The higher the energy efficiency target, the greater the benefits
A new report by Cambridge Econometrics quantifies the benefits resulting from higher levels of ambition for the 2030 energy efficiency target.
EU-wide energy saving goals have been in place for the past decade but these have been voluntary and yielded disappointing results. Despite energy efficiency investments, energy use fell by only 4% between 2010 and 2019 and over this period dependency on imported energy increased. Thus, new legislation on energy efficiency, building renovation and efficient products makes it essential to ramp up efforts quickly.
Intense trilogues between the European Commission, the European Parliament and the Council of the EU are currently taking place concerning the revision of the Energy Efficiency Directive (EED). For more than a year, EU citizens and businesses have been severely impacted by rising energy prices. The war in Ukraine is putting at risk energy availability and the climate crisis is causing extreme weather conditions. Saving energy makes an important contribution to resolving these problems.
While most EU countries support energy efficiency in principle, many delegations expressed concerns at the last revision of the EED about overall ambition level. Arianna Vitali from the Coalition for Energy Savings, said at the time “many member states seem willing to water down the Commission proposal, disregarding the benefits [of energy savings] for their own economies”. The report highlighting the benefits of a higher energy efficiency target is therefore timely1.
The report models three levels of ambition for the energy efficiency target that are currently being negotiated. The Council’s general approach is 9%, the Commission’s proposal in the REPowerEU plan is 13% and finally the European Parliament supports 14.5%.
The most ambitious option – 14.5% by 2030 – would deliver the following environmental, economic and social benefits;
- Reduction of household energy costs by 120 billion euros: Energy efficiency decreases household energy and transport bills because it reduces energy consumption and lowers energy prices. A 14.5% energy efficiency target would on average reduce household expenditure on energy by 10.3% and save 8.5% on transport in 2030. This would equate to a saving of 120 billion euro in energy and transport expenditures for the whole EU. This works out as an average saving of 609 euro for each European household. The study shows that energy poverty is addressed, as the poorest households benefit more from energy efficiency measures and would experience a larger cut in their bills compared to the richest households.
- Reduction of fossil fuel imports, saving 38 billion euros: Saving energy boosts EU energy security by reducing reliance on imports and the impacts of possible supply disruptions. A 14.5% energy efficiency target would cut EU spending on fossil fuel imports by 12.2% in 2030, leading to savings of about 38 billion euro, equivalent to about 40% of EU spending on energy imports from Russia in 2021. In particular, the greatest reduction in monetary terms is achieved for oil and gas imports, a saving of 24 billion euros.
- Decrease in GHG emissions by 12.2% (315 Mt CO₂eq): By reducing energy consumption, energy efficiency measures also reduce energy-related GHG emissions. With a 14.5% energy efficiency target, the EU’s GHG emissions would be reduced by an additional 12.2 % in 2030 (about 315 Mt CO₂eq in absolute terms). This is equivalent to the GHG emissions of Spain in 2019. It would bring the EU significantly closer to its Climate Law objective to reduce GHG emissions by 55% in 2030 and set the EU on a credible path towards its climate neutrality goal.
- Decrease in air pollution by 19% for PM₁₀ and SO₂ and by 13% for VOC and NOx: The combustion of fossil fuels for space heating, hot water provision, transportation and electricity production leads to an increase in emissions of air pollutants, which ultimately affect air quality. Energy efficiency measures also contribute to reducing adverse impacts arising from air pollution that is generated from the use of fossil fuels, as well as inefficient heating systems and modes of transport. In 2030 the largest impacts come from damage costs associated with coarse particulate matter (PM₁₀) and sulphur dioxide (SO₂), which would be reduced by 19% in the 14.5% scenario. This is mainly driven by a fall in the extraction and manufacturing of fuels and the reduced energy supply, which are the main source of SO₂ emissions. Similarly, the reduction in air pollution damage caused by coarse particulate matter (PM₁₀) is driven by a fall in energy consumption from residential, commercial and institutional activities, which are the principal sources of PM₁₀ emissions. Despite the lower magnitude, significant improvements are also associated with reductions in damage due to volatile particulate matter (VOC) and nitrogen oxides (NOX) of 13% in the 14.5% scenario.
- Creation of 752,000 jobs: Investments in energy efficiency increase employment due to higher levels of production in the economy and a shift in production towards more labour-intensive sectors. Moreover, there are positive “multiplier effects” from higher consumer expenditure, which result in more economic activity and therefore job creation. The study finds that a 14.5% energy efficiency target would create 752,000 jobs in 2030 (an increase of 0.4% in the economy-wide employment rate), with the largest increase in sectors producing energy efficiency goods and services, such as construction, manufacturing and utilities. This is equivalent to three times the current number of workers in coal mining and related activities in 2018.
- Increase in Gross Domestic Product (GDP) by 94 billion euro: Energy efficiency improvements also lead to a positive impact on the overall economic activity of the EU, with the creation of additional wealth and therefore GDP growth. A 14.5% energy efficiency target would increase the EU’s GDP by 0.6% in 2030, which represents the creation of 94 billion euro in monetary wealth. This is roughly equal to the GDP of Slovakia in 2021.
Niels Fuglsang, MEP, who defends a 14.5% energy efficiency target for 2030 writes:
“For years, some of us have been saying that the safest, cleanest and cheapest energy is that which we don’t use. With the Ukraine war and rapidly falling gas supplies coming from Russia, this is truer than ever. But Europe has been sleeping at the wheel”.² He adds that “One of the reasons Europe is so dependent on Russian energy is that, over the past decade, gas was aggressively marketed as a transition fuel. It seemed simpler to switch from coal to gas than to go all-in on energy efficiency and renewables. We have to learn from this, or sleepwalk into another crisis.”
Measures to reduce energy consumption tend to be neglected in favour of more visible policies like the deployment of renewables, but change is possible. The EU’s climate chief said energy savings were the surest way out of the crisis in the short term. “The era of cheap fossil fuel is over. For good. It will not come back,” according to Franz Timmermans, European Commission vice-president. And while the “era of cheap renewable energy is real” and coming fast, “it’s not coming fast enough to solve the problems this year or perhaps next year,” he conceded.
So in the meantime, “saving energy, not using energy, is the cheapest energy obviously,” he said in a speech at the European Energy Efficiency Day 2022.³
It must be emphasised that even the highest level of ambition in the study, the 14.5% target, represents only moderate ambition, as the cost-effective energy savings potential for the EU stands at least at 19%, given high energy prices. The EU institutions are therefore discussing levels of ambition that are below what is technically feasible and economically viable.
Article based on the report 2030 EU energy efficiency target: The multiple benefits of higher ambition, found here: https://www.camecon.com/what/our-work/2030-eu-energy-efficiency-target-m...
1Energy efficiency law ´too ambitious´for some EU member states, by Frédéric Simon, EURACTIVE, 1st December 2021, https://www.euractiv.com/section/energy/news/energy-efficiency-law-too-a...
2Why Europe needs an ambitious energy efficiency target, by Niels Fuglsang, Euractiv, 14 September 2022. https://www.euractiv.com/section/energy/opinion/why-europe-needs-an-ambi...
3Not using energy is the cheapest energy´. EU climate chief insists, by Nikolaus J. Kurmayer. Euractiv, 20 October 2022. https://www.euractiv.com/section/energy/news/not-using-energy-is-the-che...