Final countdown for Energy Efficiency Directive

There is still some time to make the Energy Efficient Directive efficient. Photo: PiLensPhoto / Fotolia

Only three months to go before the directive that could mean thousands of green jobs is to be finalised, but the Council is instead heading in a direction that could even water down existing legislation.

In June 2011 the European Commission proposed to the Parliament and the  Council a new directive for energy efficiency. This directive is intended to replace the Energy Service Directive from 2006 and the Combined Heat and Power Directive from 2004. EU member states are negotiating at the moment with the European Parliament on this new Energy Efficiency Directive (EED), in accordance with the request of the European Council, which in January called for the finalisation of negotiations by the end of June 2012.

According to Martin Lidegaard, climate and energy minister for Denmark, which currently holds EU presidency, the European Council has emphasised that the Energy Efficiency Directive can contribute to growth and job creation in Europe. According to the Commission the directive can create up to two million jobs – mostly local jobs that cannot be outsourced. Through enhanced energy efficiency, the EU can save billions of euro on imported energy. Money that can instead be channelled towards energy efficiency measures, jobs and growth in Europe.

Environmental NGOs such as Climate Action Network Europe (CAN Europe) and many independent research studies argue that energy savings will increase European GDP and jobs. CAN Europe has the following analysis: “According to the Commission’s Impact Assessment accompanying the EED, Europe’s GDP will be higher if the 20 per cent savings target is met. This is besides the other benefits listed in the March 2011 Energy Efficiency Plan (e.g. two million new jobs, €1000 annual savings per household on energy bills). The whole point is to save energy by investing in energy efficiency within the EU. Europe spends roughly €400 billion a year importing energy. This represents a flow of wealth and jobs out of Europe. Investing as much of that as possible in efficiency improvements within the EU is clearly much better for our GDP, and it creates domestic jobs which can’t be outsourced. The German KFW energy efficiency scheme is a good example of the impact on the economy: the Juelich Research Centre recently estimated that every euro invested by the state brings in €4 to €5 in tax revenues, for instance from previously unemployed workers now employed in the building sector.

The Commission has also stated that the EU is failing to meet its energy efficiency target with current policies. The Commission, Council and Parliament all agree the EU is currently on track to save only nine per cent of its energy consumption by 2020. The Commission, in its Impact Assessment to the EED, says a binding target is needed to meet the 20 per cent target.

The CO₂ target is not strong enough to drive energy efficiency. Many member states – under industry pressure – deliberately overestimated 2005 emissions levels and therefore got many more Emissions Trading System allowances than needed. Studies by research group Sandbag suggest that there will be a 1.9 Gt oversupply of permits in Phase III of the ETS (running from 2013-2020). This means the cap is far too high and the carbon price far too low to adequately drive energy efficiency. Furthermore, the ETS and the effort sharing decision allow up to 50 per cent offsets, meaning that half of all reductions in emissions can take place outside the EU, further weakening the incentive for energy efficiency.

Regarding the claim that the renewables target is causing higher energy prices, CAN Europe argues that: “as the European Commission’s 2050 Energy Roadmap shows, the cost of decarbonising our energy system in all scenarios, including high renewable energy sources (RES), is no more expensive than remaining with fossil fuels. This is because regardless of the scenario, Europe’s aging energy infrastructure must be replaced. The real story is the way that energy efficiency can make the renewables target easier to meet. The 20 per cent RES target is defined as a share of final energy demand in 2020. Current final energy demand is 1200 million tonnes of oil equivalents (Mtoe), so 20 per cent RES would mean 240 Mtoe. If final energy demand in 2020 is 1000 Mtoe the RES target would need to be 200 Mtoe (this reduces RES investment costs). If final energy demand is 1400 the RES target would need to be 280 Mtoe. This shows the RES target has no real impact on energy savings, but energy savings make meeting the proportional RES target much easier” .

The negotiations on the package for the Energy Efficiency Directive in the European Parliament took a big step forward at the end of February 2012. The Industry, Research and Energy Committee (ITRE) of the Parliament voted in the draft Energy Efficiency Directive and voted by a large majority in support of a binding 20 per cent energy savings target

Before the vote, the political groups in the Parliament had agreed to give member states more flexibility to achieve the efficiency target of 20 per cent by 2020. “If the member states accept a binding target, they should be allowed to deviate from fixed EU rules on energy turnovers or building renovations,” said Markus Pieper MEP, responsible for the dossier for the EPP Group in the leading ITRE Committee.

CAN Europe was cautiously positive about the following results:

• binding, effort-shared savings targets for member states immediately upon entry into force of the Directive, which will aggregate to a consumption of not more than 1474 Mtoe by 2020, which is the original Commission definition of the 20 per cent target;
• national trajectories marking out the path that member states must take to 2020;
• cumulative 1.5 per cent annual savings to be delivered by energy suppliers or distributors, across all end use sectors including transport;
• a 2.5 per cent renovation rate for all public buildings, with a definition of deep renovation as 75 per cent improvement in energy performance;
• a requirement for national roadmaps for deep renovation of the entire building stock by 2050;
• national financing facilities to aggregate funds and direct them to projects;
• decent requirements for CHP, with clear statement that this should not be at the expense of renewables;
• a mandate for the Commission to come forward with a proposal to fix the ETS “if appropriate” once the Directive enters force.  

The developments are less positive in the Council according to CAN Europe. The Danish Presidency text contains some improvements, but is still very far from acceptable, and estimates by CAN Europe conclude that it would still only close about half of the gap to the 20 per cent target. Problems include:

• No binding targets, watered-down references to the 20 per cent target, and no reference to the Commission bringing forward binding targets even in 2014;
• Article 6: early (past) actions allowed to count towards the 1.5 per cent savings; also supply side savings (whereas this is meant to be an end use measure);
• Article 4: public building renovation rate limited to central government buildings with many exemptions, and only weak requirements as to the level of the renovations;
• Article 10: many exemptions and opt-outs on CHP provisions.

In fact the problems are so severe that the text as it stands may even represent a rollback on existing legislation (the Energy Services Directive and the CHP Directive). Essentially all countries apart from Denmark, Belgium, Ireland and Greece have very bad positions according to CAN Europe. The UK in particular is the key player in weakening references to the 20 per cent target and the Commission review. Germany has no position yet due to disagreement between the Environment and Economics ministries. France is very opposed to the 1.5 per cent savings requirement in Article 6. Austria is pushing hard for early action references – back as far as 2000.

Direct negotiations between the Parliament and the Council have now started and must be finalised in June 2012. The European Union must this spring ensure that the EU will reach its goal of reducing the level of energy consumption by 20 per cent by 2020.

Reinhold Pape

For further information contact:
Erica Hope
Senior Policy Officer Energy Effciency, CAN Europe
erica@caneurope.org