Tuesday, February 14, 2012

Job creation potential of the Energy Efficiency Directive

The crucial Energy Efficiency Directive is being discussed at today's meeting of the Transport and Energy Council in Brussels.

Martin Lidegaard, the Danish Minister of Climate, Energy and Buildings, a key helmsman of the EED, said yesterday that, “As Presidency, we will do our utmost to deliver on this request to get an agreement on energy efficiency by the end of June 2012, and to make sure that the current gap to the 20% Energy Efficiency target in 2020 is closed”.

Some of Europe’s largest investors and private enterprises, including 1E, Danfoss, Knauf Insulation, Philips Lighting, Schneider Electric, Siemens, the European Climate Foundation and Kyoto Club have called upon national Energy Ministers to change tack on the Directive in advance of the meeting.

Donald MacDonald, a trustee director of the BT Pension Scheme, Britain's largest at £36 billion, and Chairman of The Institutional Investors Group on Climate Change (IIGCC), said, "The issue of carbonisation is totally embedded into every single asset class. Failure to take this up in investment policies could be a failure of fiduciary duty."

"Energy efficiency is critical to the wider effort to mitigate climate change," MacDonald added. "For private investment to flow, policy makers must focus on removing barriers to investment inherent in sectors such as the real estate market.

"This requires policies that provide regulatory certainty to investors and are targeted enough to take the complexity of the market into account. The Energy Efficiency Directive will remain crucial to achieving this."

Nick Robins, head of HSBC's Climate Change Centre of Excellence, has said he is optimistic about the EED's implementation, and claimed that opposition to green investment was "bottoming out" after being fuelled by the economic crisis.

"We have the beginnings of a case for being more quietly optimistic. We are recognising the case for energy efficiency," he said.

The EED proposes market based energy efficiency obligation schemes such as the renovation of 3% of public buildings each year.

Research has demonstrated that these schemes could create half a million jobs and save around €50 billion (annually) in primary energy imports by 2020, as well as achieving half of the energy savings needed to close the 20% energy savings gap by 2020.

And the construction industry estimates that the equivalent of up to 530,000 full time jobs would be created in Europe through an ambitious strategy to improve energy efficiency in buildings by 2020.

As for financing the measures, to top up the EU-ETS carbon price investment, a new IEA report, Policy Pathways: Joint public-private approaches for energy efficiency finance, suggests three particular kinds of public-private partnership agreements which could be of use:
  1. Dedicated Credit Lines, established by a public body (such as a government agency and/or donor organisation) to enable financing of energy efficiency projects by a private-sector organisation (like a bank or financial institution)
  2. Risk-Sharing Facilities, involving a kind of partial credit guarantee established by a public body to reduce the risk of energy efficiency project financing to the private sector and
  3. Energy Saving Performance Contracts (ESPCs), which can condition the performance of energy service companies (ESCOs) using targets and private-sector financing.

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