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What role do transaction costs play in energy efficiency improvements and how can they be reduced?
(2019)
Ex-ante policy evaluation requires a detailed understanding of how the subjects addressed by the policy react to its implementation. In the context of energy efficiency, policy measures typically aim at influencing investment decisions towards more efficient options.
As has been discussed widely in the context of the "energy efficiency gap", investments in energy efficiency improvements are frequently not conducted even though they seem cost-effective from a simple cost-benefit perspective, where transaction costs have been identified as one important barrier.
While transaction costs have been discussed widely from a conceptional perspective, empirical studies quantifying transaction costs and measures to reduce them are rare. This paper presents approaches, results and insights from a recently completed research project funded by the German Federal Energy Efficiency Center (BfEE), addressing transaction costs in various energy efficiency measures and the role of energy efficiency services to overcome the barrier.
We analyse a set of 11 energy efficiency investments covering private households, public institutions and the industry sector. We gather data on direct investment costs and energy cost savings and provide a detailed analysis of the various barriers and transaction costs associated with the implementation. We then analyse the costs of existing energy efficiency services using data provided by the BfEE. We compare the different cost elements and analyze the potential of energy efficiency services to reduce transaction costs.
We find that the role of transaction costs differs substantially between households, public institutions and companies and that the impact of energy efficiency services on transaction costs needs to be evaluated using different methodological approaches. We conclude that while data availability on disaggregated transaction costs is a major challenge, energy services can reduce transaction costs considerably.
This report explores the future role of the voluntary carbon market and its potential to contribute to raising the ambition of climate policy. For this purpose, desk research was complemented by interviews with voluntary carbon market representatives. The report finds that the current roles of the voluntary market are set to change fundamentally due to the Paris Agreement. For the future of the voluntary market as an investor, three roles were identified, each of which is associated with specific challenges: The market may maintain its current role of buyer of carbon neutrality credits, it may become a supporter of NDC implementation, or it may become a driver of ambition. With regard to the future role of private certification standards, the Paris Agreement may hold the possibility of using such standards in the context of compliance activities. Overall, the findings indicate that the voluntary market has some potential to contribute to ambition raising. Whether this potential will actually be unlocked depends on how the concept of ambition raising will be operationalized under the Paris Agreement and to what degree it can be integrated into the voluntary market's activities and business models.
Improvements in energy efficiency have numerous impacts additional to energy and greenhouse gas savings. This paper presents key findings and policy recommendations of the COMBI project ("Calculating and Operationalising the Multiple Benefits of Energy Efficiency in Europe").
This project aimed at quantifying the energy and non-energy impacts that a realisation of the EU energy efficiency potential would have in 2030. It covered the most relevant technical energy efficiency improvement actions in buildings, transport and industry.
Quantified impacts include reduced air pollution (and its effects on human health, eco-systems), improved social welfare (health, productivity), saved biotic and abiotic resources, effects on the energy system and energy security, and the economy (employment, GDP, public budgets and energy/EU-ETS prices). The paper shows that a more ambitious energy efficiency policy in Europe would lead to substantial impacts: overall, in 2030 alone, monetized multiple impacts (MI) would amount to 61 bn Euros per year in 2030, i.e. corresponding to approx. 50% of energy cost savings (131 bn Euros).
Consequently, the conservative CBA approach of COMBI yields that including MI quantifications to energy efficiency impact assessments would increase the benefit side by at least 50-70%. As this analysis excludes numerous impacts that could either not be quantified or monetized or where any double-counting potential exists, actual benefits may be much larger.
Based on these findings, the paper formulates several recommendations for EU policy making:
(1) the inclusion of MI into the assessment of policy instruments and scenarios,
(2) the need of reliable MI quantifications for policy design and target setting,
(3) the use of MI for encouraging inter-departmental and cross-sectoral cooperation in policy making to pursue common goals, and
(4) the importance of MI evaluations for their communication and promotion to decision-makers, stakeholders, investors and the general public.
The current global momentum for carbon pricing has lately produced innovative hybrids: carbon taxes allowing the use of offsets from emission sources not targeted by the carbon tax for compliance with the tax load. This study aims at filling the knowledge gap in existing literature by exploring the potential impacts of domestic offset components in carbon taxes on mitigation of national emissions, including the country examples Colombia, Mexico and South Africa.
The findings indicate that the use of offsets in carbon taxes may significantly influence mitigation of national emissions both positively and negatively. On the one hand, this model may result in real emission reductions from offset projects and positive spillover effects of efforts to reduce emissions from emission sources covered by the carbon tax to other emission sources. Furthermore, the offsetting component can be used as a bargaining chip in political negotiations facilitating the introduction of mitigation policies and measures and/or strengthening their ambition level. On the other hand, it also entails serious risks: Offsetting could compromise the environmental integrity of the carbon tax through low-quality offsets. Furthermore, offsets reduce incentives to curb emissions in the emission sources covered by the carbon tax, potentially leading to carbon lock-in effects. Moreover, an offsetting component could provoke opposition to further climate policies and measures for emission sources generating offsets, as replacing the offsetting component with mandatory emission reduction policies would eliminate revenues from offset credits. General opposition of stakeholder groups to the introduction of offsets may even hinder the introduction of carbon pricing instruments and offsetting altogether.
The study identifies options that could be employed to increase potential positive effects of introducing an offset component to a carbon tax and mitigate related risks, pointing to the country examples included, where appropriate.
The implementation of energy efficiency improvement actions not only yields energy and greenhouse gas emission savings, but also leads to other multiple impacts such as air pollution reductions and subsequent health and eco-system effects, resource impacts, economic effects on labour markets, aggregate demand and energy prices or on energy security. While many of these impacts have been studied in previous research, this work quantifies them in one consistent framework based on a common underlying bottom-up funded energy efficiency scenario across the EU. These scenario data are used to quantify multiple impacts by energy efficiency improvement action and for all EU28 member states using existing approaches and partially further developing methodologies. Where possible, impacts are integrated into cost-benefit analyses. We find that with a conservative estimate, multiple impacts sum up to a size of at least 50% of energy cost savings, with substantial impacts coming from e.g., air pollution, energy poverty reduction and economic impacts.
Europe needs a new vision of progress. An energy transition has this potential. It can give the "European idea" a future-oriented content. The goal for 2050 is clear: a Europe without fossil and nuclear energy! This is not a utopia. Studies, resolutions of the EU and some member states prove that this vision is feasible and has many advantages: more jobs, more security of supply, fewer premature deaths due to air pollution, reduction of resource conflicts, falling energy costs. New green lead markets for renewable energies and resource efficiency are emerging. A European energy transition requires an alliance, ideally fuelled by neighbours France and Germany. Many are hoping for Germany as a driver of nuclear and coal phase-out. But deciding on "revolutionary goals" is not enough: finally implementing them is what Germany and Europe are waiting for. This report shows which concrete steps can advance this vision of progress.
"400,000 new homes per year are needed in German cities." This figure has been cited repeatedly in political discussions, media, and statements of different groups for a couple of years now. Living space is needed to mitigate the (further) inordinate increase of rents in some cities and regions and to ease finding appropriate flats at affordable prices for low- and medium-income households. But how to activate investors and the real estate market?
Having the triangle of sustainability in mind with its ecologic, social and economic cornerstones the discussion - metaphorically spoken - currently pulls the three corners: Which should have the highest priority?
The economically driven most favourable solution is lowering the requirements for new buildings such as the energy performance to make building cheaper. The social perspective prefers an increase of public social housing investments regardless of efficiency standards. And the ecological side argues that a high performance is needed to reach energy and climate targets in the buildings sector.
Starting at this point of discussion, firstly, the paper reflects the assumptions behind the numbers of new homes needed against a sufficiency background.
Secondly, it presents current changes in German building policies: a new legislation for energy supply and efficiency is currently in preparation.
It discusses the potential to integrate sufficiency aspects in building policies, focussing specifically on the new regulation, financial incentives, and energy advice.
The paper analyses if and to what extent it is likely to balance the three cornerstones of sustainability by integrating sufficiency aspects into efficiency policies. Household experiences with prepayment meters are used as an example to illustrate the potential for tapping efficiency and sufficiency potentials in low-income households considering social, economic, and ecological aspects. Based on the identified (in)consistencies, thirdly, it suggests further development in German policies to make better use of synergies between the ecologic, social and economic demands on buildings.
In the context of the German-Korean Energy Policy Dialogue, integration of renewable power sources and smart grids have been identified as topics with high relevance. This study aims to support mutual learning and exploration of new fields for collaboration by identifying similarities and differences in the respective status quos, strategies and policies in both countries.
After a short introduction to the South Korean energy situation, Chapter 2 provides an overview of the South Korean power market, its situation regarding renewable power sources and the Korean definition of smart grids. Chapter 3 of this study highlights the major South Korean energy strategies and regulatory frameworks relevant to integration of renewable energies and smart grids. In Chapter 4, the status and perspectives of renewable energy sources integration and smart grids in South Korea are discussed, presenting various demonstrative examples, new business models and the current situation of technology deployment. Chapter 5 puts South Korea in the global context and compares it to Germany. Finally, Chapter 6 draws conclusions and presents recommendations on suitable areas for mutual learning.
This report on urban mobility performance measurement is aimed at enabling stake- holders of the city of Bucharest and the public to understand their current urban mobility situation through a point-based results framework. It shall provide the city of Bucharest with a yardstick to measure its performance and benchmark the progress against some of its counterparts. It measures the urban mobility and compares it with 13 other European cities: Berlin, London, Vienna, Brussels, Moscow, Rome, Zurich, Paris, Amsterdam, Copenhagen, Oslo, Budapest and Madrid.
Similar to many other European cities, Bucharest employs a Sustainable Urban Mobility Plan (SUMP) in order to continuously improve urban transport and mobility and to make it more sustainable. In this respect, the report should also be regarded as a document which supports the stakeholders in Bucharest in their efforts to develop transport and mobility in the city more sustainable.
While the Paris Agreement (PA) has enshrined ambitious long-term objectives, the current level of action of the Parties to the Agreement falls far short of this ambition, as is recognised in the very COP decision adopting the Agreement. The Global Stocktake (GST) established in Art. 14 of the PA is a key element to address this problem. Its purpose is to review the implementation of the PA and to assess the progress made towards the collectively agreed goals.
The aim of this report is to develop recommendations on how to maximise the potential impact of the GST. The report starts from a perspective of what the GST could ideally do, irrespective of decisions already taken under the UNFCCC and other political constraints. In the second step, the report takes these limitations into account and suggests ways for how to nonetheless work towards the desired outcome.