Energy Efficiency Policies around the World: Review and Evaluation

1.5 Energy Efficiency Policies Evaluation

Why is evaluation necessary?

Energy efficiency policies and measures are not free. Whatever policy structure and implementation scheme, whatever the measures taken, there is a cost to the taxpayer.

As a general rule, energy efficiency policies and measures are economically sound if the macro-economic benefits of increased energy efficiency achieved by these policies and measures outweigh the overall cost to the taxpayers. The bigger the difference between the benefit and the cost, the more attractive and effective are the policies and measures.

Evaluating energy efficiency policies and measures is necessary to ensure that public funds are well used. The evaluation can be done at two levels:

• From the taxpayer viewpoint: the public cost involved in the policies and measures.
• From the macro-economic viewpoint: the benefit resulting from the actual progress in energy efficiency achieved through the policies and measures.
  

Why tracking energy efficiency at the macro level is not an easy task?

Insulating a house makes it obviously more energy efficient from an engineering point of view: less energy is consumed for the same comfort.  However, this technical improvement at the micro-level may be not visible at the macro-level - the whole stock of dwellings - if, at the same time, more houses are built, dwellings get larger, more appliances are used and/or if the comfort is improved.

The same applies to industry: each factory can decrease its energy consumption per unit of output with more energy efficient technologies, but this may not be seen at the level of the industrial sector if there is at the same time an increase in the production or a higher growth in the production of energy intensive industries.

Energy efficiency is not just a technical matter, it is also a matter of efficient services: making a phone call instead of a personal visit, using public transport instead of a car, recycling bottles, reducing heat at night, using timber instead of concrete for house construction, all this results in a decrease in energy consumption for identical or similar services. Again, such improvements at the micro-level may not be directly visible at the macro-level. Assessing energy efficiency also means measuring the overall impact of all the improvements at the micro-level on the evolution of energy consumption

Of course, assessing energy efficiency from a policy view point does not mean reviewing each particular dwelling or factory; but it certainly means estimating, or measuring, how much all these improvements at the micro-level did contribute to the actual evolution of the energy consumption in the various sectors, and for the whole country.

Several difficulties emerge when assessing energy efficiency progress. First, from a conceptual viewpoint, energy efficiency is at the same time both a pure economic concept (similar to that of productivity) and a political concept (the result of energy efficiency policy); the boundary between these two concepts is never clear.

Secondly, from a methodological viewpoint, it is difficult to separate out the various causes behind observed actual energy efficiency improvement: more energy efficient socio-economic structures, price setting, results of sectoral policy measures; etc.  A good illustration is the example of cars. How to measure the energy efficiency of cars: in terms of technology, drivers' behaviour, or pattern of use?

Energy efficiency indicators designed and calculated in this study aim at developing solutions to these difficulties, in three ways:

• Overall macro-economic indicators tend to reconcile the macro-economic and political concepts of energy efficiency, measuring separately the main components of the overall energy intensity of the GDP: those linked to the structure of the economy and those linked to sectoral energy efficiencies;
• Sectoral indicators aim first at reconciling the economic appraisal of energy efficiency in the sectors with the technical appraisal of efficiency improvements in dwellings, vehicles, industrial processes, etc., and second at relating these technical appraisals to the evaluation of actual energy savings, from which economic benefits can be estimated;
• Comparative country indicators, based on comparable data set, aim at allowing comparison across countries to highlight, in energy efficiency achievements, those which can be attributed to differences in policies and measures and to taxation and pricing policies.