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Opinion of the European Economic and Social Committee on the ‘Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions — Energy Efficiency Plan 2011’

On 8 March 2011, the Commission decided to consult the European Economic and Social Committee, under Article 304 of the Treaty on the Functioning of the European Union, on the

Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions — Energy Efficiency Plan 2011

The Section for Transport, Energy, Infrastructure and the Information Society, which was responsible for preparing the Committee's work on the subject, adopted its opinion on 22 June 2011.

At its 473rd plenary session, held on 13 and 14 July 2011 (meeting of 14 July), the European Economic and Social Committee adopted the following opinion unanimously.

2.1 Energy efficiency is at the heart of the Europe 2020 strategy. It contributes to all three key objectives of energy policy – security of supply, competitiveness and the environment/combating climate change. The EESC has continuously supported the goal of better energy efficiency and has in many opinions given its views on related measures.

2.2 This opinion covers two initiatives. The EESC decided to prepare in 2011 an own-initiative opinion on energy efficiency, concentrating on changing behaviour and ways to achieve results. When the Commission presented its new Energy Efficiency Plan 2011 in March 2011 it was decided to present the Committee's views on it in the same opinion.

2.2.1 Hence in this opinion the conclusions and recommendations as well as chapters 2. ‘Introduction’ and 4. ‘General comments on energy efficiency’ are common to both parts. Chapters 3. ‘The gist of the Communication on the Energy Efficiency Plan 2011’ and 5. ‘Specific Comments’ refer to the Communication on the Energy Efficiency Plan, while chapter 6. on ‘Measures to enhance behavioural change’ refers to the own initiative of the Committee. This last chapter is primarily based on findings from a hearing organised on 18 May 2011.

2.3 The gross inland energy consumption (minus non-energy use) was in 2007 projected to 1 842 Mtoe, equalling the saving target to 368 Mtoe. Recent calculations give a projected consumption of 1 678 Mtoe in 2020. Latest statistics from 2008 show an EU gross inland energy consumption of 1 685 Mtoe.

2.4 The final energy consumption in 2008 was 1 169 Mtoe. 25 % of this energy was consumed in the residential sector and 12 % in services. In households 67 % of energy consumption goes to space heating, 15 % to lighting and appliances, 14 % to water heating and 4 % to cooking. Transport contributes to 32 % of energy use, industry to 27 %, and other uses 4 %.

3.1 The earlier Energy Efficiency Action Plan of 2006 and subsequent legal and other measures have been successful drivers of better energy efficiency. They were, however, not designed to reach a target of saving 20 % of EU's primary energy use by 2020, which was set later. According to estimates the EU is on the path to reach half of this target.

3.2 The new plan is part of the Europe 2020 flagship Initiative for a Resource Efficient Europe. The aim is to reach the 20 % savings target in 2020. The plan presents the Commissions aims, which will be realised by legal and other proposals later in 2011, first by revising the Energy Services and CHP Directives (1).

3.3 Fully implemented the existing and new measures have, according to the Commission, a potential to savings of up to EUR 1 000 per year per household, create up to two million jobs and reduce greenhouse gas emission by 740 mill tons, as well as improve Europe's industrial competitiveness.

3.4 The greatest saving potential lies in buildings. The focus is on accelerating renovation of public and private buildings and improving the performance of components and appliances:

3.6 To enhance energy efficiency in the energy generation industry (30 % of primary energy use):

3.8 The Commission will continue to foster development, testing and deployment of new energy-efficient technologies.

3.9 Financing to enhance energy efficiency, in order to overcome market and regulatory failures, is primarily a national responsibility. Complementing this, the EU supports energy efficiency through Cohesion Policy programmes, the Intelligent Energy Europe Programme, intermediated finance, the European Economic Recovery Programme and the FP for R&T&D. The Commission will analyse further options when preparing the next financial framework.

3.10 For consumers the Commission will study and consult on best solutions to bring about behavioural change. In addition:

3.11 Transport, even with the fastest growing energy use, is not dealt with in this plan, in waiting for the upcoming White Paper on Transport (published in April 2011).

3.12 The National Energy Efficiency Action Plans (NEEAPs) shall be expanded to cover the whole energy chain. Reporting and monitoring will be included in the ex-ante policy coordination of the Europe 2020 strategy – the European Semester.

3.13 The Commission does not as yet propose binding national targets. It will assess the development in 2013 and, if it is unlikely for the 20 % target to be achieved, it will propose binding national targets. As to sectoral targets, the plan includes some, as described above.

4.1 The EESC welcomes the Commissions proposal for a new Energy Efficiency Plan, which has finally been presented after a long delay. The Committee supports the aim of the Communication, but has some comments and wishes for clarifications, presented in this opinion. The EESC looks forward to give its detailed views on the legislative and other proposals implementing this plan. Energy efficiency and saving are predominantly dependent on actions of citizens, business and workers, which makes close consultation and participation of civil society exceptionally important.

4.2 Under present economic conditions, with restrained public finances, high unemployment and a widespread lack of sufficient confidence to make investments, this task is not easy, even if it could bring benefits in a relatively short time. Most important is to ensure a profound, sustainable, long term development towards much better energy efficiency. Pressing for short term results may not lead to sustainable results.

4.3 The choice of measures is crucial in order to achieve real results. The EESC believes, as stated in the Opinion on energy efficiency in 2008 (2), that voluntary agreements with national operators are useful, but it should be clear from any agreements approved that failure to meet targets will result in the imposition of compulsory measures. Regulation is naturally needed in many cases, but only when positive incentives do not work. Social and civil dialogue must be employed whenever possible and an additional administrative burden for all, and in particular SMEs must be avoided.

4.4 The situation is particularly paradoxical in the newer Member States, where the potential for better energy efficiency is biggest but economic resources weakest. For example there is an urgent need to repair leaking district heating systems and to ensure high quality in the building and appliances sectors. Governments have to act in the general and longer term interest. Better use should be made of structural funds.

4.5 When discussing energy efficiency and saving, it is helpful to keep some basic features in mind.

4.5.1 Better energy efficiency means less energy input per unit of output. This is mainly achieved by better technologies. Investing in a new technological solution gives lasting effects over its lifespan. Not only technology development but also deployment is crucial.

4.5.2 In spite of better energy efficiency energy consumption can still grow even in times of economic constraints, due to higher income, increasing number of households with better comfort levels and more home appliances, more travel etc.

4.5.3 Energy saving, on the other hand, means decreasing energy use mainly through change in behaviour. This must be a key target for action. To give real results change should be permanent, but the ‘rebound effect’ easily outplays this. The EESC stresses the need to pay more and closer attention to motives and patterns of human behaviour. What kinds of incentives really do influence people to change their behaviour? (see also chapter 6).

4.5.4 Energy saving can also be the result of decreased economic activity, which we could recently witness during the financial crises. Enhancing energy saving should foster economic development, social wellbeing and quality of life. The important target is to disconnect economic growth from growth in energy use.

4.5.5 There is also a need to assess how the costs of energy efficiency measures are passed on to consumers, and mitigate these repercussions to ensure that it does not become more difficult for consumers to access energy and to prevent energy exclusion from becoming any worse. It is of outmost importance to strike a better balance between the costs and benefits of energy efficiency, without jeopardising consumer access to energy and the universal nature thereof.

4.6 A thorny issue is the measurement of results of energy efficiency measures. It is surprising that the Commission does not mention this at all, not even in the Impact Assessment of the Plan. In many cases the measures as such, and their theoretical potential, are registered as results. The real aggregated results, as a change in the projected use of energy, appear with a considerable time lag. On top of that we have the time lag of statistics - presently the newest are from 2008.

4.7 The grounds for the estimate that the EU would be on track to reach half of its target by 2020 also remains somewhat unclear. Obviously this is based on several sources and calculations, taking into account the recent economic downturn. But is this an average result, or the most optimistic or pessimistic scenario?

4.8 The EESC sees energy efficiency and saving predominantly as a responsibility of the Member States, due to the vast potential at local level, defined by local circumstances and traditions. The Committee strongly underlines the importance of thorough and ambitious NEEAPs. It emphasises that these plans should be more strategic than in the past, and that public consultations should be carried out during the drafting and evaluation processes. The Committee welcomes the proposed new approach to reporting and monitoring. Member States should not deviate from this responsibility. The Commission should help to strengthen the ownership of the Member States and to create a common framework for these activities.

4.9 The Committee agrees with the Commission's view on the role of the EU in this context, derived from Article 194(1) of the Treaty on the Functioning of the Union. This is, briefly: avoiding internal market distortions; common framework for mechanisms but leaving the Member States to set concrete levels to be met in coordination with the EU level; platform for exchanging best practices and capacity building; financing through EU instruments; and promoting the EU internationally.

4.10 It is evident that all potential for better energy efficiency needs to be realised. In order to get tangible results within a reasonable timeframe without high costs and thereby motivate actors, measures should be first directed to those areas with the most cost-effective and large potential.

4.11 As to proposed measures, the Committee supports the rolling out of Ecodesign and labelling requirements, but first the functioning of the new labelling system needs to be evaluated (see 6.8). It also supports measures to overcome the upfront financing obstacles to building renovation and refurbishing. The Committee also recommends examination of those sectors where long-term Voluntary Agreements can be used effectively.

4.11.1 All measures have to be applied with careful view to their cost effectiveness and differing circumstances. Neither households and industries nor the public sector should be unduly burdened. Higher energy prices and related costs do in theory lead to less energy use, but in practice they lead to a risk of energy poverty, as price elasticity of households is known to be low. Also, the competitiveness of industry and jobs are put at risk. This seems self evident, but obviously needs to be reiterated, given some of the Commission's proposals. These will be commented upon in the next chapter.

4.11.2 The Committee would reiterate its concern about the impact of some measures on the costs for and possible repercussions on consumers. It is essential that policy focuses on the most long term and sustainable solution to fuel poverty, namely radical improvement to the energy efficiency standards of housing, particularly that occupied by low income and vulnerable households.

4.11.3 As the Commission points out, there are effective programmes in place in many Member States, some having been successfully operated for several years or even decades. In the view of the Committee, it is clearly preferential to continue and, where appropriate, strengthen these schemes, instead of deeming them outdated and giving support to new measures only.

5.1 The Committee agrees with giving the public sector the role of a frontrunner and example to be followed by businesses and households. However, the requirement to double the pace of building renovation could prove too burdensome in spite of its positive effects. Also a clearer definition of what is a public sector building is needed.

5.2 The measures to enhance energy efficiency and saving in households are to be supported. The EESC has in 2008 (3) presented detailed recommendations on measures, in particular tax incentives, for energy efficiency in buildings. In this context the Committee repeats the importance of better understanding human behaviour to design best incentives, which may not always be economic (see also 6.5 and 6.5.1).

5.3 The goal of enhancing better efficiency in generation of heat and electricity is supported by the Committee, but some of the proposed measures could be too heavy and inefficient.

5.3.1 The energy business should as such include sufficient economic incentives for utility companies to invest in the most energy efficient technologies available and applicable and thereby avoid massive public intervention. The newest technological breakthroughs, which are not yet ripe and very costly, i.e. not in reality available on the market, should receive support for further development before take-up by users.

5.3.2 The Committee underlines the role of cogeneration as highly efficient production of heat and power. Cogeneration is to great benefit applied widely in Europe, with some cost-effective potential untapped. District heating and cooling still have a big potential in Europe, but obligations should be applied prudently as district heating and cooling systems are costly investments, not to be made obsolete in a few years. Ensured access to networks for electricity from cogeneration can be a useful measure to support a cost-effective expansion of central and decentral cogeneration systems.

5.4 The Committee agrees with the Commission that energy efficiency is a promising business sector. Its development should, however, be approached by enhancing demand, not primarily pushing supply. Utilities should certainly be obliged to provide much better information, including on bills, than is often the case presently. Already in its opinion on the Energy Services Directive (4) the Committee was doubtful about putting energy saving obligations on utilities as this goes against business logic.

5.4.1 On white certificates, the Committee proposes that the Commission makes a thorough study of existing schemes, taking into account the results where they have been applied, analysing their overall impacts and feasibility with the internal market and other existing legislation.

5.5 The Commission notes that progress in energy efficiency has been greatest in manufacturing industry – 30 % in 20 years. In addition EU-level measures, like the ETS, already target energy intensive industries. It is unclear what the Commission means by big industries – big energy users e.g. energy intensive industries, or any big companies? In any case, the Committee strongly supports the measures proposed by the Commission to enhance energy efficiency in SMEs.

5.5.1 There is always room for further improvement, and to realise this, the Committee additionally recommends the use of long term Voluntary Agreements. In some cases unusually large untapped efficiency potentials surely occur. If for instance a small part of a sector has not acted effectively on its energy efficiency potential, this may however not justify new mandatory measures for whole sectors. The cases of big untapped potentials of energy efficiency should be addressed more directly and selectively. Energy audits and management systems are widely and increasingly in use and normally part of obligations under Voluntary Agreements. In this context it is important that the possibility to grant state aid prevails, while it is prohibited by EU rules to grant aid to measures that are mandatory.

5.5.2 Extending ecodesign requirements to standard industrial equipment is worth exploring, but neither widespread use of tailor-made solutions nor further innovativeness should be hampered.

5.6 The Committee agrees with the Commission on the large untapped potentials in the use of ICT for energy saving purposes, like smart metering and vast applications linked to them. This is a promising area for European innovation, and it should be boldly developed in cooperation between different relevant parties.

5.7 The Committee has previously expressed hesitance about binding overall targets for energy efficiency, and recommended exploring the feasibility of sectoral targets on a case-by-case basis. The Committee appreciates that the Commission has so far chosen this route. All efforts should be focused on measures to achieve real results.

5.8 The Committee regrets that the Communication does not take up energy efficiency in services, like retail, leisure and sports, except for that in buildings. Also, it only mentions but does not develop the issue of the external dimension of energy efficiency. The Committee has presented recommendations on EU's external energy policy, including efficiency, in two opinions in recent years (EESC opinion on The external dimension of the EU's energy policy, OJ C 182, 4.8.2009, p. 8 and Energy supply: what kind of neighbourhood policy? (CESE 541/2011)).

6.1 The supply side of energy has been the target of many policy measures to enhance energy efficiency, and even more so with the Commission's new plan to address the whole energy chain. Support to technical development, minimum performance standards as well as labelling and certification requirements are put in place, and more are planned at EU and national level. Still these alone are not enough to achieve real results, because so much depends on the behaviour of citizens and enterprises. Therefore, on its own initiative, the Committee wants to direct attention to the demand side and practical experiences of measures to change behaviour.

6.1.1 To this end the Committee arranged a hearing on 18 May 2011. The programme and presentations are to be found on the website (5). This chapter is based on the presentations and discussion at this hearing.

6.2 There is much potential for energy saving even without any investments. In households, for example, one can simply switch off lights in empty rooms, lower the room temperature, not leave appliances on standby, use the car less and drive more economically etc. In enterprises, audit under voluntary agreements reveal many measures of the same kind.

6.2.1 A good example of successful voluntary action is the EESC itself. A recent EMAS review of the buildings of the EESC and the CoR shows that from 2008 to December 2010 the consumption of electricity has decreased by 10.6 % and of gas by 30.3 %.

6.3 Information and awareness are the first steps to accomplish these simple measures, as well as others that require some investment. Experience from, amongst many others a Danish utility SEAS-NVE, shows that in order to be effective, information must be segmented to different user values, preferences and needs. For this a deeper understanding of human behaviour is needed, with behavioural psychology as an important tool.

6.3.1 To better navigate in the abundance of information energy users need help to compare features of appliances and measures. One good example of such an effort is the Topten website by WWF and others, available all over Europe.

6.3.2 ‘Disinterest – precontemplation – contemplation – preparation – action – maintenance’ are in the experience of the Transition Town Movement the citizens steps to results in energy saving. And action requires awareness, but this alone is not enough.

6.3.3 According to a recent study by the OECD, less expensive equipment is the top motivator to reduce energy consumption at home, while more practical information and belief in environmental benefits scored much lower.

6.4 Policy makers must thus not rely only on information and awareness measures nor on environmental policy messages to bring results on energy efficiency and saving. Consumers as well as other energy users need to benefit from action. A smaller energy bill can be such a benefit, if it is immediate. Otherwise incentives are needed.

6.5 VAT reductions, guarantees, direct subsidies etc. are possible economic incentives. These are needed, but should be applied with great care, in particular under present constraints on public finances. For instance the latest, very expensive technology should rather receive support for further development towards a lower price than incentives to users to invest in it.

6.5.1 The EU Structural Funds could make a bigger and more effective contribution, in particular in the new Member States, where the potential is big and support badly needed. The Commission should study the reasons for low use of available resources, and as appropriate, revise the rules for financing. It seems that in many cases the share of EU funding is too low to act as an incentive.

6.6 Even very modest incentives can be effective. Positive feedback in the form of a letter of recognition or doing well in a local competition may be enough. Social pressure in neighbourhoods have brought good results. Many times a recommendation from a friend is decisive. Social media could be used to enforce these kinds of features. Phenomena like this, also called nudges, need to be further studied and developed.

6.7 In the building sector, the energy efficiency of new buildings is a matter for regulation. A problem to be solved in this context, too, is the issue of split incentives (owner/tenant).

6.7.1 In the old building stock, measures to enhance energy efficiency are met by doubts about the financial effects of investment: The results are still influenced by behaviour and the value of the investment on the market is unclear. Builders should meet this by, for instance, high performance guarantees. Governments should, in addition to awareness measures, follow a stable policy line and provide financial incentives.

6.7.2 Improvements should be free to low income households and not funded by loans since many low-income households are reluctant or cannot afford to take out loans. It is often more cost effective to improve homes on a street by street, area by area basis.

6.7.3 Certification of the energy performance of buildings is a positive measure – in theory. In practice many problems have occurred, from unskilled auditors to no real value for the certificates on the market. Tests have given highly differing results by different auditors for the same building. The Energy Performance of Buildings Directive leaves open the options to the Member States on whether to use energy demand or energy use as calculation base, so does the related standard EN 15217. A European wide energy performance certificate for buildings based on calculated energy demand and a revision of EN 15217 are needed. The Commission should take a serious look at the certification requirements and system, and at least introduce common criteria for audits. A harmonised calculation method for energy consumption in buildings on the basis of reference buildings for different climatic zones will be a good solution.

6.7.4 Both for new buildings and renovation of old ones, the availability of skilled planning, projecting and labour are essential and represent a bottleneck. Effective measures are urgent to increase education and training of all involved, from architects and district planners to workers, and to adapt the curricula to energy efficiency needs.

6.8 For household appliances eco-labelling is an important measure to inform the consumer. This has given good results and could do so in the future, even if its biggest potential has probably been tapped by now. However, the renewed system has met criticism. It is not clear enough and can lead to misinterpretations (e.g. A+ can be displayed as best performance level). Also, its design has not been thoroughly tested by consumers. The Commission should study the situation and make necessary adjustments.

6.9 Smart/distant metering of energy use is spreading quickly, in accordance with EU requirements. This clearly increases the productivity of energy companies. But its benefit to households, who mainly pay for it directly or indirectly, is unclear. The meter alone does not do much. In addition energy use should be easily and visibly displayed, to which many innovative solutions are provided and under development by the IT sector. Furthermore an easy way to adapt one's energy use should be provided. (e.g. let the energy company interrupt distribution at certain hours etc.) For the time being, the Commission should analyse the use of smart meters in the Member States and their effects on household behaviour and, if needed, amend present provisions or propose further measures, with due regard for personal data.

6.10 In industry the use of long term Voluntary Agreements has shown convincing positive results in several Member States, for example Finland. Incentives are normally connected to these systems. In the Finnish experience, with very modest incentives, a motivating factor is the comprehension by participants that in case of failure regulation is the alternative. Voluntary agreements could be an effective measure also in the public sector, as is shown by recent developments in Finland. Sectoral agreements at EU level have delivered some results, but not always worked as expected. This is no ground for a negative appreciation of existing and well functioning national long term agreements.

6.11 All in all, energy users need to change their behaviour fundamentally and permanently. Citizens, as consumers, workers and voters, are key. Projects can only be successful when all stakeholders, not only authorities and enterprises but also trade unions and users are fully involved.

Brussels, 14 July 2011.

The President of the European Economic and Social Committee

Staffan NILSSON

(5) http://www.eesc.europa.eu/?i=portal.en.events-and-activities-energy-efficiency-changing-behaviour.