We need progress on energy efficiency, so why are we so coy about ditching inefficient products?

As a cheap and effective means of improving energy efficiency, politicians should be rushing to support standards-based policies

05 Nov 2012, 00:05

Power button on standby

Just weeks before the Energy Bill finally crawls, blinking and disorientated, into the light of day, it appears that we are finally going to have a debate on the need for more urgent progress on energy efficiency.

In response to mounting pressure from the indomitable Andrew Warren of the Association for the Conservation of Energy and a compelling new report on energy efficiency incentives from Green Alliance, ministers at the Department of Energy and Climate Change (DECC) appear increasingly willing to accept that the bill should include measures to promote efficiency.

Energy and Climate Change Secretary Ed Davey has used several recent public appearances to hint strongly that he wants to see the Energy Bill's planned "capacity mechanism" include an element to drive "demand management" and "demand response". Strip away the jargon that makes the energy efficiency debate so difficult to follow and it looks as if Davey wants to see more incentives to encourage businesses and households to save power, particularly at times of peak demand.

Add in the fact that both Shadow Energy and Climate Change Secretary Caroline Flint and chair of the Energy and Climate Change Select Committee Tim Yeo have said they are likely to table amendments to ensure energy efficiency is included in the bill if the government fails to do so, and we have reason to be optimistic that some much needed progress could be on the cards.

The case for some kind of demand response capacity mechanism or energy efficiency incentive is hugely compelling, not least because study after study has shown it is far cheaper to reduce the amount of electricity we use than build new generation plants to meet our staggeringly wasteful demand. As Yeo observed recently, energy efficiency is the one aspect of the green economy that even climate sceptics can endorse - after all, it just makes good financial sense. Throw in the government's soon-to-be-launched Green Deal financing scheme and the UK could be within a few months of having the foundations of an effective energy efficiency strategy for the first time in its history.

But while energy efficiency incentives should definitely be introduced - either through the efficiency feed-in tariff mechanism advocated by Green Alliance or the inclusion of demand management in the energy bill's capacity mechanism, as hinted at by Davey - there is also a case for complementing these new incentives with a simpler and more cost effective mechanism for driving efficiency: standards.

Energy efficiency standards and their policy cousins, mandatory labelling schemes, differential taxes, green procurement standards, and outright bans on inefficient products, remain one of the most effective means of driving both the adoption of energy efficiency measures and the development of new efficient technologies. What's more, they cost cash-strapped governments next to nothing when compared to more expensive incentive programmes.

Virtually every story of energy efficiency standards is a story of success. Vehicle fuel efficiency standards adopted in the EU and US have been integral to slashing emissions and driving innovation in cleaner automotive technologies; the UK's reduced road tax rates for cars that meet low emission standards have been such a success that the government is having to look at ways to compensate for lost revenue as millions of drivers switch to greener cars; A-G ratings for electrical appliances save consumers hundreds of pounds a year, just as green IT labelling schemes have led to rapid improvements in energy efficiency; banning horribly inefficient incandescent light bulbs has almost single-handedly created a technological revolution in lighting technology, while saving consumers millions of pounds in the process; and just last week the introduction of a new A-G efficiency rating for car tyres promises to save fleet operators £500m a year.

So why are politicians so reluctant to talk about these undoubted success stories, and, more pertinently, why are they reluctant to accelerate the roll out of a low cost policy approach that is proven to work.

I am afraid our answer lies once again with our good old friend political cowardice.

There are only two arguments used against standard-based energy efficiency initiatives, neither of which are particularly compelling, but both of which are capable of defeating weak politicians.

Firstly, some businesses inevitably complain that demanding energy efficiency standards, environmental taxes, or product bans drive up costs as they are forced to invest in developing more efficient alternatives. But these concerns can be easily overcome by ensuring that standards are realistic and companies are given a long enough lead time to comply with them. The history of efficiency standards shows that policy makers almost inevitably end up not showing enough ambition, allowing technology providers to easily meet the new standards ahead of schedule, as has happened time and again with vehicle fuel efficiency and IT energy efficiency standards. Yes, standards can sometimes lead to an increase in upfront costs for products as companies develop new designs to save energy, but these costs come down over time and any increase in upfront costs is compensated for many times over by reduced running costs (a reality that allows clever financing options to overcome the problem of higher upfront costs).

Secondly, critics of standards-based policies argue against them on the ideological grounds that they impinge upon consumer freedom, particularly when they are used as a basis for banning or imposing higher taxes on inefficient products. This criticism is harder to dismiss when it is essentially the result of personal politics, but policy-makers who accept the urgent and compelling need to improve energy efficiency should be able to construct an argument against it. After all we ban or penalise all sorts of products that are deemed to not be in the public interest, ranging from drugs and guns to unsafe toys and sub-standard home improvements. If blatant energy inefficiency is not in the public interest, and it clearly is not, then we should have the confidence to gradually phase out inefficient products. You cannot sell a car that does not have an MOT or peddle electrical products that do not meet safety standards; you should not be allowed to sell countless products that are still guilty of appalling levels of energy inefficiency.

Sadly, introducing these policies is often harder said than done. Efforts to ban the incandescent light bulb took far longer than they should have done due in large part to outcry from a small number of traditionalists, while a simple and effective attempt to support the take up of the new Green Deal scheme by requiring households to agree to energy efficiency improvements when undertaking other renovations was scrapped at the merest whiff of media opposition to so-called "conservatory taxes".

And yet, wherever politicians have been brave enough to drive through these types of policies they have been remarkably successful and the consumer has been the main beneficiary.

Energy efficiency gains are absolutely critical to the wider success of the green economy and we simply cannot meet environmental targets without them. Incentives must play an important role in driving much-needed investment in energy efficiency, but cash-strapped governments would also be advised to show some political backbone and accelerate the roll out of standard-based policies that have been proven to work.

It is too late to get such policies into the UK's Energy Bill, and it would probably not be a particularly suitable place for them anyway, but efficiency-focused labelling schemes, procurement standards, taxes, and yes outright bans, should be at the heart of the next phase of the government's energy efficiency push.

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Previously known as the BusinessGreen Blog, James' Blog features musings, observations and occasional rants from BusinessGreen editor James Murray

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