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Energy efficiency offers a way out of Europe’s economic woes

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Energy efficiency offers a way out of Europe’s economic woes

Austerity isn’t working

With European Union output still 2% lower than pre‐crisis levels and 16 of 27 Member States experiencing a 5% or more increase in unemployment, a new report from E3G argues that the time has come to consider a second round of fiscal stimulus. This time, however, it focused on energy efficiency to drive growth and build the foundations of a sustainable economy.

The report ‘The Macroeconomic Benefits of Energy efficiency: The case for public action’ argues the current UK and wider European focus on austerity combined with structural reforms will not be enough to drive economic recovery in the short term. A second round of stimulus packages looks increasingly vital to driving growth.

However, to be justifiable in a time of limited public funds, a stimulus effort must focus on the most beneficial investments in terms of resilience to economic shocks and provide a strong foundation for future productivity and growth. An energy efficiency stimulus is a strong candidate on both counts. It provides a ‘hedge’ against fossil fuel price spikes, delivers increased energy security, cuts carbon emissions and creates jobs that can utilise spare labour capacity.

Energy efficiency: a good investment but hard to deliver

With an estimated €4.25 trillion in investment required across the European economy out to 2050 and supposed modest costs of energy efficiency measures, the investment potential abounds. Yet in 2011 less that 7% of global clean energy spend was on energy efficiency, indicating there are major issues with getting money to projects.

Ingrid Holmes, lead author of the report, said today “Energy efficiency is a good investment that is hard to deliver. The issues are less with financing and more about creating a pipeline of attractive projects. To be successful in creating that pipeline Governments will need to give energy efficiency the same focus as other critical national infrastructure”.

Holmes goes on to say “It’s partly about providing incentives to businesses, industry and householders to help stimulate early demand − but also about creating regulatory and delivery frameworks that sustain long‐term demand”.

The report makes key recommendations on how this can be achieved including:
– A demand side feed‐in‐tariffs to provide certainty over energy savings;
– An enhanced role for public banks − including the European Investment Bank − in providing early stage capital to programmes;
– The creation of institutional capacity to coordinate and verify delivery of measures;
– Minimum standards for existing buildings that in the longer term ensure energy performance is reflected in property prices.

The Energy Efficiency Directive is an opportunity not to be missed

The Energy Efficiency Directive − which is currently in trialogue − provides an opportunity to create a framework for delivery across the EU and give national politicians a mandate to drive forward regulatory reforms at home. Yet several Member States are arguing for a watered down Directive. Short term financing constraints have been cited as one of the key reasons, as have concerns about subsidiary.

Holmes says “This is simply missing the bigger picture. European Commission analysis shows the total cost impacts of the Directive over the 2011−020 period are negative – with an annual average reduction in overall spending on energy of about €20 billion. To side‐step the wrangling over bottom‐up prescriptive measures, top down binding targets should be put back on the table”.

ENDS

Contact: Ingrid Holmes, programme Leader, Low Carbon Finance, T: 07825 829592 Email: Ingrid.holmes@e3g.org

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