Opinion of the Economic and Social Committee on the 'Communication from the Commission: Energy efficiency in the European Community - Towards a strategy for the rational use of energy` (98/C 407/27)

On 19 May 1998 the European Commission decided to consult the Economic and Social Committee, under Article 198 of the Treaty establishing the European Community, on the above-mentioned communication.

The Section for Energy, Nuclear Questions and Research, which was responsible for preparing the Committee's work on the subject, adopted its opinion on 22 July 1998. The rapporteur was Mr Hernández Bataller.

At its 357th plenary session (meeting of 9 September 1998) the Economic and Social Committee adopted the following opinion by 117 votes in favour with one abstention.

1. Introduction

1.1. The European Commission has forwarded its 'Communication on energy efficiency in the European Community - Towards a strategy for the rational use of energy` to the Economic and Social Committee, the Council, the European Parliament and the Committee of the Regions. This communication stems from the commitment made by the EC in a White Paper ().

1.2. The communication drawn up by the Commission is also based on the need to meet the objectives laid down by the Kyoto Conference on reducing greenhouse gases (); for the EU this means an 8 % reduction in emissions between 1990 and 2010. The communication finds further justification in the benefits linked to efficient energy use, such as guarantee of supply, job creation and the elimination of other pollutants.

1.3. The communication also takes into account the fact that the improvement in energy intensity in most Member States has stalled, necessitating a renewed effort to pursue policies for optimizing energy consumption. Furthermore, it is acknowledged that this communication is only the first step towards an overall strategy in this area and presupposes a short/medium-term political commitment to mobilize the interest of other economic and social players. This strategy comprises the definition of objectives, timetable and responsibilities, in other words an action plan.

1.4. The purpose of this opinion is therefore to give the ESC's view on the Commission communication and to put forward concrete recommendations which will improve it and can serve as guidelines for the future action plan.

1.5. On the same front, the ESC has drawn up an own-initiative opinion on 'Policies for the rational use of energy (RUE) in the European Union and in countries which are candidates for early membership`. This opinion contains a series of recommendations for encouraging RUE policies in the light of a possible fall in energy prices, deregulation of the sector and the deterioration in energy intensity. This document will be used as a reference for the following comments.

1.6. The Committee's views are therefore based on the abovementioned opinion and on other opinions issued in response to various Commission initiatives. This includes, by way of recent examples, those on the Communication 'A Community strategy to promote combined heat and power (CHP) and to dismantle barriers to its development` () and the Communication on 'Transport and CO2: developing a Community approach` ().

2. The Commission communication

2.1. The objectives of the communication can be summarized as (i) to highlight the already existing potential, (ii) to present what has been achieved so that this can serve as a springboard for renewed efforts by the Member States, local and regional authorities and the Commission, (iii) to provide a platform for a discussion aimed at framing an action plan and preparing the ground for a more coordinated drive to comply with the Kyoto agreements.

2.2. The present situation with regard to energy prices, together with the barriers standing in the way of further action to improve energy consumption, have resulted in energy intensity stagnating over recent years compared with the trend up to the early 90s, despite the Commission's efforts through various programmes and regulations.

2.3. Nevertheless, the communication considers that the potential for energy saving is 18 % compared with consumption in 1995, with an improvement of: 17 % for industry, 14 % for transport and 22 % for the domestic and tertiary sector. The basis for this estimate is the MURE model drawn up by the Commission.

2.4. The present process of liberalization and deregulation in the energy sector is clearly going to have an impact on efficient energy use. Firstly, prices will fall, better reflecting production costs and preventing cross subsidies, with a beneficial impact on the profitability of RUE projects. Secondly, greater competitiveness is going to encourage an improvement in efficiency within the energy sector itself.

2.5. Market forces on their own, however, are not sufficient to achieve the economically feasible potential, given that energy is a secondary factor in many cases. Hence there is a need for the institutions to develop specific measures, bearing in mind the social and economic benefits associated with a reduction in energy consumption.

2.6. Various kinds of barrier stand in the way of improved energy consumption:

- Energy prices do not adequately reflect environmental costs and other externalities associated with the generation/transport/consumption of energy.

- There is a lack of information on both available solutions and the results of completed projects. To this should be added a lack of awareness about energy costs, which results in efficiency taking a back seat to purchase cost.

- Energy saving has less visibility than generation projects and, more specifically, than renewable energy sources, which makes it less attractive from a political point of view.

- There are institutional and cultural barriers, above all on the part of the energy companies which back large-scale, centralized, instead of small-scale, decentralized solutions.

- There are also technical barriers, basically a lack of training/information on the part of companies, technicians and engineers who ought to encourage lower-consumption technologies; among other things these barriers prevent a reduction in costs through mass production or standardized maintenance.

- Finally, the communication mentions the financial barriers to the implementation of such projects, which are generally granted less favourable credit terms than centralized generation projects.

2.7. An important factor in limiting success has been the lower priority given to the RUE programmes implemented by the Member States, despite the support expressed for the recommendations drawn up by the Community. The various initiatives under Community and Member State programmes are summarized in both the communication and the ESC's opinion on combined heat and power ().

2.8. According to the Commission's communication, the coordination of strategies by the Community and the Member States is also important and should be improved, above all so that experience can be pooled and synergies harnessed. Electricity is an area of special interest as it is the main source of the greenhouse effect and its consumption is increasing markedly in buildings and industry owing to the higher living standard of European citizens.

2.9. The strategy proposed by the Commission is based on the following premises:

2.9.1. To improve intra-Community cooperation it is proposed that a sub-group on energy efficiency be set up within the group on convergence of national energy policies, the latter group being a Commission initiative which is awaiting approval by the Council ().

2.9.2. More targeted promotion of energy efficiency in other Community programmes: structural funds (through greater regional integration); transport (technological improvements, introduction of new uses and modes, fuel prices to include externalities, etc.); RTD (strengthening of RUE projects in the Fifth framework programme); and international cooperation.

2.9.3. Secondly, the specific priorities for action are:

2.9.3.1. Energy efficiency in the building sector: buildings account for 40 % of consumption and therefore require priority action. Measures are proposed not only for physical equipment but also the design of buildings.

2.9.3.2. Revision of Directive 93/76/EEC to limit CO2 emissions by strengthening certain of its articles and making it easier to implement for the Member States which to date have not given sufficient priority to the proposed measures.

2.9.3.3. Energy efficiency of household appliances and other consumer goods, through stricter labelling and minimum efficiency agreements with manufacturers. The latter will apply to industrial equipment, for which there is no labelling scheme at the moment.

2.9.3.4. More extensive use of 'voluntary long-term agreements` to establish minimum efficiency requirements, provided they cover a significant number of manufacturers and appropriate monitoring machinery is established.

2.9.3.5. Increased dissemination and promotion of information, especially to encourage labelling, training and certification. In this connection, a system of awards for the most efficient consumers is being considered.

2.9.3.6. Support for 'third-party financing`, 'guarantee of results` and other financing schemes. These schemes are not widely used and the following are therefore recommended: increased bank participation, schemes which guarantee results, and independent project evaluation.

2.9.3.7. Promoting energy efficiency in the gas and electricity sectors and CHP. Wider use of integrated resource planning (IRP) based on the draft directive on rational planning techniques. Besides support for CHP, agreements with the energy utilities are proposed, along with continued support through the SAVE programme.

2.9.3.8. Energy management and technology procurement. The Commission intends to present a draft directive on energy management to encourage public bodies to set an example with their purchases. As an extension of this initiative, cooperative technology procurement is proposed for the large-scale purchase of more efficient equipment by the private sector, mainly in the building sector.

2.9.4. The next steps will be to gather information and feedback on the initiatives proposed by the Commission with a view to strengthening the measures of both the Commission and the Member States and providing a basis for the future action plan.

3. Comments on the Commission communication

3.1. The comments set out below are based on the views already expressed by the ESC in earlier opinions ():

- The Kyoto protocol lays down emission reductions for the EU which the Member States have to respect; compliance has to be guaranteed and assessed.

- Deregulation and liberalization of the energy sector, essential for the creation of the single market, will make European businesses more competitive by reducing prices and removing cross subsidies, but a more imaginative and innovative approach is required to encourage RUE actions.

- In line with the communication from the Commission to the Council submitted to the Cardiff Council (), it is important to integrate the energy/environment dimension into all decisions involving the creation of the European Union.

- The priority sectors to target for stimulating a more efficient use of energy are transport and buildings. More specifically, transport represents a major challenge in view of the inflexibility towards changes in modes and uses, and the economic importance of road transport.

3.2. Turning to the detail of the communication's content, generally speaking it is well-argued and prepares the ground for launching a strategy aimed at reducing energy consumption.

3.3. In the Committee's view, however, some comments are necessary to provide a firmer foundation for a future action plan:

3.3.1. The estimates for existing savings potential are based on the MURE model. No information is provided as to its particular features, algorithms and scenarios, which makes it difficult to assess the reliability of these estimates. If the current trend in energy consumption is taken into account, the potential for industry seems overestimated while that for buildings and especially for transport seems underestimated. At all events, insufficient evidence is produced to back the figure of 18 % given by the Commission.

3.3.2. While the current drive to liberalize the markets undoubtedly makes for a reduction in costs for the final consumer, the beneficial impact on RUE projects is overestimated. The reduction in cross subsidies may, however, occasionally result in increases in some prices, which should encourage the search for ways of lowering energy consumption.

3.3.3. The barriers are not all equally important and it would therefore be advisable to prioritize them.

3.3.4. In general, the influence attributed to the SAVE programme () is not consistent with what has actually been achieved in improving energy intensity. The transposition of directives has been slower than desired and the impact of labelling less than suggested by the communication.

3.3.5. With regard to the strategy proposed by the Commission, the ESC endorses the ideas of setting up a sub-group within the convergence group and improving the integration of RUE in Community programmes.

3.3.6. With regard to the specific priorities, no mention is made of measures which, while not directed at improving energy consumption, do have a considerable influence on it, e.g.: improved comfort, continuous rather than discontinuous processes, increased productivity (), improvements in urban traffic, etc.

3.3.7. Nor is there any reference to the introduction of technologies aimed at reducing the environmental impact, and which do this with lower energy consumption and even generate energy, e.g.: oxidation of effluents, organic cycles, etc.

3.3.8. Consequently the future action plan will have to address not only the environmental benefits, but also an improvement in the general competitiveness of industry and security of energy supply.

3.3.9. There is no mention as a priority - although it could be incorporated in the equipment labelling - of the importance of the spread of air-conditioning in some Community countries, or of the increase in the size of vehicles and domestic electrical appliances, resulting from higher living standards.

3.3.10. In the case of buildings, it is necessary not only to draw up standards but also to ensure, by means of checks, that they are respected not only at the design stage but also during construction and when buyers/tenants are informed of their rights and what information they should demand.

3.3.11. Nor is there any mention of the fact that, generally speaking, the level of compliance with appliance labelling legislation is low, because the consumer is unaware of its existence and the vendor promotes those appliances which give the biggest profit margin.

3.3.12. With regard to minimum efficiency standards and negotiated agreements, more details should be given about manufacturers' reluctance to participate in these schemes, and solutions should be proposed. Generally one should adopt a positive approach and reward those manufacturers who promote low-consumption appliances with recyclable components. This should act as an incentive to competitors.

3.3.13. The real impact of existing information networks () should be evaluated. The mere fact that such networks exist does not mean that they are effective or, even less, that they are the same from one country or region to another. The launch of an award scheme has its good points in that it could be used for benchmarking or reference by other consumers, but the risk is that some awards may be subject to political bias.

3.3.14. The reasons should be given why 'third-party financing` has not been the success anticipated, despite the support and the mass of information published on the subject. It seems unrealistic to ask commercial banks to act as guarantors for energy service companies (ESCOs).

3.3.15. We do not have any information on specific experiences with projects where the guarantee of results scheme has been applied, but these guarantees should come from equipment manufacturers and, to some extent, from insurance companies, but never from banks. At all events, these procedures can be applied to projects where cash flows are easy to separate from the rest of the business, as in the case of CHP, but are difficult to apply to energy saving projects.

3.3.16. As regards the 'integrated resource planning programmes`, the communication does not take into account the fact that the present trend towards deregulation and unbundling may hamper the development of DSM actions, since the benefits stemming from the improved load curve cannot be passed on to the marketing/distribution sectors. It is therefore necessary to work on a medium to long-term timescale when incorporating the externalities linked to the energy chain.

3.4. Generally speaking, the proposed actions take little account of the results achieved to date by the various programmes and lean too heavily on the SAVE programme. It would have been preferable to propose a number of actions coordinated between the various programmes, both Community and national.

3.5. It is important to provide an adequate budget for the future action plan which integrates the present programmes and is commensurate with the hoped-for benefits.

3.6. Clearly the action plan will have to be coordinated with the international cooperation programmes and strengthen the position of Community enterprises in the outside world.

4. Recommendations

4.1. Broadly speaking the Committee approves without reservation the Commission's initiative. The following proposals and recommendations are designed to serve as a basis for the future action plan which should include short-term actions.

4.2. The Commission communication is, moreover, in line with its communication to the Council () which sets out a number of recommendations to allow for the environmental implications of the various Community programmes.

4.3. These recommendations, while having different objectives, reinforce the views expressed by the ESC in its own-initiative opinion () which puts forward some proposals for specific actions.

4.4. With regard to the 'potential savings` table, besides specifying the methodology used, the same point of departure and time-scale (1990-2010) should be used as in the Kyoto agreements, as well as mentioning the potential reduction in gas emissions from attainable potential energy savings.

4.5. The Committee endorses the need to monitor both national and Community RUE programmes and the various directives and legal provisions, which should incorporate appropriate monitoring machinery from the outset. In the event that additional expenditure is required to carry on with the impact assessment, this assessment should be performed by organizations which are independent of the bodies responsible for the programmes and should include possible improvements, even if they run counter to original intentions ().

4.6. Coordination with the Member States and their programmes is also regarded as fundamental. In this connection an analysis of the national programmes mentioned in annex 2, both individually and comparatively, would have been very useful.

4.7. As mentioned in the communication, many players are involved, but a clear framework of action should be established, beginning with energy consumers and working up to the 'energy utilities`, so as to avoid the duplication and dissipation of effort found in some Community and national programmes.

4.8. The setting-up of a forum within the energy committee could be useful, but its terms of reference and powers would have to be clear so as not to create a talk-shop with little outside influence. As a first step, the action plan would have to be drawn up as a basic reference point.

4.9. The legal provisions on buildings () should make a clear distinction between new buildings - and again between subsidized public housing () and the private sector - and existing buildings. In the case of the latter, special conditions should be laid down for renovation in the historic core of cities.

4.10. Despite the fact that the transport sector programmes for reducing emissions and improving traffic involve an element of rational energy use, an action line should be introduced for this sector within the action plan since it is not mentioned in the communication.

4.11. Greater importance should be attached to raising the awareness of the public and energy users in general, so that they pay attention to the information contained on energy labels and demand specific information on the energy consumption of appliances throughout their useful life. The publicity campaigns should be well-run and evaluated, avoiding excessively general information and making use of the different communication media now available.

4.12. To this end, education/information at all levels, from secondary school to university, is regarded as important, above all for architects and engineers in that their decisions affect energy consumption.

4.13. The Committee would also encourage the dissemination of information, which must be based on actual, measured results. In the case of those projects whose main objective is not to optimize energy consumption, the latter should be clearly differentiated from the other benefits.

4.14. The action plan provided for in the communication will have to ensure that the process of liberalizing and deregulating the energy sector - which will benefit free competition and reduce costs - is carried out with an eye to its impact on the consumer and not only to maximizing profits in the short term. To this end, measures should be included to facilitate offers of 'energy savings` with the same degree of competition as offers of 'generation`.

4.15. Quality standards for industrial processes should include a section on improving the energy efficiency of the process concerned, setting up, for example, best practice or benchmarking schemes which would be used as a reference by other energy consumers.

4.16. Some recommendations should be drawn up in the action plan on the procedures to be followed when framing and monitoring national programmes and coordinating them with this Commission initiative and with the programmes of other countries.

4.17. From a purely formal point of view, it is recommended that the main features, premisses and algorithms of the MURE model, the examples of the Altener guarantee of results and 'cooperative technology procurement` be included as an annex to the communication.

4.18. A summary should also be included of the main results achieved by the SAVE programme which could serve as a starting point for the priority lines of action proposed in the action plan.

Brussels, 9 September 1998.

The President of the Economic and Social Committee

Tom JENKINS

() 'An energy policy for the European Union` - COM(1995) 682 final.

() The six gases concerned are, in order of importance: carbon dioxide (CO2), methane (CH4), nitrous oxide (N2O), hydrofluorocarbons (HFCs), perfluorocarbons (PFCs) and sulphur hexafluoride (SF6).

() COM(1997) 514 final and opinion OJ C 157, 25.5.1998.

() COM(1998) 204 final; opinion in preparation.

() OJ C 157, 25.5.1998.

() This initiative is in line with the proposal put forward by the ESC in its own-initiative Opinion on 'Policies for the rational use of energy (RUE) in the European Union and in countries which are candidates for early membership`, although in this case it is proposed that the administrative burden be minimal and that the forum link up through the informatics network.

() These include its Opinions on 'Policies for the rational use of energy (RUE) in the European Union and in countries which are candidates for early membership`; 'A Community strategy to promote combined heat and power (CHP)` - OJ C 157, 25.5.1998; and 'Transport and CO2: developing a Community approach` - in preparation.

() 'A strategy for integrating environment into EU policies` - COM(1998) 333 final.

() It is surely questionable whether a mere ECU 45 million over five years is sufficient to improve energy intensity by 1 % per annum.

() Of the industry-related projects submitted under Thermie, only about 40 % had improved energy consumption as their main objective. In the rest, this was a secondary objective.

() The virtual network recommended by the ESC in its own-initiative Opinion on RUE is a data base on the results achieved by the programmes.

() 'Policies for the rational use of energy (RUE) in the European Union and in countries which are candidates for early membership`.

() There is in general an element of 'patronage` in the assessments of the various programmes and some reluctance to indulge in healthy self-criticism.

() It should also be borne in mind that this is one of the key areas in the Fifth RTD Framework Programme.

() For two reasons: to set an example and the fact that the occupiers have less money to cover subsequent costs. These buildings should be covered by the conditions applicable to public and technology procurement as referred to in the communication.