The politics of energy efficiency

Friday, 22. October 2010     0 comment(s)
Vadim Kononenko
Researcher - The EU's Eastern Neighbourhood and Russia research programme

Energy efficiency is in the air. Many governments in the world report they are adamant about their goals to achieve ambitious energy efficiency targets. China, Russia, the EU, and the US all have energy efficiency as part of their energy strategies including targets such as energy waste cuts by 20% or 40% in the next ten to twenty years.

But energy efficiency really is about saving energy, so it by the end of the day boils down to such mundane things like installing energy metering devices, better window insulation, energy saving bulbs and various other technologies. So why the fuss?

Well this is not just about applying latest technologies and setting new targets. There is of course the economic side of the problem. For one, saving energy is not what people normally do. Ever increasing energy input is part of the modern social and economic development, which is sometimes called ”the Carbon Age”. Spending a lot of energy in many parts of the world still makes as much economic sense as saving it. There is then the problem of finding the right energy price which would become an incentive for households and industries to consume less energy and use it more efficiently.

It is often postulated that the force of the market should help set the price right. However, energy price formation in a given country almost always involves regulation. That means energy efficiency is not just an economic issue as it is deeply political. It is also true that energy efficiency involves many other considerations relating to social policy, climate policy, investment and standardization policies. So easy and technical as it may seem, energy efficiency is a complex political process. That is why many of the targets set out in the energy strategies of many countries will be hard to achieve despite all the enthusiasm.

Russia is just one example. As the domestic tariffs for energy are getting higher, the government wants to the consumers to offset the cost by implementing energy efficiency measures. However, coordinating social and energy policies is not easy particularly with the economic slowdown and the elections on the horizon. It can well be that Russia’s energy efficiency programmes will be trapped in a sort of ”catch 22” dilemma. To achieve the target one needs to push the price up by removing subsidies. However if this is done too radically, the population and the industry will find hard to help it with energy efficiency measures (which also require initial investment). But if the government keeps the price within limits, it would not provide for adequate incentives for implementing energy efficiency and achieving the targets.

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