Industrial energy efficiency and climate change mitigation

Industry contributes directly and indirectly (through consumed electricity) about 37% of the global greenhouse gas emissions, of which over 80% is from energy use. Total energy-related emissions, which were 9.9 GtCO₂ in 2004, have grown by 65% since 1971. Even so, industry has almost continuously improved its energy efficiency over the past decades. In the near future, energy efficiency is potentially the most important and cost-effective means for mitigating greenhouse gas emissions from industry. This paper discusses the potential contribution of industrial energy-efficiency technologies and policies to reduce energy use and greenhouse gas emissions to 2030.

Utility energy efficiency schemes: savings obligations and trading

Utility financed and/or operated energy efficiency schemes have a long history going back to the first energy crisis in 1973. It is therefore appropriate to ask what is new about the recent raft of white certificate schemes and whether there is anything that makes them more effective than the older approaches. This paper attempts to answer these questions by reviewing the experience with earlier utility schemes and comparing them with the more recent schemes implemented on both sides of the Atlantic as well as Australia. Up-to-date results are reported on utility programme impact in all the regions, including a new indicator analysis of the collective, long-term impact of such schemes in the USA. From this it is clear that both the new and old schemes are highly effective in delivering substantial, sustained and cost effective energy savings and associated reductions in CO₂ emissions. A key component of programme impact, including cost-effectiveness, is the effective alignment of utility commercial incentives with the delivery of energy savings. There are essentially two new elements of the recent utility energy efficiency schemes: i) mandated energy savings obligations and ii) the flexibility to trade the obligations. The mandated savings obligation, when linked to a suitable non-compliance penalty structure, seems to be an especially effective means of ensuring that public policy objectives for energy efficiency are met. The importance of allowing obligations to be traded for programme success is not yet clear and will require more time before proper longitudinal evaluations can be attempted.

Reducing energy use in the buildings sector: measures, costs, and examples

This paper reviews the literature concerning the energy savings that can be achieved through optimized building shape and form, improved building envelopes, improved efficiencies of individual energy-using devices, alternative energy using systems in buildings, and through enlightened occupant behavior and operation of building systems. Cost information is also provided. Both new buildings and retrofits are discussed. Energy-relevant characteristics of the building envelope include window-to-wall ratios, insulation levels of the walls and roof, thermal resistance and solar heat gain coefficient of windows, degree of air tightness to prevent unwanted exchange of air between the inside and outside, and presence or absence of operable windows that connect to pathways for passive ventilation. Provision of a high-performance envelope is the single most important factor in the design of low-energy buildings, not only because it reduces the heating and cooling loads that the mechanical system must satisfy but also because it permits alternative (and low-energy) systems for meeting the reduced loads. In many cases, equipment with significantly greater efficiency than is currently used is available. However, the savings available through better and alternative energy-using systems (such as alternative heating, ventilation, cooling, and lighting systems) are generally much larger than the savings that can be achieved by using more efficient devices (such as boilers, fans, chillers, and lamps). Because improved building envelopes and improved building systems reduce the need for mechanical heating and cooling equipment, buildings with dramatically lower energy use (50–75% savings) often entail no greater construction cost than conventional design while yielding significant annual energy-cost savings.

New thinking on the agentive relationship between end-use technologies and energy-using practices

The subject of efficient technologies and how to get them into the homes and hands of users has been at the centre of energy efficiency policy from its inception. What the record shows is that efficient technologies may well increase the efficiency of energy throughput but that promised reductions in energy demand seldom pan out. Confronted with this problem, the usual policy approach has been to work harder to get markets, incentives and information to loosen up the ‘barriers’ to technology penetration. Social scientists have been recruited to facilitate markets with better information and incentives, in other words, to improve the behaviour of energy end-users. The paper argues that both technologists and behaviouralists have oversimplified the ways that technologies and socio-cultural contexts interact to affect energy-using practices. The concept of distributed agency is introduced to capture the theoretical link between technology and behaviour. The examples of air conditioning and food refrigeration are used to illustrate these points.

Towards a sustainable energy balance: progressive efficiency and the return of energy conservation

We argue that a primary focus on energy efficiency may not be sufficient to slow (and ultimately reverse) the growth in total energy consumption and carbon emissions. Instead, policy makers need to return to an earlier emphasis on “conservation,” with energy efficiency seen as a means rather than an end in itself. We briefly review the concept of “intensive” versus “extensive” variables (i.e., energy efficiency versus energy consumption) and why attention to both consumption and efficiency is essential for effective policy in a carbon- and oil-constrained world with increasingly brittle energy markets. To start, energy indicators and policy evaluation metrics need to reflect energy consumption, as well as efficiency. We introduce the concept of “progressive efficiency,” with the expected or required level of efficiency varying as a function of house size, appliance capacity, or more generally, the scale of energy services. We propose introducing progressive efficiency criteria first in consumer information programs (including appliance labeling categories) and then in voluntary rating and recognition programs such as ENERGY STAR. As acceptance grows, the concept could be extended to utility rebates, tax incentives, and ultimately to mandatory codes and standards. For these and other programs, incorporating criteria for consumption, as well as efficiency, offers a path for energy experts, policymakers, and the public to begin building consensus on energy policies that recognize the limits of resources and global carrying capacity. Ultimately, it is both necessary and, we believe, possible to manage energy consumption, not just efficiency, in order to achieve a sustainable energy balance. Along the way, we may find it possible to shift expectations away from perpetual growth and toward satisfaction with sufficiency.

Tradable energy efficiency certificates: the Italian experience

The Italian white certificates scheme took effect in January 2005. The command and control component of the scheme, i.e., the energy efficiency obligation, was introduced with the implementation of the first European directives on the liberalization of the electricity and natural gas market (Ministero dell’Industria, del commercio e dell’artigianato. Legislative Decree of 16th March 1999, n.79, 1999; Ministero dell’Industria, del commercio e dell’artigianato. Legislative Decree of 23rd May 2000, n. 164, 2000), in the form of a public service obligation (PSO) raised on distribution companies. The market-based component, the trading of energy efficiency certificates (EECs), was introduced by the government in mid-2001, together with the definition of the level of the obligation and of the other elements of the policy package. In the following three years the regulatory authority for electricity and gas (AEEG) designed the implementing technical and economic regulation governing the system through an extensive public consultation. During the same period, a revision of some of the basic elements of the scheme was also carried out, in order to take into account some institutional changes (i.e., new shared responsibilities between the federal government and regional administrations in the energy policy field), as well as some improvements suggested by the regulator. In December 2007, some components of the mechanism were updated on the basis of the results achieved and of the critical issues that emerged during its implementation (Ministero delle Attività Produttive (MSE). Ministerial Decree of revision and update of the Ministerial Decrees of 20the July 2004, 2007).

Market imperfections and economic efficiency of white certificate systems

This paper takes the view that energy markets and markets for energy efficiency have significant imperfections, including ones that cannot be repaired through prices alone. The acknowledgement of the various market imperfections, however, does not endorse automatically the use of various instruments, such as tradable white certificates (TWC). Therefore, it is necessary to clarify under what conditions a TWC system can have equal or superior effectiveness and economic efficiency as compared to other instruments. The article explains the principles of a TWC system in terms of market functioning and price formation. It also highlights some key assumptions regarding additionality of energy savings, transaction cost, free riding, target setting and regulatory predictability. Subsequently, the paper illustrates how a TWC system interacts with other energy efficiency policy instruments, in particular standards and taxes. After these explanatory sections the article turns to the modelling of actual TWC price formation in selected countries and subsequently presents a comparative assessment of a TWC system with an energy tax for Finland and the Netherlands.

Tradable white certificate schemes: what can we learn from tradable green certificate schemes?

In this paper, we analyze the experiences gained from tradable green certificate (TGC) schemes and extract some policy lessons that can lead to a successful design of a market-based approach for energy efficiency improvement, alias tradable white certificate schemes. We use tradable green certificate schemes existing in the Netherlands and Sweden as case studies. Departing from an assessment of both TGC schemes, we identify several institutional and market aspects that have affected their performance. We conduct the analysis by addressing key evaluation criteria (i.e., cost and energy effectiveness, administrative burden, technological innovation, political feasibility, and transaction costs). It is not our intention to demonstrate to the reader a normative aspect of designing tradable white certificate schemes. Rather, we identify some key policy lessons which can be summarized as: a binding long-term target must be clearly expressed in terms of policy time frame and certainty, a proper liquid market must be ensured for tradability of certificates, the scheme should be technology neutral, transaction costs should be kept low, and the energy efficiency target should not only address ‘low hanging fruits’ but also promote innovation.

Breaking down the silos: the integration of energy efficiency, renewable energy, demand response and climate change

This paper explores the feasibility of integrating energy efficiency program evaluation with the emerging need for the evaluation of programs from different “energy cultures” (demand response, renewable energy, and climate change). The paper reviews key features and information needs of the energy cultures and critically reviews the opportunities and challenges associated with integrating these with energy efficiency program evaluation. There is a need to integrate the different policy arenas where energy efficiency, demand response, and climate change programs are developed, and there are positive signs that this integration is starting to occur.

The business case for energy management in high-tech industries

The high-technology sector – characterized by facilities such as laboratories, cleanrooms, and data centers – is often where innovation first occurs. These facilities are sometimes referred to as the “racecars” of the buildings sector because new technologies and strategies to increase performance often trickle down to other building types. Although these facilities are up to 100 times as energy-intensive as conventional buildings, highly cost-effective energy efficiency opportunities are often overlooked. Facility engineers are in the trenches identifying opportunities to improve energy productivity but often are unable to make the broader business case to financial decision makers. This article presents the technical opportunities for reducing energy costs, along with their broader strategic value for high-tech industries.

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.

Market behaviour and the to-trade-or-not-to-trade dilemma in ‘tradable white certificate’ schemes

This paper provides an empirical analysis of market behaviour under ‘Tradable White Certificate’ (TWC) schemes. It focuses on the entire set of ‘flexibilities’ granted to obliged parties to meet a mandatory energy-saving target cost-effectively, i.e. range eligible measures, eligible end-use sectors, banking provision, market engagement of non-obliged parties, and trading as such. We found that market behaviour responds to the unique design and context in which TWC schemes are implemented. Contrary to expectations, limited trading is observed so the ‘to-trade-or-not-to-trade’ dilemma is further analysed. A real TWC market has emerged only in Italy, where obliged parties (i.e. energy distributors) show preference towards ‘to-trade’. In Great Britain and France, an autarky compliance approach is identified, with obliged parties (i.e. energy suppliers) showing preference towards ‘not-to-trade’ driven by, among many factors, commercial benefits of non-trading (e.g. increased competitiveness). At the same time, results show clearer indications of cost-effectiveness for Great Britain than for Italy. In general, high energy-saving effectiveness is observed, but low ambitious saving targets and pitfalls in the regulatory framework need to be considered to further develop TWC markets. Initial market and institutional conditions strongly suggest that trading might not be an immediate outcome. Ambitious energy targets can trigger a more dynamic usage of all flexibilities by eligible parties and thus active behaviour in TWC markets.

Interactions of white certificates with other policy instruments in Europe

In a tradable white certificate (TWC) scheme, each certificate issued represents a certain amount of energy saved. Used in conjunction with an energy-saving obligation on certain parties in the energy supply chain and with rules for trading, monitoring and verification established, an efficient market for energy savings in sectors not covered by the European Union (EU) Emissions Trading Scheme can be established. However, a plethora of other mechanisms are already in place to promote a more sustainable use of energy in Europe. This paper analyses the interactions (both potential and realised in existing schemes) between TWCs and other policy instruments including tradable green certificates, the European Union Emissions Trading Scheme, the European Union Energy Performance in Buildings Directive as well as taxes, subsidies and loans. Measures implemented through a TWC scheme that reduce the consumption of electricity can make targets under a tradable green certificate scheme easier to attain. Where a tradable green certificate scheme contains relative targets, the target should be increased to achieve the same absolute amount of renewable power. A TWC scheme can also reduce the number of allowances electricity generators will need to surrender under the EU Emissions Trading Scheme. By reducing the available emission rights in the National Allocation Plans, this effect is possible to counteract.

Promoting emerging energy-efficiency technologies and practices by utilities in a restructured energy industry: a report from California

The potential energy savings from emerging technologies (i.e. those technologies emerging from research and development) represent a significant resource to California and the US. This paper describes how California's investor-owned utilities (IOUs) have been promoting emerging technologies over the past three years to increase energy efficiency in the buildings sector. During these years, the IOUs have experienced significant changes in their regulatory environment as part of the restructuring of the energy industry in California. These regulatory changes have impacted the way emerging technologies are treated by the regulatory community and the IOUs. After reviewing these changes, the paper concludes by discussing potential opportunities to improve the market penetration of emerging technologies.     

Life cycle cost analysis of energy efficiency design options for refrigerators in Brazil

The purpose of this paper was to present the results of a life cycle cost analysis concerning the purchase and operation of a more efficient popular refrigerator model compared with a baseline design in Brazil. The summarized results may be useful for organizations working to promote sustainable energy development. This paper specifically focuses on refrigerators, since their energy consumption is predicted to constitute over 30% of the total average domestic electricity bill in Brazilian households. If all new Brazilian refrigerators had an energy efficiency at the level consistent with the least life cycle cost of ownership, it would result in an annual savings of 2.8 billion dollars (US$) in electricity bills, 45 TWh of electricity demand, and 18 Mt of CO₂ emissions, with a respective payback period of 7 years which is less than half the average estimated lifetime of a refrigerator. The analysis was conducted following the guidelines of similar analyses available from the US Department of Energy and the Collaborative Labeling and Appliance Standards Program.

Incentives for energy efficiency in the EU Emissions Trading Scheme

This paper explores the incentives for energy efficiency induced by the European Union Emissions Trading Scheme (EU ETS) for installations in the energy and industry sectors. Our analysis of the National Allocation Plans for 27 EU Member States for phase 2 of the EU ETS (2008–2012) suggests that the price and cost effects for improvements in carbon and energy efficiency in the energy and industry sectors will be stronger than in phase 1 (2005–2007), but only because the European Commission has substantially reduced the number of allowances to be allocated by the Member States. To the extent that companies from these sectors (notably power producers) pass through the extra costs for carbon, higher prices for allowances translate into stronger incentives for the demand-side energy efficiency. With the cuts in allocation to energy and industry sectors, these will be forced to greater reductions; thus, the non-ET sectors like household, tertiary, and transport will have to reduce less, which is more in line with the cost-efficient share of emission reductions. The findings also imply that domestic efficiency improvements in the energy and industry sectors may remain limited since companies can make substantial use of credits from the Kyoto Mechanisms. The analysis of the rules for existing installations, new projects, and closures suggests that incentives for energy efficiency are higher in phase 2 than in phase 1 because of the increased application of benchmarking to new and existing installations and because a lower share of allowances will be allocated for free. Nevertheless, there is still ample scope to further improve the EU ETS so that the full potential for energy efficiency can be realized.

The potential for electricity conservation and carbon dioxide emission reductions in the household sector of Brazil

Pressure is mounting in large Non-Annex 1 countries like Brazil, China, and India to accept binding commitments to reduce their greenhouse gas emissions in the second, post-2012, commitment period. In the case of Brazil, pressure is higher for the country to commit itself to reduce its emissions from land use changes but, because of the country’s recent high economic growth rates, very soon, this pressure will also turn to reducing its greenhouse gas emissions from electricity production and use in the various sectors of the economy. This paper summarizes the methodological approach, and the results, of a study aimed at assessing the potential for electricity conservation and carbon dioxide emissions reductions in the Brazilian household sector. The study splits the household sector into 20 subsectors, considering five different geographical regions and four household electricity consumption levels (a proxy for different household income levels). Technical, economic, and market potentials are determined for electricity conservation in these 20 subsectors for the period 2005–2030, and results are also translated into carbon dioxide emission reductions using the Clean Development Mechanism (CDM) combined margin (build margin plus operating margin) approach for determining the emission’s factor for the power grids. Results show significant electricity and carbon dioxide reduction potentials at negative costs for both household final consumers (market potential) and the economy as a whole (economic potential) in the residential sector of Brazil.

Overview of energy consumption and GHG mitigation technologies in the building sector of Japan

This paper outlines the energy consumption and greenhouse gas emission trends in the residential and commercial sectors in Japan. The results showed that the increase in residential energy consumption in Japan is mainly caused by the widespread use of heating equipment, hot water supply apparatus, and other household electrical appliances. On the other hand, it was indicated that the increase in commercial energy use is mainly due to the increase of the floor area of buildings, particularly hotels, hospitals, and department stores. The paper also describes political measures to promote energy conservation, including the building energy conservation standard, Comprehensive Assessment System for Building Environmental Efficiency, top runner programs, financial incentives, and the dissemination of the Cool Biz concept. Finally, the projections of CO₂ emissions until 2050 are presented.

Energy efficiency technologies for road vehicles

A key message of the Fourth Assessment Report (AR4) of the Intergovernmental Panel on Climate Change is that improved energy efficiency is one of society’s most important instruments for combating climate change. This article reviews a range of energy efficiency measures in the transportation sector as discussed in AR4 and assess their potentials for improving fuel efficiency. The primary focus is on light-duty vehicles because they represent the largest portion of world transport energy use and carbon dioxide emissions; freight trucks, a rapidly expanding source of greenhouse emissions, are also discussed. Increasing energy efficiency can be achieved by improving the design and technology used in new vehicles, but vehicle technology is only one component of fleet fuel economy. Measures that create strong incentives for customers to take energy efficiency into consideration when buying and operating their vehicles will be crucial to policy success.

The role of energy intensity improvement in the AR4 GHG stabilization scenarios

This study analyzes the role of energy intensity improvement in the short term (to the year 2020) and midterm (to the year 2050) in the context of long-term greenhouse gases (GHG) stabilization scenarios. The data come from the latest Emissions Scenarios Database and were reviewed in the Fourth Assessment Report (AR4) by the Intergovernmental Panel on Climate Change. In this study, quantitative decomposition analyses using the extended Kaya identity are applied to the stabilization scenarios in Categories I to IV of Table SPM.5 in the AR4. Furthermore, quantitative decomposition analyses of Category IV scenarios are conducted for major GHG-emitting countries, such as the USA, Western Europe, China, and India, by utilizing the large number of reports in the database. This study provides in-depth analyses of the relationship between energy intensity improvement and other major indicators. One finding is that energy intensity improvement plays an important role in the short term, and the rate of energy intensity improvement is assumed to be around 2% per year as a median value across Categories I–III in the midterm on the global scale. However, achieving stringent stabilization levels requires various other measures regarding the use of less-carbon intensive fossil fuels, the shift to non-fossil fuel energies, and advanced technologies such as carbon capture and storage.