In general, these policies are designed to address not only climate change commitments and environmental problems, but also to improve economic efficiency, energy security, industrial competitiveness and consumer well-being. In some cases, they also can reduce government spending. Moreover, they seek to accomplish their aims with little or no disruption to the economy. Given the magnitude of both the goals and constraints, there is great need for effective energy efficiency policies. This report sets out six essential elements of a coherent framework for such policies.
Markets are an excellent foundation from which to encourage energy efficiency.
It is the millions of consumers, producers and market intermediaries who ultimately decide through their behaviour, purchases, product designs, research activities and investment decisions how efficiently energy is used. The potential for energy efficiency improvements can never be fully realised unless these energy users take into account, either explicitly or implicitly, the energy economic consequences of their everyday decisions. Moreover, the market can be an effective mechanism for weighing the importance of energy efficiency against other individual and social concerns, for channelling creative and financial resources to the concerns of highest priority, and for establishing lasting interest in improving energy efficiency. In some situations, transition to full cost pricing and removal of subsidies may cause social difficulties. Evidence shows that energy users adopt fewer energy efficient options than are in their financial interest.