assessed, showing a potential for energy savings in European Union in 2025 of 11.4 TWh (65 % energy saving relative to predicted energy requirement of EU ICT system UPS based on current practice).     

Rewarding energy savings rather than energy efficiency: Exploring the concept of a feed-in tariff for energy savings

Financial incentives are important for overcoming certain market barriers to improved energy efficiency and for the adoption of energy efficient technologies. Financial incentives are mainly focused on the introduction of specific technologies, rather than behavioural change. While the declared goal of financial support schemes very often is to save energy or reduce harmful emissions rather than to foster new technologies per se, it is often encountered that such financial support for energy efficient technologies may not ensure real energy savings due to the rebound effect and various market barriers.In the area of renewable energies it is common for financial support to be given to power producers for the verified production of renewable electricity, in the form of a guaranteed financial incentive (feed-in tariff). In the energy efficiency policy research little attention has been paid to the possible use of a “feed-in tariff” in the form of a financial incentive based on the kWh saved by the end-user. This paper discusses the possible setup of a feed-in tariff designed to reward energy savings.     

Energy efficiency standards for refrigerators in Brazil: A methodology for impact evaluation

In Brazil energy efficiency standards for cold appliances was established in 2007. A specified single set of MEPS (minimum energy performance standards) for refrigerators, freezers and freezer refrigerators was implemented without evaluating its impacts and estimation of potential electricity savings. This paper presents a methodology for assessing the impacts of the Brazilian MEPS for cold appliances. It uses a bottom-up approach to estimate residential end-use consumption and to evaluate the energy saving potential for refrigerators. The household electricity consumption is projected by modeling appliance ownership using an econometric approach based on the recent household survey data. A cost–benefit analysis for more stringent standards is presented from the perspective of the society and electricity customers. The results showed that even considering the current market conditions (high discount rate for financing new efficient equipment) some MEPS options are advantageous for customers. The analysis also demonstrates significant cost-effective saving potential from the society perspective that could reach 21 TWh throughout the period of 2010–2030—about 25% of current residential consumption.     

Market diffusion,technological learning,and cost-benefit dynamics of condensing gas boilers in the Netherlands

High costs often prevent the market diffusion of novel and efficient energy technologies. Monitoring cost and price decline for these technologies is thus important in order to establish effective energy policy. Here, we present experience curves and cost-benefit analyses for condensing gas boilers produced and sold in the Netherlands between 1981 and 2006. For the most dominant boiler type on the Dutch market, i.e., condensing gas combi boilers, we identify learning rates of 14±1% for the average price and 16±8% for the additional price relative to non-condensing devices. Economies of scale, competitive sourcing of boiler components, and improvements in boiler assembly are among the main drivers behind the observed price decline. The net present value of condensing gas combi boilers shows an overall increasing trend. Purchasing in 2006 a gas boiler of this type instead of a non-condensing device generates a net present value of 970 EUR (Euro) and realizes CO₂ (carbon dioxide) emission savings at negative costs of −120 EUR per tonne CO₂. We attribute two-thirds of the improvements in the cost-benefit performance of condensing gas combi boilers to technological learning and one-third to a combination of external effects and governmental policies.     

Efficiency improvement opportunities for televisions in India: implications for market transformation programs

Televisions (TVs) account for a significant portion of residential appliance electricity consumption in India, and TV shipments in India are expected to continue to increase. We assess the market trends in the energy efficiency of TVs that are likely to occur without any additional policy intervention and estimate that TV efficiency will likely improve with saving potential of 6 terawatt-hours (TWh) per year in 2020, compared to today’s technology. We discuss various energy-efficiency improvement options and evaluate the cost-effectiveness of three of them, at least one of which improves efficiency by at least 20 % cost-effectively beyond these ongoing market trends. We provide insights for policies and programs that can be used to accelerate the adoption of efficient technologies to capture the cost-effective energy savings potential from TVs which we estimate to be 3.4 TWh per year in 2020.     

Transaction costs of Tradable White Certificate schemes: The Energy Efficiency Commitment as case study

This paper analyses the nature and scale of transaction costs (TCs) borne by obliged parties under a “Tradable White Certificate” (TWC) scheme. Taking the first phase of the Energy Efficiency Commitment (EEC1) in Great Britain as a case study, several sources of TCs were considered, such as search for information, persuasion of customers, negotiation with business partners, and measurement and verification activities. Information was obtained through interviews and a questionnaire distributed to obliged parties. Results show that the most significant sources of TCs were related to search for information, persuading customers and negotiating with managing agents/contractors to implement energy efficiency measures. Perceived high TCs related to contract negotiation and liability risks slightly reduced the low trading level. The scale of TCs was estimated to be around 10% and 30% of total investments costs for the lighting and insulation segments, respectively. The results indicate that, despite the presence and scale of TCs, the EEC1 scheme generated energy savings that yielded net societal benefits. Estimated financial benefits range from 0.6 to 6 p/kWh for insulation and lighting savings, respectively. When avoided external costs due to electricity savings are included, estimated economic benefits range from 3 to 8 p/kWh. Several lessons from the EEC1 can be drawn for TWC schemes. Among others, it is found that informative policy instruments to raise awareness among end-users are critical if a TWC scheme is to deliver cost-effective energy savings. In all, the nature and scale of TCs under TWC schemes will differ because of a number of endogenous and exogenous determinants.