Europe, Keep Your Energy Savings Target in View!

This month marked the release of the European report Energy Savings 2020, authored by Ecofys and the Fraunhofer Institut für System- und Innovationsforschung and commissioned by the European Climate Foundation and the Regulatory Assistance Project. The report provides a summary of progress toward reaching energy savings goals in the region, as well as projections for the future.

Source: Energy Savings 2020

The bad news? Despite the recent economic recession and current progressive policies, the European Union still needs to save an estimated 208 million tons of oil equivalent (Mtoe) before it can reach its energy savings target of 20 percent by 2020. The good news? The study concludes that the target can be met—provided that there is a tripling of policy impact!

Energy savings is paramount in the transition to a low-carbon economy. For one, it can curb greenhouse gas (GHG) emissions. Energy Savings 2020 estimates that energy savings can account for half of the reductions necessary to cut European GHG emissions 80 percent by 2050. Energy savings can also reduce the need for energy imports and increase energy security. Europe imported nearly 50 percent of its energy in 2000, and this share is projected to reach 68 percent in 2030. According to the study, by meeting its “20 percent by 2020” efficiency target, Europe could reduce this dependency to 55 percent in 2020, assuming that fossil energy imports are saved.

Moreover, energy efficiency measures would boost economies affected by the economic crisis. The European Commission estimated in 2006 that the 20 percent target represented some 390 Mtoe of energy savings in 2020 compared to business as usual. Based on this calculation, Energy Savings 2020 concludes that 100–150 billion Euros (US$140–200 billion) could be saved annually at oil prices of $48–70 per barrel. Yet this oil price projection is modest. When the recession is fully over and as economies take off again, it can be expected that oil will soar to much higher levels, and possibly stay above $100 permanently.

Companies would profit hugely from reducing their energy costs while improving both their long-term environmental performance and their international competitiveness. European citizens would benefit as well, from lower energy costs as well as reductions in environmental pollution.

The European Commission estimated in 2005 that meeting the 20 percent energy savings target could result in the creation of 1 million jobs by 2020. Of course, an accelerated shift to a low-carbon economy  could lead to the loss of jobs in certain energy-intensive areas. At the same time, however, some labor-intensive sectors such as manufacturing would gain from the development of new, energy-efficient materials and equipment. The energy sector itself would be bolstered, as would the transport and service sectors.

Yet, contrary to its sister targets (a 20 percent reduction in European GHG emissions and a 20 percent share of renewables in the region’s energy mix by 2020), the EU’s goal of 20 percent energy savings is only voluntary. It is not addressed directly in the region’s climate and energy package, which is at the heart of EU policy in this issue area; rather, it falls under the Energy Efficiency Action Plan, which also includes policies such as eco-design and labeling, energy services, the energy performance of buildings, and combined heat and power (CHP) directives.  According to Energy Savings 2020, this current legislation would lead to only 11 percent energy savings by 2020—well below the 20 percent target.

The study’s authors therefore advocate for a new binding target for energy savings as a way to foster more ambitious and coordinated policies. They believe that among various design possibilities, binding targets at the member-state level for end-users  (i.e., final energy consumers, typically in the residential, commercial, industrial, and transportation sectors) is the most feasible option. These targets would provide a framework, giving EU member states the flexibility to choose which energy saving measures best suit their economies. Setting targets at the end-use level also would allow for compatibility with renewable energy policies in the most cost-effective way: the greater the reduction in energy demand in the end-use sectors, the more achievable the 20 percent share of renewables in the energy mix is.

The authors of the study are optimistic about energy savings potentials in Europe and therefore push the EU to act. They conclude that a threefold increase in policy impact is required to reach the “20 by 2020” goal. This is ambitious, but not impossible—and the goal may even be able to be achieved cost-effectively. But will the European Commission acknowledge these latest findings? Stay tuned. The region’s next Energy Efficiency Action Plan is expected in early 2011.

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