Latest briefing from E3G – Energy efficiency as Europe’s first response to energy security

Energy efficiency is now higher on the political agenda, with seven countries writing to the European Commission to request binding energy efficiency targets be put on the table. Importantly this includes three of the four crisis-hit Member States – Ireland, Greece and Portugal. These are countries that have clearly understood that it is better for their economies to invest internally in reducing energy use than to continue to rely on imports to feed the energy system.

Yet, according to the most recent E3G briefing, the European Commission itself seems fixed on low ambition with a range of targets from 27% to 35% being discussed, citing concerns about cost (see above!) and impact on the EU Emissions Trading Scheme (which it also acknowledges can be addressed through the new proposed market stability reserve that would withdraw carbon allowances to stabilise the price if it goes too low). At the low end, the 27% target, actually represents a lowering of ambition on current levels. Needless to say NGOs and progressive businesses are pushing hard for the 40% of cost-effective savings that is technically feasible at this stage – and would step up the EU’s climate offering. But energy efficiency is also important for energy security: recent events in Ukraine highlight European exposure on energy imports. And not surprisingly, those MS that are most exposed to Russian gas imports are also those that have the most potential to improve their efficiency. The Commission’s Energy Security Strategy Communication published in June did acknowledge these points – but has too little to say on what precise actions it will take to progress this agenda in the short term.

The briefing from E3G sets out why energy efficiency should be Europe’s priority response to the energy security threat and opportunities to move this agenda forward in the short and medium term.

The core points are:

• The Commission’s strategy is still too focused on supply side fixes to gas dependence which would increase EU economic vulnerability to fossil price shocks and do not maximise the synergies between energy security, competitiveness and sustainability objectives;
• Those EU countries most dependent on Russian gas are also those with the worst energy efficiency performance and poorest implementation of the EED. The EU security package should incentivise and require action to deliver cost-effective energy demand reduction before using scarce EU resources to deliver additional gas, which would otherwise just be wasted in inefficient homes and factories. Action to accelerate building retrofit, build electricity demand reduction markets and incentivise industrial efficiency could, by 2030, reduce gas demand equivalent to over 170% of Russian gas imports in 2011;
• At the forthcoming June Council meeting, a package of short term EU financial support (EIB, structural funds, State Aid exceptions) should be endorsed to support accelerated energy efficiency deployment, but access to this – and any additional funds for interconnectors – should be conditional on having credible national delivery plans under the EED. A temporary exemption to State Aid rules for energy efficiency investments undertaken over the next 3 years should also be brought forward; and
• The EU has a 40% efficiency potential for 2030, but delivering this potential will require binding EU and national energy efficiency targets to drive domestic reforms and give strong signals to investors. To aid achievement of a 40% target, the October Council meeting should direct the Commission to carry out a review of options for delivering a single demand side market for efficient goods, services and buildings, and propose reforms to deliver this as current national approaches and restrictive practices are preventing the development of efficient markets and supply chains.

The big question now is: will sense prevail?

E3G is an independent, non-profit organisation operating in the public interest to accelerate the global transition to sustainable development. The briefing is available here.