COMMISSION STAFF WORKING DOCUMENT   IMPACT ASSESSMENT Accompanying document to the   COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT, THE COUNCIL, THE EUROPEAN ECONOMIC AND SOCIAL COMMITTEE AND THE COMMITTEE OF THE REGIONS COMMISSION STAFF WORKING DOCUMENT   Energy Efficiency Plan 2011     {COM(2011) 109} final {SEC(2011) 278} final {SEC(2011) 279}final {SEC(2011) 280} final
Date: 2011-03-08
Institutions: European Commission
Subjects: consumer, energy consumption, energy policy, energy saving, energy transport, financial aid, impact study, innovation

EN 

EN 

   EN 

 
 
EUROPEAN COMMISSION 

Brussels, 8.3.2011 
SEC(2011) 277 final 

COMMISSION STAFF WORKING DOCUMENT 

IMPACT ASSESSMENT 

Accompanying document to the 

COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN 
PARLIAMENT, THE COUNCIL, THE EUROPEAN ECONOMIC AND SOCIAL 
COMMITTEE AND THE COMMITTEE OF THE REGIONS 
COMMISSION STAFF WORKING DOCUMENT 

Energy Efficiency Plan 2011 

{COM(2011) 109} final 
{SEC(2011) 278} final 
{SEC(2011) 279}final 
{SEC(2011) 280} final 

ELECTRONIC VERSION ONLY 

EN 

   EN 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
TABLE OF CONTENTS 

1. 

2. 

Introduction and policy context ................................................................................... 4 

Procedural issues and consultation of third parties ...................................................... 5 

2.1. 

Organisation and timing............................................................................................... 5 

2.1.1.  Stakeholders consultation............................................................................................. 5 

2.1.2.  Studies .......................................................................................................................... 5 

2.1.3.  Opinion of the Impact Assessment Board (IAB) ......................................................... 6 

3. 

Problem definition........................................................................................................ 6 

3.1.  What is the problem? ................................................................................................... 6 

3.2.  Why is the savings potential not achieved? ............................................................... 12 

3.2.1.  Market failures ........................................................................................................... 12 

3.2.2.  Regulatory failures ..................................................................................................... 13 

3.2.3.  Other barriers ............................................................................................................. 14 

3.3.  What policies exist to address the problem? .............................................................. 14 

3.3.1.  EU policies: assessment of the Energy Efficiency Action Plan of 2006 ................... 14 

3.3.2.  Current actions in MS ................................................................................................ 16 

3.4. 

3.5. 

4. 

4.1. 

4.2. 

4.3. 

5. 

5.1. 

5.2. 

6. 

6.1. 

6.2. 

6.3. 

6.4. 

How much of the potential will be achieved in 2020?: Baseline scenario................. 17 

The Union's right to act, subsidiarity and proportionality ......................................... 22 

Policy objectives ........................................................................................................ 23 

General policy objectives........................................................................................... 23 

Specific policy objectives .......................................................................................... 24 

Consistency of the objectives with other EU policies................................................ 24 

Policy alternatives and options................................................................................... 25 

General policy alternatives......................................................................................... 25 

Options analyzed........................................................................................................ 29 

Analysis of impact and comparing the options .......................................................... 31 

Residential and tertiary sectors .................................................................................. 32 

Transport sector.......................................................................................................... 44 

Industry sector............................................................................................................ 45 

Energy sector.............................................................................................................. 52 

EN 

2 

   EN 

 
7. 

8. 

Conclusion: Outline of the preferred new policy framework .................................... 62 

Monitoring and evaluation ......................................................................................... 65 

ANNEX I 

Report on the public consultation  

ANNEX II 

PRIMES 2009 Energy efficiency scenario results 

ANNEX III  Assessment  of  the  Energy  Efficiency  Action  Plan  of  2006  (published  as  a 
separate  Commission  Staff  Working  Document  accompanying  the  Energy 
Efficiency Plan 2011) 

ANNEX IV  National  Energy  Efficiency  Action  Plans 

(NEEAPs):  update  on 
implementation (published as a separate Commission Staff Working Document 
accompanying the Energy Efficiency Plan 2011) 

EN 

3 

   EN 

 
 
1. 

INTRODUCTION AND POLICY CONTEXT 

The EU leaders, realizing the important benefits of energy efficiency and savings to the EU's 
social, economic and environmental agendas, have committed to reach the objective of 20% 
primary energy savings in 2020 compared to the PRIMES 2007 baseline1.  

The Energy Efficiency Action Plan (EEAP) of 20062, endorsed at the Spring 2007 European 
Council,  was  a  major  step  towards  reaching  this  objective  and  aimed  at  contributing  about 
14%  reduction  in  20203.  In  the  EEAP,  it  was  acknowledged  that  further  policy  measures 
will  be  needed  and,  therefore,  its  mid-term  evaluation  and  revision  was  envisaged  for 
2009. The European Council4 and the European Parliament5 have also urged the Commission 
to adopt a new ambitious strategy. 

To  provide  for  a  new  impetus  for  energy  efficiency  and  saving,  the  Commission  is 
developing  a  new  Energy  Efficiency  Plan  (EEP)  (strategic  initiative  in  CWP  20116).  The 
EEP would set the overarching policy framework in order to put Europe on the right path not 
only  for  a  20%  saving  in  2020  but  also  for  longer  term  efficiencies  in  support  of  the  2050 
goals, by identifying the areas where future EU action is needed and outlining which policy 
instruments are best suited to address the challenges at EU level.  

The aim of this Impact Assessment (IA) is to support EEP preparation. The depth of analysis 
is  proportionate  to  the  foreseen  general  policy  level  of  the  EEP  itself.  The  concrete 
legislative  and  other  initiatives  following  this  overarching  policy  communication  to  be 
developed will be accompanied by detailed IAs and 'ex-ante' financial analysis, if required.  

The IA approach is summarized in the figure below. Firstly, it is analyzed whether the cost-
effective potential of at least 20% energy savings in 2020 will be met with the current EU and 
national policy mix. Secondly, based on this analysis, the remaining potential and policy gaps 
are identified for each sector. Thirdly, policy alternatives are considered. Fourthly, a number 
of  policy  options  are  analyzed  for  their  EU  value  added  also  considering  the  resources 
available, their potential impact and their effectiveness, efficiency and coherence (E/E/C) with 
other policies. Finally, based on the analysis, the preferred policy framework is outlined. 

1 
2 
3 
4 
5 
6 

7224/1/07, REV 1 
COM(2006) 545 
SEC(2006) 1174 
7880/1/09, REV 1, 11018/1/08, REV 1 and 7224/1/07, REV 1 
2010/2107(INI), 2008/2214(INI), 2006/2113(INI) and 2007/2106(INI)) 
Commission Work Programme 2011. COM(2010) 623 final, VOL. II 

EN 

4 

   EN 

 
 
                                                 
2. 

PROCEDURAL ISSUES AND CONSULTATION OF THIRD PARTIES 

2.1. 

Organisation and timing  

A broad consultation process and collection of expertise has informed the preparation of this 
Impact  Assessment.  It  is  based  on  the  experience  gained  from  the  implementation  of  the 
EEAP  of  2006  and  a  wide  range  of  information  sources  and  inputs  from  stakeholders.  The 
process was supported by an Inter Service Steering Group, lead by DG ENER. In addition, a 
specially dedicated Task Force has been created within DG Energy (DG ENER) to coordinate 
the inputs from several units and the Executive Agency for Competitiveness and Innovation.  

2.1.1. 

Stakeholders consultation 

A  very  broad  ranging  stakeholders  consultation  provided  valuable  input  to  this  IA.  A 
preliminary set of possible approaches were presented to Member States on several occasions, 
including at the Bucharest forum (9-10 June, 2009 and 6 – 7 July 2010), the Informal Energy 
Council  in  Are  (23-24  July  2009)  and  the  meetings  of  Energy  Director  Generals  on  11 
September,  2009  and  7  October  2010.  Member  States  highlighted  the  benefits  of  increased 
energy efficiency and were very supportive of its higher uptake. A number of good practice 
examples were presented. Nevertheless, some delegations highlighted that there are a number 
of national differences that need to be taken into account. 

In  addition  a  large  number  of  stakeholders'  inputs  were  collected,  in  particular  at  the  EU 
Sustainable Energy Week 2009 (9-13 February 2009 and 22-26 March 2010), the Bucharest 
forum (9-10 June, 2009 and 6-7 July 2010), targeted meetings with stakeholders on financing, 
buildings and utilities in June 2009 and a number of bilateral discussions in 2009 and 2010. 
Many stakeholders called for a more ambitious and proactive approach at EU level. 

To  further  explore  policy  options,  the  Commission  carried  out  a  broad  on-line  public 
consultation  in  2009  with  239  submissions  from  various  organizations,  companies  and 
individuals  from  across  the  EU.  Whilst  stakeholders  did  generally  acknowledge  that  the 
measures  in  the  current  Energy  Efficiency  Action  Plan  should  continue  to  be  implemented, 
the majority argued that the time had come for a more focused and targeted approach in order 
to  further  promote  energy  efficiency.  A  detailed  analysis  of  stakeholders'  responses  is 
provided in Annex I. 

2.1.2. 

Studies 

The analysis for this IA is also based on a large number of studies and evaluations. These 
include the Commission mid-term assessment of the current EEAP (see Annex III), examples 
of  successful  projects  supported  by  the  Intelligent  Energy  Europe  programme7,  and  an 
external study specifically tendered to provide analysis for this IA. Another important source 
of information and examples of various policies adopted in the EU Member States are the first 
National  Energy  Efficiency  Action  Plans,  submitted  by  Member  States  in  2007  and  2008 
within  the  reporting  obligations  of  Directive  2006/32/EC  and  the  their  evaluation  reports 
prepared by the Commission (SEC(2009)889 final and Annex IV). There are also a number of 
studies  analysing  the  benefits  and  challenges  for  energy  efficiency  and  energy  savings. 
However,  many  of  the  data  and  information  sources  are  fragmented  as  regards  the  issues 
discussed  and  countries  covered  and  consequently  various  assumptions  were  applied  to  the 

7 

http://ec.europa.eu/intelligentenergy 

EN 

5 

   EN 

 
                                                 
analysis. As the majority of the policies on energy efficiency are rather new very limited ex-
post studies of the individual policy measures are available.  

2.1.3.  Opinion of the Impact Assessment Board (IAB) 

This Impact Assessment was discussed at a meeting of the IAB on the 15th of December 2010. 
The  text  was  well  received  and  no  resubmission  was  required  but  several  recommendations 
were made calling for: 

•  Improved analysis on the general policy framework and on the justification for the need for 

energy efficiency targets 

•  Strengthened  analysis  of  the  problems  to  be  addressed  and  greater  use  of  the  evaluation 

results of the existing action plan and national plans 

•  Improved description of the baseline assumptions and analysis of the rebound effect 

•  Inclusion  of  a  clearer  presentation  of  costs  and  benefits  (incl.  a  clear  definition  of  cost-

effectiveness) 

•  Better outline the role of transport sector. 

All these, but the last one, were reflected in this report and have helped its improvement. The 
only recommendation that could not be addressed fully was the inclusion of further details on 
the  transport  as  the  sector  would  is  discussed  in  great  detail  in  the  IA  for  the  forthcoming 
White Paper on Transport. Detailed analysis of the costs and benefits of the identified types of 
policy instruments and analysis of various target options and their interactions with the other 
targets  was  not  prepared  as  the  definition  of  the  specific  policy  initiatives  and  their  impact 
assessment    is  to  be  carried  out  in  a  consecutive  IA(s)  that  will  accompany  the  legal 
proposal(s). 

3. 

PROBLEM DEFINITION 

3.1.  What is the problem? 

The EU target would not be met 

At the Spring Council 2007, the EU Heads of States and of Governments stressed 'the need to 
increase energy efficiency in the EU so as to achieve the objective of saving 20% of the EU's 
energy consumption compared to projections for 2020'8. This 20% reduction can be reached 
by introducing cost-effective9 measures which means that the investments made will be paid 

8 
9 

7224/1/07 REV 1 
Cost-effective  can  be  interpreted  in  different  ways.  In  a  study  (Boonekamp  2006)  for  the  Energy 
Efficiency  Action  Plan  it  is  mentioned  that  the  World  Energy  Assessment  2000  (Jochem,  2000)  has 
been used and it refers to the term ‘life cycle costs’. Therefore, in this IA a measure is considered cost-
effective  when  the  pay-back  time  of  the  investment  (including  the  operational  costs  but  minus  cost 
savings) is equal or in most cases shorter than its technical lifetime. This is because of the savings on 
the energy bill or reduced need for maintenance. The studies that analyse the potentials (including those 
mentioned in footnote 10) take into account various discount rates. This means that only measures with 
a positive net present value are considered as cost-effective. 

EN 

6 

   EN 

 
                                                 
back  from  the  reduced  energy  bills  within,  or  often  much  shorter  than,  the  lifetime  of  the 
energy  savings  measures  realized10.  This  would  make  the  EU's  economy  more  competitive 
saving  from  imports  about  €200  bn  annually  in  2020 11,  create  jobs  and  new  business 
opportunities, and EU citizens would pay less on their energy bills, reducing the number of 
fuel  poor  households  and  foster  innovation.  Energy  efficiency  and  savings  benefits  the  EU 
economy as a whole, Member States, businesses and private individuals. 

Energy efficiency also means better use of energy resources and reduced import dependency. 
20% less energy use also means less CO2 (or reduction of 740 MtCO2eq annually in 202012) 
and  harmful  emissions,  less  impact  on  the  ecosystems,  and  better  quality  of  life  for  people. 
The implementation of energy efficiency measures also creates jobs and offers possibility to 
retain the current ones at local level, particularly in the construction sector that has been badly 
affected  by  the  economic  crises.  It  is  estimated  that  up  to  2  million  jobs  can  be  created  or 
retained because of energy efficiency13. 

However, the EU is not on track to fully realize this cost-effective energy savings. Whilst, 
the latest business-as-usual scenario (see Section 3.4) shows a break in the trend towards ever 
increasing energy demand, the reduction in the consumption will be only about 9% in 2020. 
Therefore, if the EU does not double the efforts, it will not reach its 20% target and will 
not realize all the associated benefits for the economy, society and environment.  

Energy efficiency vs energy savings 

Even though the terms 'energy efficiency' and 'energy savings' are often used interchangeably 
(including  in  this  IA),  there  is  a  significant  difference  between  the  two.  'Energy  efficiency' 
means  that  we  use  less  energy  inputs  while  maintaining  an  equivalent  level  of  economic 
activity or service. 'Energy savings' is an absolute decrease of energy consumption and can be 
done  through  increased  energy  efficiency,  behaviour  changes  or  even  decreased  economic 
activities.  Examples  of  energy  savings  without  efficiency  improvements  are  heating  a  room 
less in winter, using the car less, or enabling energy saving modes on a computer.  

Gains in energy efficiency do not automatically translate into an overall reduction of energy 
consumption.  Even  though  the  products  and  processes  are  continuously  becoming  more 
energy efficient, our total final energy consumption continues to grow. This is due to the fact 
that  with  higher  disposable  incomes  the  level  of  comfort  rises,  the  number  of  households 
increases,  more  appliances  are  bought,  longer  distances  are  travelled  with  bigger  cars  and 
planes and homes become bigger and are better acclimatized to the seasons.  

10 

11 

12 
13  

For  example,  European  Climate  Foundation.  2010.  Energy  Saving  2020;  Fraunhofer  ISI  et  al.  2009. 
Study  on  Energy  Savings  Potentials  in  EU  Member  States,  Candidate  Countries  and  EEA  Countries; 
Lechtenböhmer and Thomas, Wuppertal Institute. 2005. The mid-term potential for demand-side energy 
efficiency in the EU. 
COM(2006)  545.  Calculated  savings  are  368  Mtoe  in  2020;  at  88$'08/oil  barrel  in  2008  this  equals 
€ 190 billion. 
2 tCO2/toe (based on general CO2 intensity in 2020, PRIMES 2009 energy efficiency scenario) 
This is rather conservative estimation of the direct energy efficiency employment effects and is based 
on analysis of the results of several EU and national sector specific studies, incl: Ecorys. 2010. Ex-ante 
evaluation  of  the  initiative  on  the  building workforce  training  and  qualification  in  the field  of  energy 
efficiency  and  renewable  energy  within  the  Intelligent  Energy  Europe  Programme;  GHK  Consulting, 
Cambridge  Econometrics,  Institute  of  European  Environmental  Policy.  2007.  Links  between  the 
environment, economy and jobs; and Impact Assessments for Ecodesign SEC(2009) 1016, SEC(2009) 
1020, and SEC(2009) 1013 

EN 

7 

   EN 

 
                                                 
The  EU  value  added  is  mainly  at  triggering  energy  efficiency  improvements.  However, 
certain measures that target behavioural change are also important and have been adopted at 
EU level. For example, the existing energy labelling of products, buildings and cars, various 
awareness campaigns, financing and fiscal stimuli or dissuasive tools have aimed at changes 
of  consumer  choices  towards  more  rational  use  of  energy  resources.  That  is  why  in  this  IA 
also tools that are aimed at behavioural change will also be studied. 

Cost-effective possibilities remain in each sector 

Based on a number of studies14, cost-effective potential exists in all final energy demand 
sectors  as  well  as  in  the  energy  transformation  sector.  A  difference  should  be  made 
between technical potentials (best available technology irrelevant of costs) and cost-effective 
potential.  The  technical  potential  currently  not  cost-effective  and  thus  measures  for  its 
realization will not be discussed in this IA. 

The  figure  below  illustrates  that  for  the  final  energy  sectors,  even  though  some  of  the 
potential is currently being used (i.e. low policy intensity scenario, see also section 3.3.2), the 
cost-effective savings potential in each  sector (i.e. the  high policy intensity scenario) would 
not  be  fully  utilized  in  202015.  Further  savings  (i.e.  technical  potential)  are  possible  but  not 
cost-effective. 

Figure 1. Final energy savings potential in EU 27 in 202016 

Low  Policy Intensity

High Policy Intensity

Technical potential

30%

25%

20%

15%

10%

5%

0%

Households

Transport

Industry

Tertiary

All sectors

The  rebound  effect  in  general  leads  to  a  decrease  in  the  expected  savings.  However,  it  has 
been already taken to a significant degree into account when calculating the existing potential 
sectors (see Box 1) and also in PRIMES model (see Box 2). 

Box 1: Rebound effects in the Fraunhofer et al. (2009) study 

Rebound effects can be characterised in two categories. 

14 

15 

16 

For example "Pathways to low-carbon Economy, Version 2 of the Global Greenhouse Gas Abatement 
Cost  Curve",  McKinsey&Company,  2009  and  "Energy  Savings  2020:  How  to  triple  the  impact  of 
energy saving policies in Europe" Ecofys and Fraunhofer ISI, 2010 
Fraunhofer  ISI  et  al.  2009.  The  potentials  are  calculated  on  the  PRIMES  2007  baseline  (pre-crisis 
baseline). However it is considered that the percentage savings on the new baseline could roughly the 
same on the post-crisis baseline; however the absolute savings would be lower. 
Ibid footnote 35 

EN 

8 

   EN 

 
 
 
                                                 
Direct rebound effects, i.e. rebound effects which happen directly as a consequence of the energy efficiency 
measure. The Fraunhofer et al. (2009) study considers several such direct rebound effects, in particular:  

a) 

b) 

c) 

d) 

increased time of use of energy savings lamps in residential and commercial applications and  

higher heating temperatures or longer heating duration in well insulated buildings due the increase of 
comfort level.  

longer driving distances due to more efficient cars 

high speed trains were assumed to have a higher specific consumption per passenger kilometre than 
normal trains due to their higher speed which makes that people opt for this type of transport mode. 

Generally these rebound effects happen directly in conjunction with the energy saving measures and have been 
modelled by reducing the effect of the efficiency improvement. For example in the case of the saving lamps, not 
the full theoretical impact of the savings were assumed but a reduced impact. Similar for the increased heating 
temperatures/increased heating periods a partial compensation of the savings was assumed. For cars, an 
increasing mileage was assumed. In the case of the trains a higher specific consumption expressed the rebound 
effect. The most commonly observed direct rebound effects are taken into account in the study. 

Indirect or economic rebound effects: These are rebound effects which occur generally because people have 
more money available and spend it partially on more energy consuming activities. The main reason for this is 
that in absolute terms the budget spent on energy corrected for the inflation has become smaller and smaller 
compared to the development of incomes (with the exception of the very recent years). So this is not a direct 
impact of a specific energy saving measure but happens in a way autonomously from it in a general trend. The 
Fraunhofer et al. (2009) study took that into account by considering a certain development in the drivers, 
including: 

a) 

b) 

c) 

d) 

A rebound effect has been implicitly taken into account by envisaging an increase of the average car 
size (expressed in cubic centimetres) over time. 

The  square  meters  living  space  for  apartments  and  individual  houses  is  increasing  due  to  more 
comfort levels 

People use more hot water for sanitary purposes due to an increased comfort 

People use consumer electronics for a longer time due to more time available 

The Odyssee database was used as an essential tool to calibrate such social drivers influenced by increased 
comfort factors, general rebound effects etc. by looking at their changes in past and by assuming a certain 
development in the future but also by considering certain limits. It is unlikely for example that people would heat 
rooms permanently to 30°C in winter time because this is not comfortable any more for most persons. 

The current trends and remaining potential per sector are summarized in the text below.  

Residential  and  services  (or  tertiary)  sectors  are  responsible  for  the  lion’s  share,  about 
37%, of final energy use in the EU (i.e. 25% for residential and 12% for the services sector in 
2007). They will be discussed together because the energy consumption is mostly in buildings 
where  energy  is  predominantly  used  for  buildings'  space  and  water  heating,  cooling  and 
cooking (i.e. 78% of total needs for service sector and 88% for residential in 200717). The rest 
of  the  energy  consumption  is  to  be  attributed  to  the  use  of  electric  appliances  and  lighting. 
The business-as-usual scenario projects that the final energy use in the residential sector will 
increase with 4.4% over 2008-2020 period and in the tertiary sector with 1%. 

The  potential  for  cost-effective  energy  savings  for  the  two  sectors  is  currently  estimated  at 
21%18. Some of it (or 13.4%)19 will possibly be realized with the current policies but still the 
two sectors offer the biggest savings potential from the final energy sectors. In addition, most 

17 
18 

19  

Source: DG ENER statistics. Cooking cannot be separated from the data set.  
Study  on  Energy  Savings  Potentials  in  EU  Member  States,  Candidate  Countries  and  EEA  countries, 
Fraunhofer ISI from 2009, for example 
Ibid 18 

EN 

9 

   EN 

 
                                                 
of energy efficiency and savings technologies are cost-effective and on the market but further 
innovation is still possible. Therefore, is an obvious first step for reaching the EU’s energy but 
also climate policy objectives.  

Transport sector uses 32% of the EU's final energy. Since 1990, final energy consumption in 
the sector has been steadily increasing by 1.8% per year on average20. It now represents nearly 
one third of the final EU energy consumption21 and relies almost exclusively on fossil fuels. 
More  than  80%  of  transport  final  energy  use  is  due  to  road  transportation22.  In  2008,  cars 
accounted  for  72%  of  all  the  kilometres  travelled  by  passengers  whilst  road  transport 
accounted  for  46%  of  the  total  goods  transport  activities  (tkm).  For  the  period  2000-2020, 
freight  road  transport  is  expected  to  grow  by  55%  and  passenger  road  transport  by  36%.23 
Freight  activities  have  until  now  grown  faster  than  the  economy,  with  road  and  air  freight 
recording  the  largest  increase  between  1997  and  200724.  Under  the  business-as-usual 
projections the final energy use in the transport sector is expected to increase by 6% in 2020 
compared to 2008.  

The potential for cost-effective energy savings in transport is also significant: about 21% in 
202025 and only a bit more than half of it (or 12%) is projected to be realized with the current 
policy mix. Energy efficiency measures in transport can therefore contribute significantly to 
the EU's energy policy target as well as to the Climate policy objectives (transport accounts 
for more than 20% of the total EU CO2 emissions26 with the highest growth rate compared to 
other sectors). In addition, an increased share of clean and energy-efficient transportation also 
reduces congestion, pollution and noise, thus improving mobility, health and well-being. 

Industry  sector  accounts  for  27%  of  the  final  energy  demand  in  the  EU.  Large  primary 
materials  industries  (chemical,  petrochemical,  iron,  steel,  cement,  pulp  and  paper,  etc)  are 
energy intensive and account for 70% of industrial energy use. 

Considerations  for  decrease  of  costs  to  improve  competitiveness  have  prompted  many 
industries,  especially  the  energy  intensive  ones,  to  make  energy  efficiency  improvements. 
This  lead  to  smaller  economic  potential  in  2020  (about  13%)  than  the  other  sectors.  The 
majority of this potential has already been used (only 3% remaining economic one). Still the 
opportunities  are  not  fully  taken  advantage  of  which  is  particularly  true  for  small-size  and 
even  some  medium-size  industries.  For  example,  some  industry  sectors,  with  the  right 
technology  and  support,  could  make  energy  savings  of  around  20%.  By  changing  certain 
production processes, energy savings of 30% and even up to 65% can be obtained.  

20 

21 

22 

23 

24 
25 

26 

Europe's  energy  position,  markets  and  supply.  DG  ENER  Market  Observatory  for  Energy,  2010. 
http://ec.europa.eu/energy/observatory/annual_reports/doc/2009_annual_report.pdf  
32.6%  according  to  'EU  energy  and  transport  in  figures  –  Statistical  pocketbook'.  European 
Commission 
2010. 
http://ec.europa.eu/energy/publications/statistics/doc/2010_energy_transport_figures.pdf  
81.9%  in  2007  according  to  'EU  energy  and  transport  in  figures  –  Statistical  pocketbook'.  European 
Commission 2010. 
ASSESS study for the mid-term review of the EC 2001 transport White Paper, Keep Europe moving, 
2006. 
Towards a resource-efficient transport system (TERM 2009), EEA Report No. 2/2010. 
Study  on  Energy  Savings  Potentials  in  EU  Member  States,  Candidate  Countries  and  EEA  countries, 
Fraunhofer ISI from 2009, for example 
23.1%  in  2007  according  to  'EU  energy  and  transport  in  figures  –  Statistical  pocketbook'.  European 
Commission 2010. 

EN 

10 

   EN 

 
                                                 
Agriculture  and  fisheries  sectors  are  responsible  for  about  2%  of  the  EU's  final  energy 
consumption.  Energy  savings  are  possible  from  the  introduction  of  CHP  for  greenhouses, 
improved  energy  performance  of  agricultural  buildings.  Substantial  amounts  of  energy  are 
used indirectly for the production (e.g. pesticides, land cultivation, travel for  fish catch)  but 
these are not in the scope of the IA. That is why the two sectors are not looked at separately 
but  some  possibilities  explored  other  sectors  (i.e.  energy  generation  and  buildings)  would 
have positive impact for the reduction of energy use in the sector. 

Illustration  of  the  cost-effectiveness  of  a  number  of  measures  at  the  final  energy  use  is 
provided in the figure below.  

Figure 2. Overall cost-curve for energy efficiency options of end-use sectors in the EU27 in 2020. Energy 
savings  are  expressed  in  final  energy  units.  Energy  savings  (X-axis)  are  relative  to  the  baseline  (source: 
ECF study based on Fraunhofer et al., 2009). 

Energy sector also offers possibilities for energy efficiency improvements in the processes of 
energy transformation and also for increased utilization of recoverable energy. In addition, as 
energy  utilities  are  the  closest  to  the  final  energy  consumers  and  have  information  on  the 
energy  use  of  their  clients,  they  could  be  used  as  an  interlocutor  to  realize  energy  savings 
potential in the demand side. 

Increasing  transformation  efficiency  can  be  achieved  by  using  technologies  that  better 
transform  primary  energy  into  final  useful  energy.  58%  of  EU-27  electricity  is  produced  in 
conventional  thermal  power  plants.  Around  half  of  this  electricity  comes  from  coal-fired 
power plants and the rest is mainly produced based on gas combustion. Most of Europe’s coal 
plants  operate  at  36-38%  of  thermal  efficiency  while  the  best  available  technologies  (BAT) 
deliver  an  average  efficiency  of  46%.  Gas-fired  plants  operate  at  an  average  of  47% 
efficiency, while BAT are on average 59%.  

EN 

11 

   EN 

 
 
Another  way  to  increase  the  efficiency  of  electricity  generation  is  to  use  the  heat  that  is 
generated  by  using  it  in  co/tri-generation  and  district  heating/cooling.  Cogeneration  can 
achieve  80–90%  efficiency,  if  all  savings,  including  the  avoided  network  losses  are 
calculated.  The  existing  economic  potential  is  largely  underused  and  the  less  than  optimal 
utilization of combined heat and power will grow even more pronounced in the future.  

As  regards  heat  production,  the  overall  thermal  energy  production  efficiency  of  the  EU  is 
around  40%.  Reference  technologies  in  heat-only-boilers  provide  a  range  of  operational 
efficiencies  from  70%  in  the  case  of  biogas  to  90%  for  natural  gas,  while  best  available 
technologies can deliver even higher performances.  

District  heating  and  cooling  (DHC)  is  particularly  well  placed  to  use  the  residual  heat 
produced  in  industrial  sources.  DHC,  especially  in  combination  with  cogeneration,  could 
produce significant primary energy savings, and is a proven and cost-effective way to increase 
the comfort of EU citizens at a low cost.  

There are also losses in the transmission and distribution of electricity, however, these losses 
differ widely between the different Member States from 3.2% for Cyprus to 15.7% for Latvia. 
Average losses in transmission and distribution for EU27 are calculated to be 6.4% in 200827. 

3.2.  Why is the savings potential not achieved? 

Cost-effective  energy  savings  potential  will  not  be  fully  achieved  because  the  market  for 
energy  efficient  products,  buildings  and  services  is  not  developing  quickly  enough  to 
meet  the  need  for  increased  uptake  of  the  energy  savings  potential.  This  is  because  of  a 
number of market and regulatory failures.  

3.2.1.  Market failures 

Energy market prices do not reflect all costs to society in terms of pollution, greenhouse 
gas  emission,  resources'  depletion,  and  geopolitical  dependency.  Therefore,  end  user  (and 
producer)  choices  are  made  on  the  basis  of  a  lower  energy  price  that  does  not  reflect  the 
environmental  costs  for  the  society.  Due  to  low  price  elasticity  of  some  sectors,  e.g. 
residential one, price signals are not always a solution to the challenge. 

There are many examples of split incentives or principal-agent market failures in the energy 
sector  where  the  decision  maker  may  be  partially  detached  from  the  price  signals.  For 
example,  the  landlord  should  invest  in  building  renovation  works,  but  the  tenant  normally 
pays the energy bill and benefits from its reduction. Energy providers dispose of commercial 
information about the energy use of their client and could promote energy savings measures, 
but  have  no  economic  incentives  to  do  so  as  it  would  negatively  affect  their  turnover  and 
profit.  

Asymmetric information on the benefits (e.g. limited knowledge and information) and costs 
(e.g.  overestimation  of  the  investment  needs)  makes  people  reluctant  to  make  investments 
even  though  they  are  cost-effective.  Energy  bills  are  also  not  a  major  expense  in  many 
companies,  and  therefore  the  possibilities  for  improvement  are  not  realized.  Furthermore, 
there  is  not  sufficient  and  easy  to  obtain  information  on  the  possible  energy  efficiency 
solutions available on the market or the ways in which they can be carried out or supplied.  

27 

Eurostat data. 

EN 

12 

   EN 

 
                                                 
Missing  or  incomplete  markets  cause  another  commonly  recognized  problem  which  is 
related  to  the  low  number  of  trained  professionals  (such  as  architects,  energy  auditors, 
builders, installers, sales assistants) and the lack of infrastructure. The lack of a credible and 
mature offering market prevents the emergence of a dynamic demand market which in turn is 
a  barrier  to  the  uptake  of  the  offering  market. This  has  a  particularly  negative  effect  on  the 
uptake  of  energy  services  companies  (ESCOs)  that  can  provide  integrated  energy  saving 
solutions together with financing schemes. The low demand keeps the prices relatively high. 

Initial  costs  are  a  considerable  barrier  as  judgements  on  the  profitability  of  investment  are 
done on short pay-back times and improvements that fail these criteria are not made even if 
they would bring benefits to the consumers but also society in the long-term. Proper financing 
instruments that take fully into account all financial benefits from energy efficiency gains are 
not developed because of a lack of sufficient knowledge of the financing institutions. In many 
cases  energy  efficiency  projects  are  small  scale  and  decentralised  which  increases  the 
transaction costs and further slows down the uptake of financial products.  

Harmful subsidies, regulated prices and negative incentives are other challenges to energy 
efficiency.  The  IEA’s  latest  estimates  indicate  that  fossil-fuel  consumption  subsidies 
worldwide amounted to $312 billion in 2009, down from $558 billion in 200828. The decrease 
is mainly due to declining energy prices. This is less problematic for the OECD countries but 
the latest available figures from 2004 for the EU15 are still worrying: coal received €13 bn (to 
be phase out at the latest by 2018), oil and gas €9 bn, nuclear €2 bn, and RES were supported 
only by €5 bn 29. In a number Member States energy prices, notably for gas and electricity, are 
still regulated which also provides distorted market signals30. Negative incentives are another 
challenge,  e.g.  when  the  value  of  a  building  is  higher  because  of  energy  efficiency 
improvements, higher local taxes have to be paid. 

3.2.2.  Regulatory failures 

Energy  efficiency  and  savings  are  often  considered  too  technical.  It  is  also  difficult  to 
visualize  or  measure  the  avoided  use  of  energy.  Therefore,  energy  efficiency  policies  often 
lack political visibility and are thus not embraced by politicians.  

Although there are certainly positive developments in Member States for the establishment of 
an  enabling  legislative  framework  to  stimulate  energy  efficiency  and  savings,  a  lot  more  is 
needed. The lack of a comprehensive policy framework including regulatory and support 
instruments,  and  a  poor  enforcement  is  clearly  a  major  problem  in  some  countries.  Too 
frequent  changes  in  the  legal  framework  make  the  investment  climate  risky.  Some  Member 
States  lack  administrative  capacity  to  develop  energy  efficiency  legislation  and  wait  for  its 
advancement at EU level. This has made the EU policies a key driver for energy efficiency 
legislation  in  some  Member  States  but  also  reduces  the  national  ownership  of  the  policy 
instruments. 

28 
29 
30 

http://www.worldenergyoutlook.org/subsidies.asp 
EEA. 2004. Technical report: Energy subsidies in the European Union: A brief overview. 
Communication from the Commission to the Council and the European Parliament - Report on progress 
in  creating  the  internal  gas  and  electricity  market  (SEC(2009)  287)  (COM/2009/0115  final),  at  point 
B7. The Member States that have regulated prices for electricity and gas are: BG, DK, EE, FR, HU, IE, 
IT, LV, LT, PL, PT, RO, SK and ES. In GR, CY and MT there are regulated prices for electricity. FI 
has  regulated  prices  for  gas.  In  most  Member  States  price  regulation  is  not  confined  to  household 
customers. 

EN 

13 

   EN 

 
                                                 
3.2.3.  Other barriers 

The rebound effect is another major challenge to energy savings. It implies that in spite of 
certain  improvements  of  the  efficiency  of  the  individual  products  (e.g.  appliances,  cars  and 
buildings),  overall  energy  consumption  linked  to  their  use  increases  due  to  their  increased 
volume, number or usage. This minimizes the savings from the efficiency improvements or in 
certain  cases  even  leads  to  an  absolute  increase  in  energy  consumption.  For  example,  even 
though cars produced today are more efficient, the overall energy consumption of the car fleet 
grows because we use them more regularly and often buy bigger ones. The rebound effect is 
included in the assumptions of the various studies that make evaluation of the energy savings 
potentials  and  thus  is  not  expected  to  hamper  the  possibilities  for  reaching  the  20%  energy 
savings target (see Box 1 for more details). The rebound effect is difficult to address it at EU 
level  because  it  relates  to  increased  living  standards,  freedom  of  choice  and  consumer 
behaviour. 

The low uptake of new and innovative technologies in some sectors, such as buildings, is 
also a consequence of the long life cycles and lead times of investments.  

3.3.  What policies exist to address the problem? 

3.3.1.  EU policies: assessment of the Energy Efficiency Action Plan of 2006 

The  Energy  Efficiency  Action  Plan  (EEAP)31  was  adopted 
in  October  2006  for 
implementation  between  2006  and  2012.  This  Action  Plan  sets  the  current  European 
framework  for  legislation,  policies  and  measures  conceived  to  trigger  energy  efficiency 
improvements and energy savings. It was developed because: 'even though energy efficiency 
has improved considerably in recent years, it is still technically and economically feasible to 
save at least 20% of total primary energy by 2020 on top of what would be achieved by price 
effects  and  structural  changes  in  the  economy,  natural  replacement  of  technology  and 
measures already in place'32. In this context, the EEAP is to be seen as the major European 
step  so  far  towards  the  realization  of  the  20%  saving  objective,  as  it  was  estimated  to 
contribute to a 14% decline in primary energy consumption in 202033. 

The  EEAP  defined  six  priority  areas  with  85  measures  addressing  key  energy  using  sectors 
(energy  transformation,  buildings,  services,  industry  and  transport)  and  cross  cutting  issues 
(behaviour,  financing  and  international  cooperation).  The  portfolio  of  measures  is  very 
comprehensive in terms of type (e.g. voluntary, regulatory, market-based, fiscal, support and 
information),  issues  addressed  (sectors  and  horizontal),  level  for  implementation  (EU, 
national, regional, city) and stakeholders involved (governments, private sector, citizens). In 
addition,  the  Commission  committed  to  10  priority  actions  to  be  initiated  immediately  and 
implemented as soon as possible for maximum effect. This all-encompassing approach of the 
Action Plan reflects the complex nature of energy efficiency. 

At the end of 2010, after 4 years of implementation, a very positive balance can be drawn:  

•  The majority of the 85 measures have already been completed or are in the process of 

being finalized. Only a few have not been realized as intended in the Plan. 

31 
32 
33 

COM(2006) 545. 
COM(2006)545, page 5 
SEC (2006) 1174. 

EN 

14 

   EN 

 
                                                 
•  The implementation of the 10 priority actions is well advanced with the majority of 

them already finalized.  

•  The  Plan  triggered  new  and  improved  energy  efficiency  legislation  across  Europe. 
With  more  than  20  legislative  measures  in  its  portfolio,  the  EEAP  pushed  for  the 
implementation and revision of existing key legislation targeting efficient uses of energy. 
Finally it proposed also new energy efficiency legislation. 

The main lessons learnt from the implementation of the EEAP are: 

•  A full and ambitious application of existing energy efficiency legislation by Member 
States is crucial to deliver energy savings in practice. The Commission should continue 
to provide further support to MS for better and faster implementation. 

•  Selected supporting tools need to be strengthened or expanded further to increase the 
impact  of  legislation,  such  as  National  Energy  Efficiency  Plans,  monitoring  systems, 
access to financing and training. 

•  An overarching energy efficiency plan with a long term objective is needed to trigger 
lasting political commitment towards energy efficiency improvements and energy savings. 
It needs to be streamlined and focused on actions to be taken in key areas. 

If looked from sectoral point of view the progress is as follows: 

Residential and services sectors: Substantial progress has been achieved in these sectors by 
moving forward with the implementation of key legislation, notably the Energy Performance 
of  Buildings  Directive  (EPBD)  and  the  Energy  Services  Directive  (ESD).  The  Commission 
supported  this  process  by  creating  Concerted  Actions,  BUILD  UP  initative  and  other  fora 
(e.g.  Bucharest  Forum)  helping  Member  States  with  their  national  implementation.  For 
energy-using  products,  the  implementation  of  the  Ecodesign  and  Labelling  Directives  were 
essential, inter alia the adoption of ecodesign regulation for nine product groups. The EEAP 
also put forward the revision of the EPBD and of the Ecodesign and Labelling Directives. 

Energy  generation:  The  EEAP  2006  put  forward  challenging  measures  to  improve  the 
efficiency  of  power  generation  and  distribution.  Main  progress  has  been  made  with  the 
implementation of the Combined Heat and Power Directive (CHP) and with the development 
of a Reference Document on Best Available Techniques on Energy Efficiency. Some progress 
has  been  made  with  the  promotion  of  the  connection  of  decentralized  generation  with  the 
adoption  of  the  Third  Legislative  Package  on  the  Internal  Energy  Markets.  However, 
important measures have not been implemented mainly due to the complexity and the strong 
stringency of the required measures, that made the effort for the time being not proportionate 
to  the  foreseeable  results,  taken  into  account  that  this  sector  is  already  partially  covered  by 
market instruments with similar goals, e.g. to trigger energy efficiency improvements. 

Transport: Main progress has been made, among others, with setting emission performance 
standards  for  new  passenger  cars  (EC  443/2009)  and  light-duty  vehicles  (proposals 
COM/2009/0593),  a  new  labelling  regulation  for  tyres  (EC  1222/2009),  the  promotion  of 
clean and energy-efficient road transport vehicles through public procurement (2009/33/EC) 
and the integration of aviation under the EU Emissions Trading Scheme (EU ETS) as of 2012. 
The  review  of  the  Fuel  Efficiency  Labelling  Directive  was  not  put  forward  as  intended. 
Despite putting forward most measures of the EEAP in the transport sector, more needs to be 

EN 

15 

   EN 

 
done to tackle the efficient use of energy in this sector as the consumption is expected to grow 
further. 

Industry:  As  industrial  installations  are  mostly  covered  by  the  EU  ETS,  the  EEAP  did  not 
propose  direct  priority  measures  for  this  sector.  However  a  range  of  measures  were  put 
forward aiming at raising the awareness of industrial companies, notably SMEs. 

To conclude, the EEAP 2006 is a major step in moving towards the achievement of the 
20%  saving  objective  in  2020.  The  EEAP  assessment  also  revealed  that  in  order  to  draw 
better political recognition, an overarching, long-term strategic vision is required. In order to 
capture the political attention and trigger lasting political commitment, it is essential that any 
future  Energy  Efficiency  Plan  is  better  focused  on  the  main  policy  objectives,  contain  clear 
priorities and is not too technical. It is clear that energy savings are realized at national and 
local level. Therefore, the new Plan should aim at steering and mobilizing action at all levels 
of governance. Any new Plan should imperatively build upon the experiences gained with the 
implementation of the EEAP 2006 and propose additional policies to close the gap and realize 
its  aspiration  to  mobilise  the  general  public  and  policy-makers,  and  to  provide  EU  citizens 
with  energy-efficient  infrastructure,  buildings,  appliances,  processes,  transport  means  and 
energy systems. 

3.3.2.  Current actions in MS  

Valuable information of the progress of Member States on energy efficiency can be found in 
the National Energy Efficiency Actions Plans (NEEAP) developed under the Energy End-Use 
Efficiency  and  Energy  Services  Directive  (ESD,  2006/32/EC).  The  first  NEEAPs  were  due 
for  mid-2007  but  many  of  them  were  sent  in  2008.  Following  their  submission,  the 
Commission  communicated  its  comments  and  suggestions  to  each  Member  State  and  a 
number  of  bilateral  meetings  were  organized.  As  a  result,  some  NEEAPs  were  resubmitted 
after being remarkably strengthened. For many countries this has been first time they had to 
prepare  comprehensive  plans  addressing  energy  savings  and  the  feedback  received  from  a 
number of Member States confirmed that the preparation of the first NEEAPs has proven to 
be a very useful exercise for them.  

The Commission assessment34 of the first NEEAPs and its recent update (Annex IV) showed 
that they propose a wide diversity of policy packages and measures targeting different end-use 
sectors  and  in  some  cases  supply  side  measures.  Many  of  them  demonstrate  coherent  and 
comprehensive strategies towards the intermediate and overall targets, backed by institutional 
and financial provisions. A number of NEEAPs clearly identify their priority end-use sectors 
or  policy  tools.  In  contrast,  some  of  them  show  piecemeal  thinking  with  a  scattering  of 
fragmented  energy  efficiency  measures.  The  absence,  or  sporadic  indication  of  savings 
estimates  in  the  majority  of  NEEAPs,  along  with  the  mostly  limited  degree  of  detail  about 
assumptions  made  in  estimating  savings  from  different  measures,  have  impeded  the 
quantitative  assessment  of  the  NEEAPs  and  how  realistic  they  are.  In  addition,  for  several 
Member  States  there  is  a  considerable  gap  between  the  political  commitment  to  energy 
efficiency and the measures adopted or planned, as reported in the NEEAPs, and the resources 
attributed to preparing it. 

34 

SEC(2009)  889.  Synthesis  of  the  complete  assessment  of  all  27  National  Energy  Efficiency  Action 
Plans as required by Directive 2006/32/EC on energy end-use efficiency and energy services 

EN 

16 

   EN 

 
                                                 
Studies show that there is remaining cost-effective energy savings potential in each Member 
State.  Indications  of  the  remaining  potential  are  presented  in  the  Figure  3  below35.  The 
current efforts and future business-as-usual policies of Member States broadly fall under the 
Low  Policy  Intensity  (LPI)  scenario.  If  all  proposed  measures  in  the  first  National  Energy 
Efficiency Action Plans (NEEAPs) are implemented then they represent an effort broadly in 
the  range  of  this  LPI  scenario.  The  High  Policy  Intensity  (HPI)  scenario  describes  the 
additional  technology  diffusion  of  best  energy  saving  technologies  (BAT)  to  the  maximum 
possible,  from  an  economic  viewpoint.  The  Technical  Scenario  considers  a  full  technology 
diffusion  of  BAT  to  the  technical  maximum  possible  (without  considering,  however,  very 
expensive options and still respecting investment cycles). The study concludes that under the 
HPI  Scenario  only  savings  of  19%,  compared  to  an  autonomous  scenario,  are  possible  with 
measures on the demand side.  

Figure 3. Potential for end use energy savings in 2020 compared to an autonomous scenario36 

Economic (LPI) - Total saving potential all sectors

Economic (HPI) - Total saving potential all sectors

Technical - Total saving potential all sectors

30%

25%

20%

15%

10%

5%

0%

EU27

EU15

EU12 AT BE BG CY CZ DK EE FI FR DE EL HU IE IT LV LT LU MT NL PL PT RO SK SL ES SE UK

3.4. 

How much of the potential will be achieved in 2020?: Baseline scenario  

To  project  possible  future  development  as  regards  energy  generation  and  consumption, 
PRIMES  -  a  market  equilibrium  model  for  energy  supply  and  demand  -  was  used37.  The 
PRIMES 2009 energy efficiency reference scenario (hereafter PRIMES 2009 or baseline) 
has been used as a Business as usual scenario in this IA report (for details please see box 
below  and  Annex  II).  This  scenario  includes  measures  that  have  been  implemented  by 
December 2009 and where the adopted legislative provisions are defined in such a way that 
there  is  almost  no  uncertainty  on  how  they  should  be  implemented  in  the  future.  The 
modelling gives an indication of the overall progress but not on the individual impacts of each 
measure.  To  reveal  the  progress  towards  reaching  the  target,  results  of  this  scenario  are 
compared  with  the  PRIMES  2007  which  could  be  considered  as  a  reference  for  the  20% 
energy savings objective.  

35 

36 

37  

Fraunhofer  ISI  et  al.  2009.  Study  on  Energy  Savings  Potentials  in  EU  Member  States,  Candidate 
Countries  and  EEA  Countries.  The  potentials  in  this  study  were  calculated  with  relatively  modest 
assumption on energy price development. 
Ibid  footnote  35.  The  success  of  recent  policies  such  as  the  recast  EPBD  and  the  mandatory  CO2-
Standards for cars, which in the study was still considered uncertain and included in the potentials, was 
in this figure however taken for granted and included in the reference development. 
http://147.102.23.135/e3mlab/PRIMES%20Manual/The_PRIMES_MODEL_2010.pdf  

EN 

17 

   EN 

 
 
                                                 
Box 2: The PRIMES model and different baselines 
The PRIMES model is a modelling system that simulates a market equilibrium solution for energy supply and 
demand. The model is organized in sub-models (modules), each one representing the behaviour of a specific (or 
representative) agent, a demander and/or a supplier of energy.  

The Baseline is a complete and internally consistent energy-economy-transport-environment outlook having the 
features of a development on the basis of current trends and implemented policies against which policy scenarios 
can  be  assessed. Several  EU  baselines  have  been  established  at  different  points  in  time  using  a  framework 
contract with National Technical University of Athens (author and owner of the PRIMES model). 

The indicative 20% target on energy savings refers to projections for 2020, as estimated by the Commission in 
its Green Paper on Energy Efficiency, which used the PRIMES baseline 2005. The baseline 2005 was a separate 
exercise that was not used for the target setting. The indicative target was set on the basis of a study on energy 
efficiency  potentials.  The  baseline 2005  covers  25  MS,  Bulgaria  and  Romania  were  modelled  separately.  The 
PRIMES baseline  2007 already  covers  EU-27  and  gives  similar  values  for  primary  energy  consumption in 
2020 for 27 Member States (1970 Mtoe in 2005 baseline and 1968 Mtoe in 2007 baseline).  

The  latest  update  -  PRIMES  baseline  2009  was  finalized  in  2009  and  includes  the  effects  of  policies  adopted 
until spring 2009. It is based on an average GDP growth of 1.7% per year for the period 2005-2030 as opposed 
to  2.2%  in  the  2007  baseline.  The  energy  projections  are  based  on  a  relatively  high  oil  price  environment 
compared with previous projections and similar to reference projections from other sources, with oil prices of 59 
$/barrel in 2005 rising to 106 $/barrel in 2030 (in year 2008-dollars). This baseline includes only measures that 
have been implemented by April 2009 or where the legislative provisions are defined in such a way that there is 
almost  no  uncertainty  on  how  they  should  be  implemented  in  the  future.  The  baseline  2009  includes the 
effects of measures  of  the  current  EEAP  that  have  already  been  implemented,  5  Ecodesign  implementing 
measures adopted until end April 2009 and the ETS directive. It also includes policies on energy efficiency such 
as  implementation  of  the  building  (also  the  recast  EPBD  but  limited  only  to  measures  for  which  the  concrete 
implementation is provided in the Directive and not left for interpretation to MS), CHP, end-use efficiency and 
energy services, Ecodesign and labelling Directives as well as national policies on education, information, public 
procurement and CHP. 

As regards other relevant fields the model takes into account the current Energy taxation directive. Some of the 
effects from the new Industrial Emissions Directive have been considered but those which implementation is not 
clear have not been modelled. Art. 10.3.b of the EU emission trading directive, which enables MS to use certain 
part  of  the  revenues  from  auctioning  allowances  on  measures  aimed  at  achieving  the  20%  energy  efficiency 
target has also not be included due its voluntary character and uncertainty of implementation. 

A  so  called  Efficiency  scenario  2009  relies  on  the  same  macroeconomic,  demographic,  price  and  technology 
assumptions  but  in  addition  to  all  policy  measures  included  in  the  Baseline  2009  takes  also  into  account 
measures adopted between April and December 2009 (4 additional Eco-design implementing measures, Recast 
of  the  Energy  Performance  of  Buildings  Directive,  Labelling  regulation  for  tyres  and  Regulation  Euro  VI  for 
heavy duty vehicles). For this scenario, unlike the Reference one (see p. 21), it is assumed that neither the RES 
directive  targets  (Member  States  need  to  establish  and  transmit  to  the  Commission  their  national  renewables 
action plans in 2010; these national action plans will show how Member States intend to reach their targets) nor 
non-ETS targets are fully achieved. However, the currently implemented national measures for both targets are 
reflected.  In  this  sense,  the  approach  for  this  IA  as  regards  BAU  is  rather  conservative  one  not  taking 
achievement of adopted targets for granted.  

The  model  does  not  include  assumptions  from  the  Resource  Efficiency  Flagship  Initiative,  the  Climate  2050 
Communication, and the Energy Decarbonisation Roadmap as these are under preparation. Nevertheless, there 
has  been  a  continuous  discussion between the  various  Commission  services  of  the possible  interactions  of  the 
various initiatives. 

The  model  takes  into  account  to  a  certain  degree  the  effects  of  the  rebound  effect.  For  example,  it  captures 
peoples'  desire  for  more  comfort  such  as  bigger  cars,  bigger  living  space,  bigger  appliances,  etc  which  is 
reflected for instance in the gradual change in composition of car fleet, bigger spaces to be heated. 

The progress towards reaching the target is evaluated by comparing PRIMES 2007 baseline and 2009 efficiency 
scenarios.  This  is  done  because  PRIMES  2007  provides  a  snapshot  of  the  existing  measures  (until  November 
2006) and their impact on energy trends before EEAP 2006 and 20% policy objective were adopted. PRIMES 
2009  Efficiency  scenario  provides  an  update  of  the  situation  taking  into  account  the  policies  adopted  by 

EN 

18 

   EN 

 
December  2009  and  the  latest  economic  developments.  This  analytical  approach  to  measures  the  progress 
towards the 20% objective has also been applied in other studies38. 

More details on the modelling approach and the PRIMES 2009 Efficiency scenario and its assumptions can be 
found in Annex II a) and b). 

The  main  assumptions,  indicators  and  trends  in  energy  consumption  in  EU  27  under  this 
scenario are summarized in the Table below. 

38 

E.g. ECF and Fraunhover Institute 2010: Energy Saving 2020; Background study for the IA. 2010. 

EN 

19 

   EN 

 
                                                 
Table 1: Evolution and projections of main energy indicators 1990-2020 (Source: ESTAT until 2008 and 
PRIMES 2009 projections from 2010 onwards) 

Main Indicators 

1990 

2000 

2005 

2008 

2010 

2020 

Change  
over 
 2005-2020 

Difference in 
2020 (PRIMES
2009 vs 2007)

Population (Million) 

GDP (in 000 bn Euro'05) 

470 

481 

489 

498 

499 

514 

5.1% 

8.1 

10.1 

11.1 

12.5 

11.4 

14.2 

27.9% 

Gross/ primary Inland Consumption 

1666 

1723 

1826 

1799 

1767 

1795 

-1.7% 

Gross/  primary  Inland  Consumption 
minus non-energy uses (Mtoe) 

1562 

1611 

1709 

1685 

1655 

1678 

-1.8% 

Final Energy Demand (Mtoe) 

1069 

1113 

1174 

1167 

1169 

1214 

Industry 

Residential 

Tertiary 

Transport 

366 

264 

158 

280 

327 

287 

160 

339 

326 

308 

177 

362 

318 

297 

179 

374 

313 

309 

176 

370 

327 

310 

181 

395 

3.4% 

0.3% 

0.6% 

2.3% 

9.1% 

4% 

-9.7% 

-8.8% 

-8.9% 

-9.9% 

-11.1% 

-7.7% 

-11.9% 

-9.9% 

CO2 Emissions (Mt CO2, ref approach) 

4031 

3811 

3947 

3787 

3743 

3610 

-8.5% 

-14.9% 

Energy intensity (GIC/GDP (toe/M€'05) 

204 

171 

165 

167 

155 

127 

-23.0% 

1.3% 

Import Dependency % 

45% 

47% 

53% 

55% 

55% 

60% 

13.2% 

-21.2% 

Total cost of Energy in bn €'2005 

Total cost of energy as % of GDP 

995 

1161 

10% 

11% 

1215 

1740 

49.9% 

11% 

12% 

9.1% 

- 

- 

The  PRIMES  energy  efficiency  scenario  projections  for  the  first  time  show  a  break  in  the 
trend of increasing energy  demand. After  years of growth,  the gross inland  consumption39 
excluding the non-energy use of primary fuels (referred hereafter as primary energy) in 
the EU 27 has stabilized in 2005 and 2006, slightly decreased in 2007 and 2008. The scenario 
projects 8.9% reduction of primary energy compared to PRIMES 2007 and 17% decrease of 
CO2 emissions which shows increased decarbonisation of energy generation. 

The economic crisis is included in the modelling work. The reduction of energy use is due 
to  the  economic  crisis  at  the  beginning  of  the  period  but  after  2012  is  also  positively 
influenced  by  the  increased  implementation  of  the  recently  adopted  energy  efficiency 
policies. The economic crisis has a twofold impact on energy consumption. Firstly, it leads to 
its reduction because of the lower level of economic activity, but also to a reduced investment 
and  capital  turnover  which  slows  energy  efficiency  progress.  Secondly,  the  economic 
recovery  period  translates  into  higher  economic  activity  and  energy  consumption  but  also  a 
faster  pace  in  equipment  renewing,  hence  acceleration  of  energy  efficiency  progress  takes 
place. 

The  final  energy  consumption40  is  projected  to  slightly  increase  (3.4%)  over  the  period 
2005-2020.  While  energy  consumption  in  industry  (-12%)  declined  considerably  between 
1990  and  2005,  energy  consumption  in  transport  (+29%),  households  (+16%)  and  tertiary 
(+11%)  increased  over  the  same  period.  According  to  the  projections,  final  energy 

39 

40 

Gross  inland  energy  consumption  represents  the  quantity  of  energy  necessary  to  satisfy  inland 
consumption  of  the  geographical  entity  under  consideration.  It  is  calculated  as  follows  Gross  inland 
energy consumption = primary production + recovered products + total imports + stock change - total 
exports – bunkers – non-energy use. The final non energy consumption (e.g. in petrochemicals industry, 
lubricants, asphalt) is also subtracted as this is not relevant from the energy savings perspective. 
Final  energy  consumption  includes  all  energy  delivered  to  the  final  consumer's  door  (in  the  industry, 
transport,  households  and  other  sectors)  for  all  energy  uses.  It  excludes  deliveries  for  transformation 
and/or own use of the energy producing industries, as well as network losses.  

EN 

20 

   EN 

 
  
 
  
 
                                                 
consumption in all sectors will be slightly higher in 2020 than in 2008 with transport having 
the highest growth of almost 6% (over 2008-2020 period). In 2008, buildings (or households 
and  tertiary  sectors  combined)  contribute  to  39%  of  the  EU's  final  energy  use,  followed  by 
transport (32%) and industry (27%). The relative shares are projected to stay approximately 
the same until 2030. 

There  is  a  positive  development  as  regards  energy  intensity  of  European  economies  which 
will  decrease  by  almost  23%  (or  2.0%  p.a.)  over  2010-2020  period.  This  confirms  that 
economic growth can be achieved with less energy resources, however, energy intensity does 
not necessarily translate into reduction of energy use, CO2 emissions and increased security 
of energy supply. 

Difference to the 20% target 

The 20% savings objective agreed by the European Council translates into a reduction 
of  primary  energy  use  by  36841  Mtoe  in  2020.  According  to  PRIMES  energy  efficiency 
scenario the effects of the crisis and implemented policies until December 2009 will deliver 
164 Mtoe of this savings objective or 8.9% reduction compared to PRIMES 2007 projections.  

Therefore,  the  EU  needs  to  double  its  efforts  in  order  to  reap  all  the  benefits  of  energy 
efficiency and savings in 2020.  

Another PRIMES scenario (the Reference scenario) assumes that the two binding targets on 
RES share and GHG emissions reductions are met. The result of the modelling shows that this 
would not have a significant effect on the achievement of the 20% savings objective (only by 
additional  0.8%  or  14  Mtoe).  This  is  because  there  is  a  range  of  possible  measures  for  the 
realization of GHG emissions reduction, in addition to energy efficiency. These, for example, 
include increased use of renewables, fuel switching and use of international offsets (CDM/JI). 
Therefore,  the  objectives  of  energy  efficiency  policy  would  not  be  met  by  the  two  other 
targets and additional measures to fully reap its benefits are required.  

Figure 4. Development and projection of primary energy use for the EU by 2020 

Mtoe
2300

2100

1900

1700

1500

1300

1995

No 'decoupling' after 2005

Original projections (PRIMES 2007)

Recent projections (PRIMES 2009)

20% reduction target

'invisible' 
savings 

achieved 
savings 

remaining 
GAP 

-20% 

2000

2005

2010

2015

2020

41 

Source:  PRIMES  baseline  2007,  calculation:  (Gross  inland  consumption  in  2020  (1968Mtoe)  -  Non-
energy uses (126 Mtoe))*0.2=368 Mtoe 

EN 

21 

   EN 

 
 
                                                 
In  addition,  there  are  further  measures  from  the  current  policy  portfolio  (e.g.  minimum 
requirements and labelling of boilers, water heaters and air conditioners) which have not yet 
been  adopted  and  taken  into  account  in  the  baseline  scenario.  Their  impact  could  not  be 
modelled yet but even though they will deliver additional savings, they will not be sufficient 
to close the remaining gap.  

Gains  in  energy  efficiency  do  not  automatically  translate  into  an  overall  reduction  of 
energy  consumption.  Even  though  the  products  and  processes  are  continuously  becoming 
more energy efficient, our total final energy consumption continues to grow. This is due to the 
fact  that  the  economy  grows  and  with  this  more  energy  is  used  for  production  of  goods. 
Further, with higher disposable incomes the level of comfort rises, the number of households 
increases,  more  appliances  are  bought,  longer  distances  are  travelled  with  bigger  cars  and 
planes and homes become bigger and are better acclimatized to the seasons. To illustrate these 
'invisible'  savings  on  the  Figure  above,  it  is  assumed  that  energy  consumption  grows  at  the 
same rate as the GDP.  

3.5. 

The Union's right to act, subsidiarity and proportionality 

The EU's right to act as regards energy efficiency and savings is instituted in the Treaty on the 
Functioning of the European Union, Article 194 (1) which states that:  

'' In the context of the establishment and functioning of the internal market and with regard 
for the need to preserve and improve the environment, Union policy on energy shall aim, in a 
spirit  of  solidarity  between  Member  States,  to:  …  (c)  promote  energy  efficiency  and  energy 
saving and the development of new and renewable forms of energy; '' 

Although much responsibility for addressing energy efficiency and savings rests with Member 
States,  the  EU's  right  to  act  has  been  established  because  of  the  importance  of  energy 
efficiency and savings for realizing the EU's climate change, security of energy supply, 
competitiveness  and  environmental  protection  objectives.  Tackling  these  requires 
coordinated action and coherent energy efficiency and savings policy as one of the responses 
to these challenges. As has been demonstrated in the previous sections, the various barriers to 
higher uptake of energy efficiency measures and the available cost-effective potential is not 
sufficiently  addressed  at  national  level  and  thus  the  EU  action  is  required  to  reap  the 
remaining potential benefits. EU level action is also essential for the products that are traded 
in the internal market. 

Energy  efficiency  and  savings  can  be  realized  in  various  areas  of  economic  activities  and 
everyday  life  and  thus  the  EU's  role  needs  to  take  into  account  the  specificities  of  the 
challenges, and respect the principles of subsidiarity and proportionality. Member States are 
essential for the realization of the energy efficiency policy framework and the EU intervention 
should be very well targeted and supportive to Member States' actions. More specifically the 
EU's role and level of action is in: 

–  Setting  minimum  requirements  in  areas  where  there  is  a  risk  of  internal  market 
distortions if MS take individual measures. This is applicable to policy areas where there 
is a single market with free movement (e.g. energy-using products, vehicles) where having 
27 national rules, standards and regulations would distort its functioning. For these areas it 
is  appropriate  to  provide  a  detailed  regulatory  framework  at  the  European  level.  In 
addition, such EU action can be taken if the costs of common approach are lower than 
the costs for 27 national ones (e.g. the ETS, phase III). 

EN 

22 

   EN 

 
–  Establishing a common framework which creates the basis for coherent and mutually 
reinforcing  mechanisms  for  energy  efficiency  improvements  while  leaving  in  being  the 
responsibility  of  Member  States  to  set,  in  a  transparent  and  comparable  way,  concrete 
levels  that  are  to  be  met.  This  has  been  applied  in  areas  where  there  are  major  national 
differences  (e.g.  climate,  construction  traditions,  fiscal  policies)  and  there  is  no  need  for 
full  harmonization  of  the  approaches  but  only  for  setting  of  common  instruments  and 
requirements  (e.g.  in  buildings).  This  is  the  global  policy  approach  also  in  Europe  2020 
Strategy. 

–  Creating a platform for exchanging best practices and stimulating capacity building. 
This  is  for  the  areas  where  the  EU  competences  are  limited  but  which  can  profit  from 
dissemination  of  the  experience  of  the  more  advanced  Member  States  (e.g.  awareness 
raising, professional and university training)  

–  Using  EU  instruments  to  promote  energy  efficiency,  e.g.  through  financing,  and  to 
mainstream it into the other policy areas. The EU does not dispose of sufficient funds to 
match the need for funding but it can still play an important role in mobilizing, providing 
visibility and momentum to fill a critical gap of ongoing initiatives. For example, some of 
the EU funds can be used to leverage third party financing. Furthermore, it would create 
economies of scale and allow for more effective and efficient action. EU action also allows 
for  the  wide  dissemination  of  information  and  a  variety  of  effective  implementation 
mechanisms. 

–  Promoting the EU internationally as a forerunner in the area – an activity that is also 
beneficial for EU businesses. In a time of emerging pressure for action on reduced energy 
consumption the activities at EU level are closely followed worldwide and some of the EU 
approaches (labelling, Ecodesign, EPBD) are being adopted by developed and developing 
countries.  This  will  contribute  to  lower  global  CO2  emissions  and  establish  the  EU  as  a 
recognized player on the international scene. 

All the options examined in the appraisal section will once again be checked individually 
on whether they respect the principle of subsidiarity and proportionality. 

4. 

POLICY OBJECTIVES 

4.1. 

General policy objectives 

The general EU policy objective, as set by EU leaders, is to increase energy efficiency in the 
EU so as to achieve the objective of saving 20% of the EU's energy consumption compared to 
projections  for  2020,  as  estimated  by  the  Commission  in  its  Green  Paper42  on  Energy 
Efficiency. This objective is consistent with the EU's overall energy policy. Increased energy 
efficiency is an essential element of the new European Energy Strategy 202043. 

This  objective  is  fully  consistent  with  the  EU  overall  energy  policy.  Increased  energy 
efficiency is an essential element of the new European Energy 2020 Strategy which states that 

42 

43 

COM(2005)  265:  Primary  energy  savings  amounting  to  370  Mtoe  in  2020  compared  to  a  baseline 
scenario projecting the level of primary energy consumption. The baseline was updated in 2007 to take 
account of two new Member States.  
COM(2010) 639. 

EN 

23 

   EN 

 
                                                 
''Energy  efficiency  is  the  most  cost  effective  and  quickest  way  to  reduce  emissions,  improve 
energy security and competitiveness, make the energy process more affordable for consumers 
as well as create employment, also in export industries44". 

More generally, energy efficiency contributes to broader initiatives to achieve climate change 
policy  objectives  and  to  stimulate  economic  recovery  and  smart,  sustainable  and  inclusive 
growth, as outlined in Europe 2020: A strategy for smart, sustainable and inclusive growth45.  

4.2. 

Specific policy objectives  

Based  on  the  analysis  of  the  current  policies,  potentials  and  needs  the  following  specific 
policy objectives need to be addressed:  

•  Provide  high  visibility  and  stimulate  commitment  for  energy  efficiency  at  the  EU  and 

national level 

•  Ensure  that  when  public  funds  are  spent,  energy  efficiency  considerations  are  taken  into 

account 

•  Promote capacity building, exchange of knowledge and best practices at national and local 

level 

•  Stimulate high quality (deep) energy renovation of the existing building stock  

•  Ensure higher uptake of energy efficient products  

•  Support transformation of transport towards more efficient vehicles, modes and usages 

•  Encourage the uptake of energy efficiency improvements in industry (especially for SMEs) 

•  Intensify  the  uptake  of  energy  efficiency  improvements  in  the  energy  sector  (i.e.  energy 

generation and transmission) 

•  Commit  energy  companies  to  take  an  active  role  in  energy  efficiency  improvement  with 

their clients 

In addition, the following specific policy objectives would contribute to the realization of the 
general  ones  but  are  not  analyzed  in  this  IA  because  their  impact  is  studied  in  other  policy 
documents. These include actions to: 

•  Stimulate innovation, development and demonstration of new technologies. 

•  Foster the international leadership of EU on energy efficiency 

4.3. 

Consistency of the objectives with other EU policies 

The  above-listed  general  and  specific  policy  objectives  are  in  line  with  the  existing  EU 
policies because they are: 

•  Enabling  the  reduction  of  greenhouse  gas  (GHG)  emissions  and  thus  contribute  in  a 

cost-effective way to reaching the EU's climate objectives. 

44 
45 

COM(2010) 639. 
COM(2010) 2020. 

EN 

24 

   EN 

 
                                                 
•  Making possible further commitments on greenhouse gas emission reduction. Massive 
cuts of greenhouse gas emissions of 80 to 95% in 2050 compared to 199046 are needed in 
order  to  realize  the  EU's  objective  to  limit  the  temperature  increase  to  less  than  2°C 
compared to pre-industrial levels47.  

•  Promoting economic recovery and enhancing the competitiveness of the EU industries 
in line with the Europe 2020 Strategy and  also contributing to the Resource efficiency 
flagship initiative and the sustainability layer of Europe 2020: The excessive use of energy 
brings  additional  costs  to  the  price  of  the  products  and  energy  bills.  Therefore,  the 
implementation  of  cost-effective  saving  measures  would  increase  the  competitiveness  of 
EU's  economy.  But,  also  know-how  on  energy  efficient  technologies  and  systems  is  a 
growing export field. 

•  Increasing security of energy supply as called for in the Energy 2020 Strategy48: less 
energy  used  in  Europe  means  less  reliance  on  imports.  In  2007,  our  energy  dependency 
meant  that  €332  bn  of  EU’s  wealth  were  expo rted  mainly  to  oil  and  natural  gas  rich 
countries49. Reduction of our energy demand would lead to lower imports bill.  

•  Creating jobs and fighting energy poverty in support of the EU's social agenda: Jobs 
creation or (with the economic crisis) retention, especially of people employed in SMEs, is 
another valuable contribution that EE can bring to the EU's economy. Renovation policies 
would target social housing that are the lowest energy performing building and contribute 
to  fight  against  energy  poverty.  EU  citizens  will  also  benefit  from  improved  living 
conditions, improved transport infrastructure in the cities, less pollution, better buildings, 
and lower energy bills. 

Therefore,  energy  efficiency  policies  already  interact  in  a  positive  way  with  a  number  of 
established  EU  policies.  The  coherence  of  each  policy  option  with  the  current  policy  mix 
considered in this IA is studied in detail in Section 6.  

5. 

POLICY ALTERNATIVES AND OPTIONS  

5.1. 

General policy alternatives 

Current  energy  efficiency  policy  is  an  integral  part  of  the  overarching  climate  and  energy 
policy, it is one of the headline targets of Europe 2020 Strategy and has a body of legislation 
addressing technical aspects for the reduction of energy efficiency. 

However, unlike the targets on energy and climate, e.g. RES and GHG, the energy efficiency 
one  is  not  legally  binding,  and  thus  far  has  not  been  delineated  in  terms  of  individual  MS 
targets. This undermines the credibility of the policy50 and endangers the achievement of the 
political objective of 20% reduction. 

The following global questions are essential in the development of the EU energy efficiency 
policy: 

46 

47 
48 
49 
50 

EN 

Intergovernmental  Panel  on  Climate  Change 

report  by 

4th  Assessment 
the 
http://www.ipcc.ch/pdf/assessment-report/ar4/wg3/ar4-wg3-chapter13.pdf 
7880/1/09 REV 1 
COM(2010) 639. 
COM(2008) 781. 
2010/2107(INI) 

(IPCC) 

25 

   EN 

 
                                                 
(1) 

Could  binding  targets  on  Member  States  (on  their  own)  be  sufficient  to  reap  the 
remaining potential? 

(2)  Would  concrete  policy  instruments  are  developed  at  EU  level  be  sufficient  (i.e. 

without targets)? 

(3) 

Should an approach of targets and measures be further developed? 

The  following  considerations  have  to  be  taken  into  account  when  deciding  on  the  general 
policy approach:  

•  EU and national targets, Member States devise the instruments to reach them 

Energy savings take place at local level. In this respect, the targeted energy efficiency at EU 
level  could  be  achieved  by  overall  and/or  sectoral  targets  at  national  level,  leaving  full 
flexibility to Member States on how to reach these targets.  

This approach would result in a strong deregulation at EU level and its direct impact would be 
to abandon framework policies (e.g. ESD, the EPBD, the CHP Directive) that are not essential 
for  the  functioning  of  the  internal  market  (e.g.  Ecodesign  would  be  retained).  The  energy 
savings which are expected to be delivered by these frameworks would need to be redeemed 
by  national  policies  alone.  The  setting  of  the  targets  would  have  to  take  into  account  the 
interactions  with  the  existing  national  greenhouse  gas  reductions  commitments  and  other 
relevant  policies.  An  essential  element  of  the  approach  would  be  a  robust  system  for  the 
follow-up on the progress in meeting the targets. It would acknowledge the central role of the 
Member  States  in  bringing  about  energy  savings  and  would  create  a  strong  and  visible 
ownership of energy savings policies.  

However,  this  approach  would  require  significant  administrative  efforts  from  the  national 
authorities as they  would have to develop the legislative measures themselves and it can be 
expected that some Member States would face difficulties in coping with the challenge alone. 
For  example,  regularly  a  number  of  Member  States  and  many  industries  have  asked  the 
Commission to develop a common framework and standards (e.g. on energy performance of 
buildings,  Eco-design)  as  Member  States  lack  administrative  capacity  to  develop  this  and 
industries  do  not  want  to  comply  with  numerous  different  requirements.  Such  target  setting 
would also pose compliance costs and administrative burden on the companies that operate in 
more  than  one  country  as  they  would  have  to  comply  with  at  least  27  national  policy 
frameworks and regulations for each sector and the EU will move away from a single internal 
market for energy services.  

A  targets  only  approach  could  also  possibly  have  negative  impact  on  the  development  of 
relevant EU services markets and the mobility of workers and businesses.  

•  Detailed  EU  policy  instruments,  Member  States  implement/supplement  them,  no 

global energy savings targets 

Targets  alone  do  not  save  energy,  only  concrete  measures  do  so.  Focussing  policy  on  the 
design of energy savings policies at EU and national level might guarantee more action than 
losing time and resources with target formulations. 

In practical terms this approach would mean that no further targets on energy efficiency and 
savings are set at EU level but a number of EU individual measures on energy efficiency are 

EN 

26 

   EN 

 
adopted following the EU competences established by the Treaty of Lisbon. New instruments 
would  need  to  be  designed  to  trigger  additional  energy  savings  so  to  harvest  the  economic 
energy  saving  potential  in  all  sectors.  Member  States  would  still  be  responsible  for  their 
implementation  and  also,  where  appropriate,  setting  additional  ones  in  order  to  establish  a 
comprehensive policy framework. 

This  approach  would  highlight  the  need  for  concrete  action  to  bring  about  savings  in  the 
different sectors. The measures could be designed to reach the full economic savings potential 
by 2020, that is some 368 Mtoe primary energy savings. However, the lack of general policy 
objectives would make the monitoring of the progress difficult. There is also a risk that this 
approach becomes very technical and focused on technical problems and areas and does not 
attract  sufficient  political  attention.  The  lack  of  political  mobilization  has  been  one  of  the 
main political challenges and if the approach of only developing concrete measures is adopted 
then there is a possibility that the impact is more limited and not sufficient resources are put to 
address the problems.  

•  Comprehensive  policy 

framework 

at  Member  States' 

level 

(including 

objectives/targets), EU develops policy instruments to support Member States 

The  two  policy  alternatives  discussed  above  (targets  only  or  measures  only)  revealed  that 
neither  of  the  approaches  could  fully  address  the  diverse  challenges  of  energy  efficiency. 
Therefore, it is worth considering a combination of the two.  

Establishing a national/sectoral objective and/or target for energy efficiency can be a trigger 
for enhanced action and creates political momentum for this policy field, which is otherwise 
characterised by a multitude of dispersed technical solutions. Complementing this target with 
concrete instruments at national and EU level would ensure that its is met. 

The approach of combining compulsory national energy efficiency action plans with a set of 
partly indicative and partly binding target values at national and/or sectoral level leaves large 
room to the Member States to define the target/policy combination that fits best to the national 
situation.  At  the  same  time,  it  is  safeguarded  that  the  biggest  available  economic  saving 
potentials are addressed. Clear objectives and concrete measures would create strong signals 
to investors in energy efficiency and thus will address the market failure of incomplete energy 
savings markets. 

Setting  policy  objectives,  detailed  measures  and  coordinating  national  energy  efficiency 
policies  by  the  national  action  plan  would  incite  Member  States  to  put  a  stronger  focus  on 
energy savings and design more ambitious and more streamlined measures to reach the energy 
savings  objectives.  In  that  respect  the  coordination  through  the  NEEAPs  and  the  political 
commitment  to  objectives  would  reinforce  the  impact  of  the  energy  saving  measures  put  in 
place.  

The approach could include: 

•  A  set  of  objectives  or  targets  and  indicators  to  ensure  high  political  visibility  and  their 
commitment to energy efficiency to be developed by the EU together with Member States. 
These  would  also  allow  the  monitoring  of  the  progress.  The  targets  could  vary  from 
binding  to  fully  indicative  ones  or  a  combination  of  indicative  and  mandatory  ones.  The 
best  modality  (e.g.  national  or  sectoral,  linear  decrease  for  each  member  State  or  burden 
sharing, primary/final or energy intensity target based on reference year or projections) and 

EN 

27 

   EN 

 
its interaction with the other policy objectives (especially with the ETS, non-ETS and RES 
targets) would need to be studied in more detail. The sectoral targets could be, for example, 
set for the public sector or even for certain economic actors (e.g. energy companies). 

they  outline 

the  general  policy  objectives  and 

•  Comprehensive  plans  (possibly  strengthened  National  Energy  Efficiency  Action  Plans 
(NEEAPs))  where 
the  concrete 
comprehensive policy mix to be drawn up by Member States. These plans could serve as 
main  policy  drivers,  linking  the  EU  policies  to  the  local  reality  and  coordinating  and 
streamlining  fragmented  policies.  They  should  include  clear  analysis  of  the  barriers  to 
energy efficiency in each country and how to tackle them and ways to actively engage the 
regional  and  local  authorities  and  various  stakeholders.  These  Plans  should  also  serve  as 
the main reporting tool from Member States towards the EU. 

•  A number of well coordinated individual measures adopted at national and EU level. The 
EU  measures  could  provide  Member  States  with  the  needed  framework  based  on  which 
they  could  further  develop  their  efforts.  Further  EU  level  legislation  would  also  be 
developed for the products and services traded at the EU internal market, where necessary.  

This approach would reinforce the level of ambition of national energy efficiency policy and 
guarantee  a  set  of  coordinated  measures  that  tap  synergies.  This  approach  would  require  a 
certain  increase  of  the  administrative  burden  on  the  national  authorities,  EU  and  local 
stakeholders for setting this framework in place and also for NEEAPs development but these 
will be compensated many times by the benefits of the realized energy savings. In addition, if 
NEEAPs turn into a single reporting obligation for ESD, EPBD and possibly other Directives 
the overall impact could even be a decrease of the administrative costs. 

As a conclusion, it is proposed that the third policy alternative, a policy framework for 
Member  States  with  EU  support,  is  followed.  This  would  recognize  the  importance  of 
Member  States  in  the  implementation  of  energy  savings  policies,  give  the  EU  an 
important supporting role, and provide for clear objectives and indicators to follow the 
progress in the realization of the energy savings potential.  

In the next sections of the IA the additional policy measures to be put in place at EU level that 
would support Member States in this approach are discussed. The issues related to the nature 
and  concrete  setting  of  the  objectives  and  indicators  will  be  further  analyzed  when  the 
concrete legal provisions are developed. 

EN 

28 

   EN 

 
5.2. 

Options analyzed 

The  selection  of  the  approach  for  the  analysis  of  the  individual  options  is  based  on  the  fact 
that  the  aim  of  this  evaluation  is  to  identify  what  type  (regulatory,  financial  or  soft-law 
measures)  of  EU  intervention  is  needed  and  suggest  which  are  the  best  examples  or 
possibilities that should be further looked at. Therefore, for each sector the following policy 
options are analyzed: 

•  No  additional  EU  action:  implies  that  no  additional  measures  beyond  the  existing  ones 

are adopted.  

•  Voluntary commitments: would mean that active participation from the various industries 

and stakeholders is sough through voluntary agreements. 

•  Regulatory  instruments:  implies  that  additional  to  the  existing  ones  command  and 

control tools are established at EU level  

•  Financial  instruments:  include  the  provision  of  various  forms  of  financial  support  but 
also means for its mobilization and also encouragement or regulation for fiscal measures. 
The support for RTD is excluded from the analysis as this is subject to detailed assessment 
in other policy documents. 

•  Awareness  and  training:  at  EU  level  mainly  comprise  initiatives  that  support  the 
exchanges of best practices and support the development of training and awareness raising 
materials. 

Fiscal instruments are not discussed in detail in this Impact Assessment as they have already 
been  subject  to  a  separate  analysis51  and  a  possible  further  initiative  is  subject  to  ongoing 
work  of  DG  TAXUD.  However,  it  should  be  noted  that  these  could  be  cost-efficient 
instruments, implemented both at the EU and at national level. For example, tax exemptions 
can drive the demand for energy efficient products, buildings and services. However, because 
of  the  low  energy  price  elasticities  for  final  consumers  (especially  households/SMEs)  the 
impacts would be more prominent at supply side. For example, the tax on the various types of 
fuel  would  be  very  important  when  an  investment  decision  for  new  energy  generation 
capacities are made (e.g. district heating company that has to choose between heavy oil and 
natural gas). Furthermore, there are fiscal instruments at Member States level that discourage 
energy efficiency (such as higher property taxes for good performing buildings) that should be 
carefully looked and phased out, if increased energy efficiency is sought. 

The types of policy instruments are not mutually exclusive. In energy efficiency, often, 
the  best  approach  is  a  combination  of  individual  instruments  that  complement  each 
other  and  create  a  comprehensive  policy  mix.  Therefore,  following  the  analyses  of  the 
options, a preferred policy portfolio of best options can be identified in each sector. 

51 

EN 

Costs  and  benefits  related 
http://ec.europa.eu/taxation_customs/common/publications/studies/index_en.htm. 

the  use  of 

tax 

to 

incentives  for  energy-efficient  appliances, 

29 

   EN 

 
                                                 
The table below provides an overview of the sectors and options analyzed.  

options for the residential and services sectors 

1 

2 

3 

4 

5 

6 

7 

8 

1 

2 

3 

4 

5 

1 

2 

3 

4 

5 

6 

7 

8 

Option A1: No additional EU action (BAU) 

Option A2: Voluntary commitments with commercial entities 

Option A3: Regulatory instruments: 

Option A3a: Additional stringent legal obligations for buildings 

Option A3b: Additional stringent legal obligations for products  

Option A4: Financial instruments 

Option A4a: Technical assistance and risk sharing facilities 

Option A4b: Energy efficiency conditionality on the spending of public funds 

Option A5: Awareness  

Option A6: Training 

options for the transport sector 

No options discussed as specific measures for the sector are discussed/analyzed in the 
forthcoming Transport White Paper and its IA 

options for the industry sector 

Option C1:No additional EU action (BAU) 

Option C2:Establish voluntary commitments with industries 

Option C3: Regulatory measures supporting the existing climate related legal tools 

Option C4: Financial instruments 

Option C5: Awareness and training 

options for the energy sector 

Option D1: No additional EU action (BAU) 

Option D2: Voluntary commitments 

Option D3: Regulatory instruments: 

Option D3a: Generation efficiency 

Option D3b: Higher energy recovery from generation 

Option D3c: Increased role of energy regulators 

Option D3d: Energy companies' role in energy savings of their clients 

Option D4: Financial instruments 

Option D5: Awareness and training (focusing on the promotion of energy services companies) 

EN 

30 

   EN 

 
 
 
 
 
 
6. 

ANALYSIS OF IMPACT AND COMPARING THE OPTIONS 

The  depth  of  the  analysis  is  proportionate  to  the  foreseen  general  political  nature  of  the 
Energy Efficiency Plan itself.  

For modelling purposes the business-as-usual scenario the PRIMES model was used (Section 
3.4). It is a general equilibrium model and has certain limitations as regards energy efficiency 
(e.g. the impact of individual measures is difficult to be distinguished, only policies for which 
there  is  almost  no  uncertainty  on  how  they  should  be  implemented  are  taken  into  account 
which is not the case for many of the EU framework policies on energy efficiency). Due to 
these  limitations  it  was  also  not  possible  to  use  the  model  for  the  assessment  of  individual 
policy options.  

To overcome these limitations, the analysis is mainly based on case studies of similar policies 
that  have  been  implemented  at  Member  States  level  or  on  the  results  of  various  academic 
studies. This allowed for qualitative, and sometimes quantitative, description of the economic, 
social and environmental impact to be made.  

Based  on  the  description  of  the  impact,  qualitative  evaluation  of  how  the  options  will 
contribute to the realization of the policy objectives, as set in Section 4 and also described in 
the businesses-as-usual option for each sector, is made using the following evaluation criteria:  

•  effectiveness – the extent to which options achieve the objectives of the proposal 

•  efficiency – the extent to which objectives can be achieved for a given level of resources/at 

least cost (cost-effectiveness). 

•  coherence  –  the  extent  to  which  options  are  coherent  with  the  overarching  objectives  of 
EU policy, and the extent to which they are likely to limit trade-offs across the economic, 
social, and environmental domain. 

•  respect of subsidiarity/proportionality 

The  following  symbols  were  used  to  describe  the  results  of  evaluation  of  efficiency, 
effectiveness and overall assessment: 

'=' 

baseline or equivalent to the baseline  

'+' to '+++' 

low to high improvement compared to the baseline 

'-' 

worsening compared to the baseline 

For  subsidiarity/proportionality  principles  the  following  symbols  are  used:  respected  R,  or 
not respected NR. 

For  coherence  with  the  other  policies  the  following  symbols  used:  coherent  C,  or  not 
coherent NC. 

As  regards  the  business-as-usual  option  under  each  sector,  only  the  main  developments, 
achievements and needs are presented. Detailed analysis is available in Annex III and IV. 

EN 

31 

   EN 

 
6.1. 

Residential and tertiary sectors 

Option A1: No additional EU action (business as usual scenario) 

Several  directives  and  initiatives  that  are  already  part  of  the  EEAP  address  the  existing 
failures in the two sectors. The main tools used are: original and recast Energy performance of 
buildings  Directive  (2002/91/EC  and  2010/31/EU),  original  and  recast  Ecodesign 
(2005/32/EC  and  2009/125/EC)  and  its  implementing  measures;  original  and  recast  Energy 
labelling Directive (92/75/EEC and 2010/125/EC) and its implementing measures, Intelligent-
Energy Europe Programme, and green public procurement (mostly voluntary). In addition, the 
Energy Services Directive (2006/32/EC), the Effort Sharing Decision, the ETS, and the draft 
Regulation  on  Construction  products  have  indirect  impact  on  the  energy  performance  of 
buildings. Certain financial (e.g. Cohesion and social policy funds, Intelligent Energy Europe 
programme  and  European  Local  Energy  Assistance  –  ELENA  facility,  IFIs  funding),  and 
fiscal measures (e.g. possibilities for VAT reduced rates and state aid exemptions in certain 
cases and conditions) are also at disposal at EU level. All these have contributed to a different 
extent  in  decreasing  the  existing  challenges  but  according  to  PRIMES  2009  projections  the 
final  energy  consumption  of  the  sector  will  increase  slightly  in  2020  leaving  the  remaining 
potential unachieved. 

However, the current policy framework does not oblige and cannot oblige property owners to 
renovate  their  buildings  or  consumers  to  change  their  appliances.  It  also  cannot  require  a 
Member State to provide financial and fiscal assistance and training to buildings workforce. 
Therefore,  the  main  challenge  as  outlined  in  the  EEAP  assessment  is  that  renovation  rates 
remain low (about 1.2% p.a. in 2008), and are further hampered by the crisis, and the impact 
of  the  recast  EPBD  cannot  be  fully  realized.  The  same  applies  to  some  appliances  –  the 
products that offer the biggest energy-saving potential (e.g. boilers, air-conditioning) have the 
longest lifetimes (15 years and above), and hence the lowest replacement rates which reduces 
the  impact  of  minimum  requirements.  Also  although  the  unit  efficiency  of  products  is 
growing, the energy use of households is still increasing, due to purchases of more and bigger 
appliances. Furthermore, in order to harness the full saving potential it is important to address 
not only the efficiency of individual products but also ensure that these products are correctly 
integrated  into  efficient  systems,  be  it  'smart  metering/smart  grids'  or  automatic  energy 
management in buildings. 

The  final  actors  (e.g.  EU  citizens,  public  authorities  and  service  companies)  in  both  sectors 
face similar market and regulatory failures that limit the uptake of energy savings measures, 
namely:  high  initial  costs,  incomplete  markets  (lack  of  trained  staff,  infrastructure, 
information),  lack  of  information/  knowledge/  motivation,  split  incentives  (landlord-tenant 
problem), poor enforcement of legislation, and rebound effect. 

A number of stakeholders have also called for more ambitious policy mix for the two sectors 
with measures on financing, training, awareness strongly supported. Some stakeholders also 
recognize  that  there  are  numerous  funding  opportunities  in  place,  but  that  these  seem 
confusing and difficult to access which discouraged participation. Furthermore, there has been 
a  strong  demand  for  more  active  engagement  of  the  public  sector  than  the  one  currently 
envisaged in the EPBD recast and the new Energy Labelling Directive. 

The EEAP 2006 has already set the legal framework by pushing for the implementation and 
revision  of  key  legislation  in  these  sectors.  In  order  to  trigger  the  renovation  process  of  the 
building sector, additional measures are needed. With respect to the resulting training needs 

EN 

32 

   EN 

 
for the buildings workforce, the EEAP 2006 had already proposed a vocational initiative on 
energy efficiency, which has not been implemented yet. 

Based on the PRIMES projections for the two sectors, the analysis of the potentials, and 
the  EEAP  and  NEEAPs  assessments  (as  discussed  in  sections  3.1  and  3.3)  it  is  evident 
that further measures are needed to be developed to tackle the remaining barriers and 
to  stimulate  increased  uptake  of  energy  improvements  of  existing  building  stock  (e.g. 
increase of renovation rates for existing buildings) and of energy efficient appliances and 
innovative technologies (e.g. increase of replacement rates of inefficiency appliances).  

Option A2: Voluntary commitments with commercial entities 

Possible approaches: Voluntary agreements combined with a support mechanism can provide 
a framework for stimulating an increased rate of renovation in the existing building stock or 
increased  uptake  of  energy  efficient  appliances.  These  are  possible,  for  example,  between 
public  authorities  and  housing  associations,  or  commercial  entities  (e.g.  chains  of 
supermarkets),  or  organizations  of  specific  economic  activity  (e.g.  organization  of  the 
architects,  of  construction  sector).  The  Commission  can  facilitate  these  by  providing 
recognition, support for the preparation of agreements and for the exchange of best practice.  

Impact:  This  option  can  contribute  to  achieving  the  policy  objectives.  The  results  of  the 
'SABO energy challenge' in Sweden52 reveal that average energy use has dropped from 149 
kWh/m2 in 2007 to 144 kWh/m2 in 2008, which amounts to an average saving of 2.3%.  

As regards costs, voluntary agreements and support mechanisms are not costly processes. In 
financial terms, the GreenBuilding Programme53 had a simple payback period of between 3-6 
months  and  the  initial  investments  triggered  were  between  6-7  times  the  programme  costs. 
Extrapolated over the lifetime of the measures implemented, the cost to promote these savings 
amounts  to  less  than  0.1  €cent/kWh  of  prim ary  energy  saved.  The  measure  would  be 
particularly cost effective even though the need for upfront investment remains. However, the 
voluntary  approach  would  imply  increased  costs  for  monitoring.  The  social  impact  (besides 
employment)  would  include  improved  living  conditions  and  well  being  for  occupants:  for 
every  €  1  invested  on  energy  efficienc y,  €  0.42  are  saved  in  health  expenses 54.  This  will 
reduce the levels of fuel poverty, increase well being and strengthen the cohesion. 

Option A3: Regulatory instruments 

Option A3a: Additional stringent legal obligations for buildings 

Possible  approaches:  In  addition  to  the  current  legal  framework  for  the  improvement  of 
energy  performance  of  buildings  and  appliances  some  very  stringent  measures  could  be 
proposed to harness the remaining potential and ensure that major energy related renovations 

52 

53 

54 

SABO  members  committed  in  February  2008  to  reduce  their  energy  consumption  by  20%  between 
2007  until  2016.  So  far,  99  companies,  owning  over  370,  000  apartments  have  taken  the  challenge. 
SABO  assists  them  through  platform  activities  for  provision  of  information  and  exchange  of  best 
practices. 
The  evaluation  of  the  GreenBuilding  Programme  is  available  at  the  GreenBuilding  website  at 
http://re.jrc.ec.europa.eu/energyefficiency/greenbuilding/index.htm.  Similar  results  have  also  been 
achieved with the GreenLight and Motor Challenge programmes. 
CECODHAS  figures,  see  the  Copenhagen  Offer  above  –  this  specific  for  well  being  not  yet 
substantiated / source not identified. 

EN 

33 

   EN 

 
                                                 
and replacement of energy-using products are being carried out. These, for example, could be 
in the form of obligation for improvement of the energy performance of buildings when they 
are  sold  or  rented  out,  or  mapping  and  mandatory  renovation  of  the  poorest  segment  of  the 
building stock. Another possibility is to introduce a binding target(s) on Member States, for 
example,  to  reach  certain  renovation  rates,  to  renovate  certain  percentage  of  their  building 
stock, or to renovate all poor performing public buildings. 

Impact:  Some  quantifications  of  the  possible  implications  are  available  for  the  various  best 
practices  or  possibilities  presented  above.  For  example,  calculations  show  that  if  there  is  a 
requirement that properties that are of the two poorest performance classes cannot be newly 
rented out until their performance is improved, the additional to the baseline primary energy 
savings  in  2020  could  be  about  33  Mtoe  with  CO2  emission  reduction  of  65  Mt.  The  CO2 
mitigation costs is in the range of -300 to 100 €/t CO 2 and 375 000 jobs will be created and 
maintained55.  Similar  prohibition  on  sale  would  lead  to  savings  of  13  Mtoe  in  2020,  26  Mt 
CO2 emission reductions, with CO2 mitigation costs in the range of -300 to 100 €/t CO 2 and 
150 000 jobs created an maintained56.  

In the US, city of Berkley, has introduced a certain energy and water efficiency requirements 
to  be  met  when  residences  above  USD  50,000  are  sold,  transferred  from  one  proprietor  to 
another,  or  renovated57.  This  has  reduced  residential  energy  consumption  by  over  13% 
between  2000  and  2005  and  allowed  households  to  save  up  to  USD  450  per  year  on  their 
energy bills. 

Thus  it  can  be  concluded  that  a  strong  regulatory  approach  will  bring  significant  energy 
savings and CO2 emission reductions.  

The  renovations  should  be  cost-effective.  However,  the  approach  might  require  that  some 
renovations  are  carried  out  outside  of  the  normal  refurbishment  cycle  which  could  lead  to 
suboptimal  investments.  In  many  cases  low  income  people  live  in  poor  energy  performing 
buildings.  Therefore,  requirements  on  their  renovation  could  be  additional  burden  for  their 
limited  budgets.  Similarly  such  obligations  could  be  significant  burden  for  associations 
owning a number of buildings, especially those offering social housing. 

Option A3b: Additional stringent legal obligations for products  

It  is  expected  that  by  mid-2011  requirements  will  cover  almost  the  entirety  of  electricity 
consumption and a large part of energy consumption in the household sector but there remains 
a  substantial  saving  potential  in  the  tertiary  sector  which  could  be  addressed  through 
mandatory minimum efficiency requirements, for e.g. in big air-conditioning and ventilation 
systems.  It  can  be  also  considered  to  introduce  labelling  and/or  minimum  efficiency 
requirements for certain construction materials, for e.g. windows. A third element to consider 
is  a  regular  tightening  of  requirement  to  ensure  that  the  efficiency  of  products  is  constantly 
improving.  

55 

56 

57 

EN 

Ecorys, Ecofys and BioIntelligence. 2010. Study to Support the Impact Assessment for the EU Energy 
Saving  Action  Plan.  The  calculation  assumes  that  the  measure  will  increase  the  renovation rates with 
0.5% compared to the baseline (i.e. from 1.7% to 2.3%) 
Ibid 55. The calculation assumes that the measure will increase the renovation rate with 0.2% compared 
to the baseline (i.e. from 1.7% to 1.9%) 
RECO 
http://www.c40cities.org/docs/casestudies/buildings/berkeley_standards.pdf 

(Residential  Energy  Conservation  Ordinance,  1979,  adopted 

in  1987).  Source: 

34 

   EN 

 
                                                 
Impact: Some indication of the impact can be given by the estimated effects of the Ecodesign 
and Energy Labelling Directives. For example, completing the current requirements limiting 
the  power  consumption  of  appliances  in  the  standby  mode  with  requirements  for  devices 
operating  in  networks  (mainly  electronic  equipment)  is  estimated  to  result  in  additional  60 
TWh saved per year in 2020 (or 11.5 Mtoe primary energy savings), leading to CO2 emissions 
reduction of 24 Mt of CO2 and €9.6 bn saved on energy bills annually by 2020 58. The costs are 
considered  negligible.  Such  approach  has  proved  to  be  effective  but  it  has  certain  limits 
related to the size and complexity of the products- for e.g. large systems such as ventilation in 
commercial  and  public  buildings  are  often  custom-made  and  therefore  difficult  to  address 
solely through product-level requirements. 

The  measures  proposed  under  this  option  are  to  be  set  in  cost-effective  manner.  There  are 
certain  administrative  costs  but  based  on  the  experience  with  the  already  adopted 
implementing measures under the Ecodesign Directive they are relatively small (requirements 
can usually be met with readily-available technology therefore there is no incremental cost or 
it is minimal. The cost for assessing conformity with the requirements is in the order of 1000-
2000 euro per model [not product!]. For market surveillance authorities to this cost must be 
added the cost of purchasing the tested product. The impacts on jobs creation are insignificant 
but there will be considerable reductions on the energy bill. The annual energy savings due to 
the  11  implementing  measures  adopted  so  far  will  be  in  the  order  of  €50  bn.  The  annual 
energy savings in 2020 are expected to be 83 Mtoe and the CO2 emissions will be reduced by 
147 Mt annually. The administrative and other associated costs are considered negligible due 
to  the  cost-effectiveness  of  the  measures.  No  problems  related  to  affordability  of  consumer 
products were observed in the implementation of the first Ecodesign measures and thus there 
is no reason to expect negative impacts from further similar measures. 

Option A4: Financial instruments 

Most  of  energy  efficiency  investments  are  good  business  opportunities.  Expected  energy 
savings and additional benefits in terms of economic activity and social improvements are the 
basis of sound returns.  

Nevertheless, the initial investment costs, but also lack of knowledge on the possibilities and 
capacity to implement the projects are considerable barriers. For example, it is calculated that 
the  energy  related  investments  to  increase  the  average  EU  renovation  rate  from  1.2%  pre-
crises level (or 1.7% over 2010-2020) to 3% in 2020 are about €29 bn annually over the 2010-
2020 period and the total cost for investments (including non-energy related investments, e.g. 
painting, scaffolding) are about €43 bn annuall y. The average annual savings over the same 
period are also considerable: €16 bn - and would  continue to deliver over much longer periods 
(i.e. the lifetime of the measure implemented). The benefits  of such increase of renovations 
would  be  considerable:  primary  energy  savings  of  38  to  60  Mtoe  in  2020,  CO2  emission 
reductions of 77 Mt in 2020, and direct jobs creation of 300 00059. 

58 

59 

For  the  conversion  from  TWh  to  Mtoe,  the  primary  energy  is  obtained  by  first  multiplying  final 
electricity  use  by  2.82  for  calculating  the  gross  energy  needed  to  generate  that  quantity  of  electricity 
(source: Eurostat 2008), and then dividing it by 11.63 to obtain the Mtoe equivalent (source: Statistical 
Pocketbook 2010). Monetary savings are estimated at 0.16€/kWh, CO2 savings at 0.43 kg CO2/kWh 
Background study for this IA. The conversion factor tCO2 to ktoe is based on PRIMES EE scenario for 
2020.  38  Mtoe  is  for  increased  renovation  rates  but  at  the  current  minimum  performance  levels.  60 
Mtoe refers to increased renovation rates to cost-effective performance levels. 

EN 

35 

   EN 

 
                                                 
To realize these benefits it is important that funding is mobilized. The EU disposes of limited 
funds  and  they  should  be  targeted  to  the  sectors  where  the  EU  intervention  is  essential.  As 
majority of the industrial and energy generation companies falls under ETS or are able to gain 
access to the capital (see sections 6.3 and 6.4) it is suggested that buildings, urban mobility 
and  small-scale  sustainable  energy  generation  projects  are  tackled.  The  projects  in  these 
sectors  are  numerous,  small  and  decentralized  in  nature,  often  responsibility  of  people  who 
are not well aware of the various possibilities and ways to structure the projects financially. 
This results in the paradox that even if a funding is available it is not fully used.  

The solution to achieve the energy efficiency objectives in the EU needs of the development 
and implementation of specific financial instruments. The most relevant instruments must be 
devised  to  tackle  programmes  rather  than  single  projects,  and  be  result-oriented  rather  than 
resource-oriented. The limited financial resources at EU level could be particularly targeted at 
providing  technical  support  to  Member  States  and  local  authorities  to  structure  such 
instruments  and  at  providing  funds  for  the  establishment  of  risk  sharing  and  guarantee 
facilities.  Providing  such  assistance  would  ensure  high  leverage  factors  for  the  EU  funds 
spent.  For  further  developing  this  approach,  the  Commission  could  rely  on  the  success  of 
ELENA  facility  and  on  the  experience  gained  with  the  other  technical  assistance  initiatives 
(e.g.  JASPERS)  or  the  targeted  support  provided  in  the  context  of  the  Cohesion  policy 
instruments JESSICA and JEREMIE.  

Another aspect as regards financing is the role of public authorities in stimulating the market 
transformation  towards  more  efficiency  products,  buildings  and  services.  Due  to  the  large 
volume  of  public  spending  it  could  be  a  strong  driver  for  higher  market  uptake  and  the 
development of the required skills. For example, public procurement accounts for around 17% 
of  EU  GDP,  or  roughly  €2,000  bn  and  public  build ings  are  about  12%  of  the  EU  build  up 
area. It is also irrational from taxpayers' point of view that when public money are spent, the 
cost effective energy efficiency possibilities are not properly taken into account. 

Another possibility for freeing up of financial resources would be the elimination of harmful 
subsidies  for  fossil  fuels  and  their  redirection  towards  energy  efficiency  improvements. 
Member  States  can  also  take  advantage  of  revenues  from  auctioning  allowances  under  Art. 
10.3.b  of  the  EU  emission  trading  directive.  All  these  could  be  an  important  source  of 
financing of energy efficiency projects but due to their political nature will not be analyzed in 
this IA.  

Due  to  the  similarity  of  the  general  approaches  as  regards  financing  for  buildings,  urban 
mobility and small-scale sustainable energy generation projects, and to avoid repetition in the 
text  the  possible  options  are  discussed  under  this  Section  and  are  only  cross-referred  in  the 
others.  

Option A4a: Technical assistance and risk sharing facilities  

Possible approach: To tackle the challenges of high upfront costs and the lack of knowledge 
and lack of sufficient technical and financial knowledge (in project financing) in the times of 
economic crisis, the EU support in the form of subventions should not be a priority (except 
through  structural  funds).  The  focused  should  be  on  making  project  bankable  through  risk 
sharing  mechanism  that  tackles  the  limited  liquidity  faced  by  the  market  so  as  to  create 
leverage and attract investments (in particular from ESCOs and private sector). The creation 
of  leverage  but  also  allowing  for  public  private  partnerships  would  alleviate  the  deficit  on 
national and local public authorities in time of budget crisis. Furthermore, to enable financing, 

EN 

36 

   EN 

 
cross  dissemination  of  best  practice  at  EU  level,  and  good  quality  of  project  technical 
assistance should also be supported.  

The  successful  model  of  the  ELENA  technical  assistance  facility  could  be  scaled  up  in 
dimension  and  scope,  gradually  involving  national  and  regional  investment  banks  and 
development  agencies  in  its  operation.  Funds  for  this  could,  for  instance,  come  from  the 
technical assistance allocated to Member States under the Cohesion policy funds. Based upon 
the  experience  with  ELENA,  it  can  be  estimated  that  minimum  leverage  factors  of  20  are 
easily accepted by major IFIs, and make sense in the long run. This technical assistance could 
also be used to structure guarantee or revolving funds that would particularly work to support 
the energy services companies. It would allow access to financing for local authorities to carry 
out  sustainable  energy  investment  projects  without  increasing  their  debt  volumes  through 
leverage of financing by the private sector. 

On  top  of  ELENA-like  facilities,  complementary  facilities  such  as  risk-sharing  facilities  for 
innovative  technologies,  guarantees,  debt  and  equity  instruments  for  energy  service 
companies and PPP schemes would be necessary albeit with lower leverage factors.  

Furthermore,  as  most  of  the  competences  with  energy  efficiency  relevance  are  local,  new 
approaches creating incentives for managing authorities to allocate resources coming from EU 
funds in energy efficiency must be devised. The creation and operation of revolving funds in 
co-operation  between  various  administrations  and  even  private  investors  look  a  reasonable 
solution. Another possibility is to target part of the funds towards local authorities. 

The approach of combination of technical assistance and risk-sharing facilities are currently 
being piloted by using the EEPR unspent funds. The relevant Regulation has been agreed but 
now the concrete mechanisms are being developed.  

Impact: The impact would depend on the structure of the technical and risk-sharing facilities 
and market needs. Recently, a market study for EEPR unspent funds was initiated in order to 
support the setting of the concrete mechanisms but no information is available yet. Still, based 
on  the  experience  with  ELENA  it  can  be  concluded  that  each  €1  public  funds  towards 
ELENA-like  facilities  for  energy  efficiency  could  mobilize  at  least  €  20  in  investments.  A 
replication effect of 5 to 1 does seem realistic with a 2020 horizon. In terms of job creation, 
the  workload-intensive  nature  of  local  energy  efficiency  would  result  in  direct  and  induced 
job creation between 60 000 and 300 000 high-skill permanent non-delocalisable posts. CO2 
emission reductions would be between 24 and 120 Mt per year. As a subsequent effect, the 
know-how  acquired  by  authorities  and  financers  during  the  implementation  phase  will 
gradually reduce the need for technical assistance, in such a way that it will become integral 
part  of  energy  efficiency  programmes  at  lower  costs.  The  measures  can  also,  if  properly 
targeted,  lead  to  lifting  households  out  of  energy  poverty  (e.g.  low  energy  demand  of  a 
building  means  low  heating  bill)  and  thus  limiting  the  burden  of  energy  subsides  for  the 
public budget. 

Option A4b: Energy efficiency conditionality on the spending of public funds 

Possible approaches: Various possibilities should be explored in detail upon the development 
of concrete proposals. For example, public procurement of efficiency products (e.g. based on 
their energy performance class in the Energy Label) or buildings (e.g. based on least-life cycle 

EN 

37 

   EN 

 
cost  analysis)  could  be  obligatory  above  certain  thresholds,  to  be  established  after  careful 
analysis60. As this is a sensitive area for Member States any EU level measures would have to 
be flexible and cost-effective. This should be easy for central government institutions, but can 
probably  only  be  voluntary  for  the  lower  levels  of  state.  Also  conditionality  could  be 
introduced on the improvement of energy performance of buildings (e.g. based on the energy 
performance certificate or energy audit) when public funds are spend for renovation projects.  

At  present,  a  number  of  national  or  local  authorities  in  the  EU  apply  some  form  of  green 
public procurement. A study of seven best performing EU Member States showed that about 
half of the signed  contract in 2006/2007 were  ‘green’, where  ‘green’  means  compliant  with 
endorsed  common  core  GPP  criteria  for  ten  product  groups  and  services61.  Some  product 
groups, i.e. overall electricity, office IT and furniture attain the highest scores in 2006/2007; 
while construction, gardening and transport the lowest.  

Furthermore,  some  banks,  including  EBRD,  require  certain  improvement  of  the  energy 
performance  recorded  in  an  Energy  Performance  Certificate  as  a  condition  for  providing 
public funding for construction or renovation of buildings projects. 

Impact:  The  approach  would  lead  to  purchasing  of  more  efficient  appliances  and  buildings 
which  would  ultimately  lead  to  energy  savings.  However,  the  approach  would  have  much 
more  profound  impact.  The  increased  orders  could  lead  to  economies  of  scale  and  would 
support  the  establishment  of  a  market  for  energy  efficient  products,  buildings  and  services. 
This would lead to further energy savings and job creation. 

There  are  a  number  of  examples  on  energy  efficient  procurement  from  across  Europe.  21 
Member  states had already  adopted  the GPP  National  Action  Plans  where  they  set  the  GPP 
targets  for  central,  regional  or  local  levels  as  well  identified  the  priority  "green"  product 
groups and services. Although the GPP is voluntary instrument most of the countries put it as 
a mandatory political obligation. Study from 2010 which compares national GPP schemes and 
criteria  in  10  countries  demonstrated  that  practicing  of  GPP  in  these  countries  is  very  high 
with their own developed GPP criteria (for example Belgium has 90 GPP criteria, Denmark 
47, Netherlands 52, UK 58 etc)62. All of these criteria were developed with the intention of 
reducing  the  impact  of  public  procurement  on  the  environment.  Depending  on  the  product 
group, most of these criteria set requirements on energy use, among others.  

Requirements  on  public  procurement  could  also  pose  budgetary  and  administrative  burden. 
The  use  of  energy  efficiency  criteria  in  procurement  procedures  can  lead  to  higher  direct 
purchasing costs, it can result in an average decrease of overall costs for public organisations. 
This  is  because  the  higher  purchasing  prices  of  efficient  goods  are  compensated  by  lower 
operating costs. Analysis of various ‘green’ goods and services63 show that the cost-reduction 

60 

61 

62 

63 

For  more  information  on  the possible  approaches refer  to:  Harnessing  the  Power of  the  Public  Purse: 
Final report from the European PROST SAVE funded study on energy efficiency in the public sector 
PricewaterhouseCoopers, Significant and Ecofys. January 2009. Collection of statistical information on 
Green  Public  Procurement  in  the  EU:  Report  on  data  collection  results.  Countries  studied:  Austria, 
Denmark,  Finland,  Germany,  the  Netherlands,  Sweden  and  the  United  Kingdom.  Product  groups  and 
services: Cleaning products & services, construction, electricity, catering & food, gardening, office IT 
Equipment, paper, textiles, transport, furniture 
DG  ENV.  draft.  Assessment  and  Comparison  of  National  Green  and  Sustainable  Public  Procurement 
Criteria  and  Underlying  Schemes.  The  study  covers  Austria,  Belgium,  Denmark,  Finland,  France, 
Germany, the Netherlands, Sweden, and the United Kingdom and Norway. 
Ibid. 61  

EN 

38 

   EN 

 
                                                 
(when  using  Life  Cycle  costing  approach)  is  on  average  around  1%  and  CO2  is  on  average 
decreased by 25% when using GPP. It is interesting that two product groups are highlighted 
as  leading  to  significant  cost  reductions  through  GPP:  construction  and  transport.  However, 
when  also  taking  into  account  the  product  group  that  have  the  relatively  higher  CO2 
emissions, construction and electricity are the proposed to be the product groups to focus on. 

Option A5: Awareness  

The  awareness  and  commitment  of  owners/tenants,  building  professionals  and  public 
authorities is paramount to the success of regulatory approaches for efficient energy solutions 
in buildings. While awareness on the contribution of buildings and equipment to the energy 
and  climate  change  challenge  is  increasing,  there  are  still  serious  gaps  in  knowledge  about 
energy efficiency measures64, which limit their concrete implementation on the ground. 

Possible approaches: most behavioural and capacity-building programmes are best developed 
at local, regional or national level, and not at EU level, as a careful analysis of the particular 
target groups and context for their behaviour, is crucial. However, the EU could play a role in 
increasing  the  effectiveness  of  such  programmes65  and  in  stimulating  the  adaptation  and 
replication of successful schemes across Europe. Such action could target owners/tenants or 
the different actors along the building value chain. It could take the form of (i) an exchange of 
best  practices;  (ii)  the  dissemination  of  guidelines  and  informative  tools;  (iii)  the 
reinforcement  of  the  EU-funded  BUILD  UP  platform66;  (iv)  the  strenghtening  of  market 
surveillance  activities  to  raise  consumers'  confidence;  (v)  requirements  for  the  provision  of 
improved billing and metering information; and (vi) the assistance in the design and launch of 
effective programmes. 

Impact:  Stimulating  behavioural  change  programmes  could  be  an  effective  option  for  the 
EU67.  In  the  United  States,  changed  patterns  of  behaviours  were  estimated  to  reduce 
household energy use by 22%68, through changes in conservation, lifestyle, awareness, low-
cost actions, and small investments. In Europe, a literature review69 concluded that changing 
energy-related  behaviour  can  potentially  save  nearly  20%  of  the  energy  consumption.  In 
addition, on the construction side, whole-system design approaches could reduce energy use 
by as much as 70%, far more than what can be achieved though attention to individual design 
or technical solutions.  

The  IEE  project,  Eco  n'Home70  service  advised  over  850  households  in  six  European 
countries.  On  average,  the  savings  achieved  in  terms  of  total  energy  consumption  were  9% 
per household (140 kWh electricity savings and 0.8 tonne of CO2 reduction per household). 
An interesting lesson learnt was that even implementing a "small" measure (e.g. switching to 

64 

65 

66 
67 
68 

69 
70 

World Business Council for Sustainable Development, "Energy efficiency in buildings, business 
realities and opportunities", October 2007 
http://www.wbcsd.org/DocRoot/qUjY7w54vY1KncL32OVQ/EEB-Facts-and-trends.pdf 
A recent analysis of 41 programme examples showed that less than 20% of these programmes used any 
form  of  market  segmentation.  Bruel,  R.  (2007)  BEHAVE.  Meta-evaluation  of  communicative 
programmes aimed at consumers. eceee summer study, 2007, 1827-1834. 
www.buildup.eu  
Allcott, H. & Mullainathan, S. (2010) Behavior and energy policy. Science, 327, 1204-1205. 
Laitner,  J.  A.,  Ehrhardt-Martinez,  K.  &  McKinney,  V.  (2009)  Examining  the  scale  of  the  behaviour 
energy efficiency continuum. eceee summer study, 2009, 217-223. 
IEE supported BEHAVE project 
http://www.econhome.net 

EN 

39 

   EN 

 
                                                 
low energy light bulbs) could trigger a behavioural change towards more complex and costly 
measures. The cost effectiveness of the Eco n'Home service was assessed at 0.15 € per kWh 
saved.  

Another  European  initiative71  brought  together  municipalities  from  all  new  Member  States 
with  support  from  organisations  in  Germany  is  already  bearing  direct  fruit.  For  instance, 
municipalities  are  using  the  PassivHaus  Planning  Package  developed  in  Germany  for 
estimation of scenarios of costs versus energy savings.  

Option A6: Training 

The  persistent  lack  of  qualified  building  workforce  (e.g.  technicians,  installers,  craftsmen, 
energy  managers,  engineers,  architects,  auditors)  is  recognised  as  one  of  the  main  non-
technological  and  non-financial  barriers  to  the  application  of  optimal  energy  renovations  or 
installation of appliances in buildings. Better initial and continuing education and training in 
energy efficiency matters is necessary not only to support the EU energy efficiency goals, but 
also to provide thousands of quality jobs across Europe, especially in SMEs.  

Possible  approaches:  The  EU  could  facilitate  continuous  cross-country  exchanges  of  best 
practices  on  how  to  embed  energy  efficiency  and  renewable  energy  systems  in  mainstream 
curricula as well as on how to establish long-term continuing education and training structure 
for the construction sector. The EU could support the creation of a platform for the exchange 
of  best  practices  and  support  the  development  of  the  needed  tools  (e.g.  framework  for  the 
voluntary  agreements,  monitoring  tools,  development  of  national  qualification  roadmaps, 
education and training curricula, accreditation and certification schemes) 

Impact:  A  recent  ex-ante  evaluation  study72  of  the  skill  needs  showed  that  in  2015,  about  
2.5  million  workers  will  be  engaged  in  the  improvement  of  energy  efficiency  and  the 
integration  of  renewable  energy  for  the  buildings  sector  only.  For  low  and  medium  skills 
groups  alone,  it  is  estimated  that  1.25  million  workers  need  to  be  trained  over  the  next  10 
years,  or  over  125,  000  annually.  The  figure  refers  to  jobs  being  created  or  retained  in  the 
building sector. Therefore, meeting the training and retraining needs would be crucial. This is 
also in line with the conclusion of the recent CEDEFOP study73. 

According to the study, there is currently no robust assessment of the impact of qualifying the 
workforce on the energy savings. With a conservative estimate that 10% of the energy saving 
potential in the building sector is dependant on the building workforce being fully skilled, the 
loss  of  energy  savings  in  case  of  an  unskilled  workforce  would  amount  to  78Mt  of  CO2  or 
€33.7 bn. 

The ex-ante study estimates the costs of training needs related to energy efficiency at €1.4 bn 
for  low  and  medium  skills  workers  (compared  to  the  €33.7  bn  costs  of  inaction).  Therefore 
there  will  be  initial  cost  for  Member  States  but  then  this  will  create  new  business 
opportunities  and  lead  to  social  benefits  in  medium  and  long-term.  The  EU  contribution 
would  be  much  lower  and  would  be  oriented  only at creating the right framework. Such an 

71 
72  

73  

IEE supported INTENSE project, review of 2,000 references in 37 articles and books 
Ecorys. 2010. Ex-ante evaluation of the initiative on the building workforce training and qualification in 
the field of energy efficiency and renewable energy within the Intelligent Energy Europe Programme 
(Study prepared for DG ENER) 
CEDEFOP. 2010. Skills for green jobs. http://www.cedefop.europa.eu/EN/Files/3057_en.pdf 

EN 

40 

   EN 

 
                                                 
initiate would have positive employment aspects from the point of view that it would allow 
for better qualified and matching to the new legal environment workforce.  

Comparing the options for the residential and services sectors 

The following table summarizes the outcomes of the analysis for each policy option.  

Evaluation criteria

Policy options  

Option A1: No additional EU action (BAU) 

Option A2: Voluntary commitments with commercial entities 

y
t
i
l
a
n
o
i
t
r
o
p
o
r
p

/
y
t
i
r
a
i
d
i
s
b
u
S

R 

R 

Option A3a: Additional stringent legal obligations for buildings 

NR 

Option A3b: Additional stringent legal obligations for products  
Option A4a: Technical assistance and risk sharing facilities 

Option A4b: Energy efficiency conditionality on the spending of 
public funds 
Option A5: Awareness  

Option A6: Training 

R 

R 

R 

R 

R 

s
s
e
n
e
v
i
t
c
e
f
f

E

= 

+ 

++ 

++ 

y
c
n
e
i
c
i
f
f

E

= 

++ 

e
c
n
e
r
e
h
o
C

C 

C 

+ 

NC 

L
L
A
R
E
V
O

= 

+ 

- 

+++  C 

+++ 

+++  +++  C 

+++ 

+++ 

++ 

+ 

++ 

++ 

++ 

C 

C 

C 

++ 

++ 

++ 

From the point of view of subsidiarity and proportionality only the option to set additional 
stringent  legal  obligations  for  buildings  (Option  A3a)  fails  the  test  because  of  its  strong 
interventionist  approach  into  an  area  that  is  of  national  and  even  local  competence.  The 
setting  up  of  an  additional  stringent  legal  obligations  for  products  (Option  B3b)  is 
justified  on  the  grounds  that  it  addresses  products  that  are  traded  at  the  internal  market  and 
intervention  at  MS  level  would  create  market  distortions.  The  options  of  voluntary 
approach, financial instruments and awareness and training (Options A2, A4a, A4b, A5 
and A6) respect the two principles because they do not aim to interact directly with the target 
group but to provide enabling framework and support the MS and various stakeholders. The 
inclusion of energy efficiency conditionality on the spending of public funds (Option A4b) 
is  also  in  line  with  the  principles  as  it  would  counter  the  proliferation  of  national  and  local 
approaches on public procurement that could present a barrier to competition. 

Majority of the proposed options are fully coherent with the existing EU energy, climate and 
social policies. In particular, the options on financing, awareness and training (A4a, A4b, 
A5 and A6) will be an important tool to support the uptake of the current legislative measures 
on buildings, products and increased share of renewables. The support for training (Option 
A6) would also contribute to Copenhagen process on vocational education and training, and 
would  complement  the  activities  of  the  European  Social  Fund  and  the  Lifelong  Learning 
Programme.  

However, setting of an additional stringent legal obligations for buildings (Option A3a) is 
not coherent with the recently achieved compromise for the recast EPBD and would require 
its amendment. Frequent changes to the legal framework would delay their implementation at 
Member States and local level and would increase the risk perception for investors and will be 
counterproductive.  Furthermore,  the  inclusion  of  energy  efficiency  conditionality  on  the 

EN 

41 

   EN 

 
 
 
 
 
 
 
 
 
spending  of  public  funds  (Option  A4b)  is  not  fully  in  line  with  the  existing  voluntary 
approach  adopted  in  two  Public  Procurement  Directives74  and  applied  in  the  Commission’s 
Green  public  procurement  initiative  and  the  recast  Energy  Labelling  Directive.  However, 
there  are  already  precedents  of  mandatory  public  procurement  for  efficiency  goods  at  EU 
level such as the Clean Vehicles Directive75 and the Energy Star Agreement which could be 
explored further.  

As regards effectiveness most of the options, with the notable exception of A1 (BAU), would 
pave the way towards reaching the objectives of increased renovation rates of buildings and 
higher uptake of efficient products.  

Mobilizing  financing  (Option  A4a)  would  bridge  an  important  gap  fro  the  realization  of 
energy  savings  measures  and  thus  would  unlock  significant  energy  savings,  i.e.  have  high 
effectiveness  (+++).  Better  targeting  of  a  public  spending  (Option  A4b)  would  have 
considerable  direct  (i.e.  higher  uptake  on  efficient  goods  and  buildings)  and  indirect  (i.e. 
market  transformation)  impact  and  that  is  why  its  effectiveness  is  evaluated  as  high  (+++). 
Option A3a which implies additional very stringent and detailed provisions on the rate and 
timing  of  renovations  at  EU  level  that  is  rated  as  moderately  effective  (++)  as  it  would 
certainly  bring  some  energy  savings,  however,  is  not  acceptable  from  subsidiarity  point  of 
view.  

The option on training (A6) would support the realization of the current policy framework 
and have the potential for unleashing the remaining potential. However, the EU value added 
in  the  approach  is  limited  and  thus  their  effectiveness  are  medium  (++).  Further 
strengthening  of  the  legal  framework  on  products  (Option  A3b)  would  lead  to  more 
savings  due  to  the  limitations  as  regards  the  complexity  and  size  of  products  and  hence  its 
effectiveness is evaluated also as medium (++). 

Measures  of  awareness  (Option  A5)  are  ranked  'low'  effective  (+)  as  at  EU  level  the 
possibilities for making wide ranging campaigns are rather limited. Options B2 on voluntary 
agreements also scores low (+) as regards its effectiveness for reaching the above mentioned 
objectives. This is because there is a lack of sanction mechanisms at EU level and thus there 
is high uncertainty regarding the realization of the commitments. 

As  regards  efficiency,  any  voluntary  commitments  (Option  A2)  would  focus  on  realizing 
cost-effective measures but the large number of small individual entities that could be part of 
the commitment could bring up the costs for monitoring, i.e. also medium efficiency (++). 

The  efficiency  of  setting  additional  products  requirements  (Option  A3b)  is  high  (+++) 
because  the  method  implies  that  only  cost-effective  requirements  are  set.  Also  the  existing 
experience  shows  that  the  administrative  costs  are  insignificant  compared  to  the  resulting 
savings and increased volumes of sales. Similarly, highly efficient (+++) is the mobilization 
of financing using technical assistance (Option A4a) because it ensure high leverage for the 
public  funds.  Applying  energy  efficiency  conditionality  to  the  spending  of  the  public  funds 
(Option A4b) is marked as medium efficient (++) as it would require increased costs at the 
time of purchase and higher administrative burden but lower operation costs.  

74 

75 

Directive  2004/18/EC  and  Directive  2004/17/EC  which  permit  for  certain  environmental  and  social 
considerations  to  be  taken  into  account  in  the  procurement  process  but  does  not  makes  them  a 
mandatory element. 
Directive 2009/33/EC 

EN 

42 

   EN 

 
                                                 
Measures on awareness (Option A5) would only focus on the improvement of programmes, 
the launch (not the full implementation) of new schemes, and the dissemination of knowledge. 
Their  efficiency  is  therefore  considered  as  medium  (++).  Similarly,  measures  on  training 
(Option  A6)  are  also  cost  effective  but  would  still  require  public  spending  that  would  be 
retuned  only  indirectly  from  increased  renovation  activities  and  tax  revenues,  i.e.  its 
efficiency is medium (++).  

Further  stringent  legal  requirements  on  buildings  (Option  A3a)  implies  high  initial 
investments  which  in  general  should  pay  during  the  lifetime  or  shorter  of  the  measures 
realized and hence are cost-effective but the approach could lead to some renovations being 
made  outside  of  the  normal  renovation  cycle  and  would  also  have  disproportionately  high 
impact  on  the  poor  segment  of  the  population  or  the  housing  associations.  Therefore,  the 
efficiency of the option is evaluated as low (+). 

EN 

43 

   EN 

 
6.2. 

Transport sector 

As  mentioned,  the  transport  sector  has  considerable  share  in  final  energy  use,  is  with  the 
highest projected growth amongst all final energy use sectors, and there is considerable cost-
effective savings potential untapped. Therefore, it is essential that it is addressed in any EU 
policy document related to energy efficiency. However, the concrete possibilities are analyzed 
in great detail in the Impact Assessment for the forthcoming Transport Write Paper. In order 
to provide consistent approach towards the sector no further discussion of individual options 
for the sector is provided in this IA. 

EN 

44 

   EN 

 
6.3. 

Industry sector 

Option C1: No additional EU action (business as usual scenario) 

There are several directives and initiatives/actions which address, together with other policy 
instruments, the existing failures concerning energy efficiency in general and in the industry 
sector in particular. The ETS aims at decreasing greenhouse gas emissions of energy-intensive 
installations  by  setting  a  cap-and-trade  system.  The  covered  installations  represent  close  to 
half  of  Europe’s  emissions  of  CO2,  and  include  the  power  and  manufacturing  (industrial) 
sector.  In  the  third  trading  period  starting  in  2013  practically  the  entirety  of  the  industrial 
sector will be covered by the ETS although a significant percentage of installations exposed to 
'carbon leakage' will be receiving emission allocations for free. The sectors judged at risk of 
carbon  leakage  are  estimated  to  account  for  around  77%  of  the  total  emissions  from 
manufacturing  industry76.  Additionally  due  to  relatively  high  transaction  costs  of  the  ETS 
combustion  installations  below  20MW  are  excluded  from  the  system.  There  is  more  than 
6000  of  such  installations  in  the  EU  representing  about  2.5%  of  CO2  emissions  of 
installations covered by the ETS.  

The  forthcoming  Industrial  Emissions  Directive77  aims  at  setting  requirements  for  industrial 
emissions and the energy-efficiency of large industrial installations, but the requirements on 
the latter element are not mandatory if the installations are within the ETS. 

The main barriers that prevent the full uptake of the remaining energy savings potential in the 
industry sector are the insufficient price signals and asymmetric information, particularly for 
SMEs.  In  addition,  SMEs  face  challenges  such  as  lack  of  financial  resources  and  human 
capital to implement the projects. 

Different  views  were  given  by  stakeholders  on  which  instruments  should  be  used  (ranging 
from  very  interventionist  to  provision  of  information  only).  However,  prevailing  majority 
asked for measures to increase the awareness for the SMEs.  

It is important to address this sector as the EEAP 2006 did not put forward any direct priority 
measures.  However  it  already  addressed  the  need  to  raise  the  awareness  of  industrial 
companies inter alia by promoting energy management schemes, developing training toolkits; 
and promoting projects under the Intelligent Energy Europe Programme, notably targeting the 
efficient use of energy in industrial SMEs. 

Based on the PRIMES projections for the sector, the analysis of the potentials, and the 
EEAP  and  NEEAPs  assessments  (as  discussed  in  sections  3.1  and  3.3)  it  can  be 
concluded  that  the  full  cost-effective  potential  would  not  be  uptaken  with  the  existing 
policy  framework,  even  though  the  industry  is  making  the  biggest  progress  from  all 
sectors  as  regards  energy  efficiency,  and  it  therefore  should  be  complemented  with 
additional  elements.  Any  further  measures  should  complement  the  existing  policy 
framework.  

76 

77 

These  sectors  include  about  100  categories,  ranging  from  mining  and  manufacturing  of  commodities 
(aluminium,  copper  etc),  food  (e.g.  fats,  alcohol,  fish),  pharmaceuticals  to  the  manufacturing  of  high 
tools,  engines,  domestic  appliances  etc).  Source:  http://eur-
value-added  goods 
and 
lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:L:2010:001:0010:0018:EN:PDF 
http://ec.europa.eu/environment/climat/emission/pdf/faq.pdf 
2010/75/EU 

(machine 

EN 

45 

   EN 

 
                                                 
Option C2: Establish voluntary commitments with industries 

Possible  approaches:  Voluntary  agreements  (VA)  or  Corporate  Agreements  with  specific 
industrial  sectors  could  be  developed  at  national  or  EU  level.  These  should  be  seen  as  a 
supportive  tool  for  the  industry  to  comply  with  the  targets  set  by  the  ETS,  but  without 
distorting the EU ETS.  

Impact: The existing experience with VA with industry shows good results in some countries 
(e.g. Netherlands, Finland, Denmark, Germany). For example, Denmark and the Netherlands 
have met their targets, respectively 4.6% absolute emissions reduction compared to 1988 and 
22.3%  efficiency  improvement  during  the  period  1989-2000.  Australia  and  Canada  have 
considerably  reduced  their  greenhouse  gas  emissions  (by  14%  with  the  Australia’s 
Greenhouse  Challenge)  with  completely  voluntary  programmes.  At  EU  level,  a  voluntary 
agreement  with  the  plastic  converters  industry  (with  consumption  of  around  14  TWh, 
comprised  of  about  50,000  SMEs)  is  currently  being  prepared  in  the  context  of  an  IEE 
project78.  It  is  estimated  that  about  14%  of  the  energy  consumption  of  the  subsector  can  be 
reduced over the period 2010 - 2020 in a cost-effective manner.  

The majority of the agreements are limited only to several countries and so far there was no 
successful voluntary agreement with industry at EU level. There is also the problem of 'free 
riders'  who  profit  from  the  benefits  of  the  agreements  but  would  have  achieved  the  savings 
anyway.  

It is difficult to determine the potential impact as it depends on many factors, including the 
stringency of the target and the energy consumption of the sectors included. If, for instance, it 
is  assumed  that  the  voluntary  agreement  leads  to  2%  efficiency  improvements  per  year, 
includes all industries and is implemented from 2012 then the final energy saving will be 26 
Mtoe in 2020 (or 38 Mtoe primary energy savings in 2020) and a reduction of 61 Mt CO2 in 
202079. 

As  regards  the  economic  impact,  the  agreement  itself  is  not  a  costly  process.  However, 
incentives  that  are  used  to  draw  sectors  into  the  VA  such  as  providing  knowledge 
infrastructure  and  energy  tax  exemption  will  lead  to  higher  costs.  There  are  also  costs  of 
monitoring.  The  cost  of  a  VA  depends  upon  its  structure  and  incentives.  As  an  indication: 
during the period 1989-2000 the costs for public bodies that organised the VA (MJA) in the 
Netherlands  amounted  to  €159m.  A  la rge  share  of  the  budget  went  to  subsidies  devoted  to 
raising awareness and the transfer of knowledge. If this example is extrapolated to the EU the 
cost for saving 2% of energy consumption is approximately €1.4 bn over the total period. 

78 

79 

IEE  project  EUPLASTVOLTAGE  'European  Plastics  Converting  Industry  Voluntary  Long-Term 
Agreement on Energy Efficiency' www.plasticsconverters.eu  
Ecorys, Ecofys and BioIntelligence. 2010. Study to Support the Impact Assessment for the EU Energy 
Saving Action Plan. This assumes that the VA are complemented by the 'threat', in case of failure, of 
regulatory  instruments  or  energy/greenhouse-gas  taxes  and  a  strong  negotiation  position  of  the 
authorities.  It  is  assumed  that  VA  results  in  8%  savings  in  2020,  with  foreseen  final  EU-27  energy 
demand from industry of 333 Mtoe in 2020. 

EN 

46 

   EN 

 
                                                 
Voluntary  agreements  in  industry  will  also  have  positive  impact  on  job  creation.  Using  the 
ACEEE  Energy  stimulus  jobs  calculator  the  net  employment  effect  of  2%  energy 
consumption reduction is estimated to be 80 000 by 202080. 

Option C3: Regulatory measures supporting the existing climate related legal tools 

Possible approaches: Several regulatory measures could be adopted by the Commission that 
would support the existing climate change requirements (under for example ETS and IPPC, 
where relevant) without contradicting to the basic principles of the current framework.  

Industry  uses  standardized  and  custom-made  equipment.  Some  of  the  standardized  one  is 
already  tackled  by  some  implementing  measures  (e.g.  electric  motors)  under  the  Ecodesign 
Directive. However, it appears that there remains a considerable cost-effective energy-saving 
potential for a number of products used in industrial process, such as large pumps or furnaces. 
This  approach  could  not  be  applied  to  the  custom-made  equipment  (such  as  machine  tools) 
but they could be addressed with a generic energy-efficiency requirement, which would then 
be operationalised by the European Standardisation Organisations.  

In general, it is believed, that industries are introducing energy savings measures as this is a 
measure to reduce the costs for production. Still, for several industries (e.g. highly-processed 
goods) energy is a minor cost factor therefore market failures persist. Hence, in addition to the 
setting  of  product-specific  requirements  another  measure  that  could  mobilize  the  uptake  of 
energy savings potential could be the setting of certain requirements for energy management 
(mandatory  independent  energy  audits  and  a  mandatory  energy  manger)  for  all  energy 
consumers  above  a  certain  threshold,  notably  large  companies.  For  SMEs  information  (net 
based  energy  audit  calculators)  and  assistance  (audits,  training)  manage  their  energy 
consumption could be envisaged.  

Thirdly,  product-specific  requirements  could  be  complemented  with  requirements  at  system 
level, as the way products are fitted within larger systems has a major impact on the energy 
efficiency. In this case the setting specific requirements at EU level could be difficult, as local 
conditions  matter  a  lot,  therefore  a  cooperation  with  European  Standardisation  Organisation 
could be envisaged. 

Impact:  As  an  example  it  is  estimated  that  setting  minimum  efficiency  requirements  on 
industrial  furnaces  could  bring  100  TWh  savings  annually  by  2020  (or  24  Mtoe  primary 
energy savings) which is comparable to the annual electricity consumption of Belgium81. The 
CO2 emissions reduction is 43 Mt. The setting of product-specific requirements is highly cost-
effective  as  significant  improvements  can  usually  be  achieved  with  readily-available 
technology (e.g. the fitting of industrial motors with variable speed drives). The forthcoming 
Regulation  640/2009  under  the  Ecodesign  directive  limiting  the  energy  consumption  of 
electric motors is expected to result by 2020 in annual electricity savings of 140 TWh (or 34 
Mtoe primary energy savings), and 60 Mt CO2 emissions reduction. The costs are negligible. 

There  are  positive  examples  from  the  application  of  energy  management  programmes.  For 
example, in Bulgaria, since 2004, all energy consumers with annual consumption above 3,000 

80 

81 

Ecorys, Ecofys and BioIntelligence. 2010. Study to Support the Impact Assessment for the EU Energy 
Saving Action Plan. Based on an energy price of €10/GJ final and a simple payback time for energy-
efficiency measures of five years 
Ibid footnote 58 

EN 

47 

   EN 

 
                                                 
MWh are subjects to obligatory energy efficiency studies/audits. The decrease of about 10% 
of energy intensity82 of industry since then can be attributed partly to such policy measures, 
although  it  was  primarily  driven  by  an  increase  in  the  price  of  energy.  In  Sweden  the 
government  encouraged  100  of  the  most  energy  intensive  companies  to  apply  energy 
management scheme83. It was expected that their managers are most aware of their energy use 
and  of  cost  reduction  opportunities.  Still,  new  investment  opportunities,  reducing  annual 
electricity consumption by 1 TWh, were identified at a total investment of SEK 1 bn. These 
investments were profitable, and in total less than 20% of the initial investments necessary to 
get the same amount of electricity from new wind- or nuclear power plants.  

The cost-effectiveness of putting in place energy-management schemes depends on the profile 
of the manufacturer (size, energy-intensity), and therefore any such requirements would need 
to  be  carefully  calibrated.  It  has  the  benefit  of  creating  locally-supplied  jobs/services.  The 
added value of requirements at 'system level' depends on whether they are able to provide a 
common framework which would assist manufacturers, while providing them with sufficient 
flexibility in implementing specific solutions. 

Option C4: Financial instruments 

Possible approaches: At present the EU ETS ensures that industrial companies with a net heat 
excess  of  20  MW  that  are  not  subject  to  the  Leakage  Directive  could  profit  from  realizing 
energy savings and that the least cost possibilities are used. Investment and/or operating state 
aid is possible for the realization of energy savings under strict conditions and some EU funds 
are  provided  to  mobilize  financing.  Therefore,  providing  further  financing  should  not  be  a 
priority and the option is excluded from further analysis. 

Option C5: Awareness and training (in particular for SMEs) 

Surveys among enterprises, in particular among SMEs, confirm that important market barriers 
hinder the realisation of cost-effective energy saving options84. One important barrier remains 
the lack of information and expertise about cost-effective energy saving possibilities and the 
high  transaction  costs  related  to  the  gathering  of  information.  Awareness  and  training 
measures  are  thus  essential  to  ensure  that  the  available  potential  is  actually  converted  into 
savings, that efficient equipment is bought and used correctly, that voluntary agreements are 
implemented effectively.  

Possible approaches: the EU could support awareness and training activities consisting of the 
following  measures:  (i)  empowering  multipliers  across  Europe,  such  as  enterprise 
associations, to act as one-stop-shops for businesses85; (ii) disseminating tools and guidebooks 
tailored  to  the  different  industry  sectors  (e.g.  online  benchmarking  tools  to  help  SME's 
compare  their  energy  consumption  with  their  peers'  and  take  appropriate  actions);  and  (iii) 

82 
83 

84 

85 

DG ENER. EU energy trends to 2030, 2009 update 
Swedish Energy Agency. 2009. Energy Management Systems – a tool for the continuous improvement 
of energy performance 
lately e.g. a survey undertaken by chambers of commerce of 12 Member States in the framework of the 
IEE supported project CHANGE, "Energy Efficiency in SMEs: Success Factors and Obstacles", 2009, 
see www.eurochambres.eu/change 
building on EU projects such as CHANGE 

EN 

48 

   EN 

 
                                                 
ensuring  European-wide  offer  of  high  quality  training  to  energy  managers,  building  on  the 
successful "European Energy Manager" training programme86. 

All three measures are "gate openers", enabling and empowering enterprises through targeted 
information and know-how to save energy and costs, often combined with improvements of 
quality of the product or the working conditions. The first and second measures are even more 
important  for  SMEs,  where  little  to  no  internal  capacity  and  expertise  exists.  The  EU 
intervention  should  be  limited  to  supporting  the  establishment  and  kicking-off  of  the 
measures. The Intelligent Energy Europe Programme (IEE) as well as the Enterprise Europe 
Network  (EEN)  could  play  a  leading  role  to  disseminate  the  measures  and  to  maximise  the 
outreach. The EU portal for tools and guidebooks already offers a large collection of material 
to be disseminated87.) 

Impact: Full-scale quantification of the impact of such measures is challenging: Voluntary by 
nature, based on attractive and solid experience, it could be expected that the impact would be 
good. There is long lasting experience with industrial energy audit programmes in some EU 
Member States, Finland in particular, has showed the effectiveness of energy audits88. 

For  example,  the  evaluation  of  the  "European  Energy  Manager  (EUREM)"  training 
programme  started  in  Germany  and,  supported  by  IEE,  and  currently  operating  in  12  EU 
countries, shows many more saving options with short payback periods than expected and a 
high implementation rate. 30% of the energy saving measures identified have a payback time 
of  less  than  two  years  and  80%  of  the  measures  are  implemented89.  EUREM  also  shows  a 
snowball effect: First, certified energy managers are not stopping after the realisation of one 
measure, but continue. Second, the courses continue and are expanded to more regions. The 
EUREM.NET  project, which transferred the training course to nine more countries, showed 
that  €  0.7  million  IEE-funding  could  trigger 
participating companies. This demonstrates that successfully implemented the leverage effect 
of  soft  measures  such  as  training  can  be  very  high.  It  is  estimated  that  triggering  the 
implementation of the proposed measures across the Member States would require € 80-100 
million over the next years. 

investments  of  about  €  90  million  in  the 

86 
87 
88 

89 

www.energymanager.eu 
www.iee-library.eu  
IEE supported project CHANGE 
http://www.motiva.fi/en/areas_of_operation/energy_auditing/overview_of_energy_auditing_in_finland 
IEE supported project EUREM.NET brochure (2009) "Proud to save", p. 9. 

EN 

49 

   EN 

 
                                                 
Comparing the options for the industry sector 

The following table summarizes the outcomes of the analysis for each policy option.  

Evaluation criteria

Policy options  

Option C1: No additional EU action (BAU) 

Option C2: Establish voluntary commitments with industries 

Option C3: Regulatory measures supporting the existing 
climate related legal tools 
Option C4: Financial instruments 

Option C5: Awareness and training 

y
t
i
l
a
n
o
i
t
r
o
p
o
r
p

/
y
t
i
r
a
i
d
i
s
b
u
S

R 

R 

R 

- 

R 

s
s
e
n
e
v
i
t
c
e
f
f

E

= 

+ 

++ 
or + 

y
c
n
e
i
c
i
f
f

E

= 

++ 

++ 
or + 

- 

- 

++ 

++ 

e
c
n
e
r
e
h
o
C

C 

C 

C 

- 

C 

L
L
A
R
E
V
O

= 

+ 

++ 

- 

++ 

The principles of subsidiarity and proportionality are respected for all options discussed. 
The  options  on  voluntary  commitments,  financing  and  awareness  and  training  (Options 
C2, and C5) provide for the EU to set a broad framework and establish supporting structures. 
As  regards  measures  that  relate  to  products  that  are  traded  at  the  EU  internal  market 
(Option  C3)  there  is  a  strong  case  for  setting  product  requirements  at  EU  level  in  order  to 
avoid  the  proliferation  of  national  requirements.  However,  in  the  case  of  energy 
management  and  system  requirements  (also  mentioned  in  Option  C3)  the  Commission 
would have to propose broad frames without being too prescriptive. 

All  options,  but  Option  C4,  proposed  are  coherent  with  the  current  framework.  These 
solutions proposed target the industrial sector parts of which is already covered by the ETS. 
However, the measures outlined are complementary to the ETS and reinforce it, leaving a lot 
of  flexibility  to  manufacturers  and  offering  assistance  to  them  in  implementing  certain 
solutions.  

As  regards  the  effectiveness,  for  the  voluntary  approach  (Option  C2)  there  is  a  lack  of 
strong  dissuasive  tool  that  would  limits  the  effectiveness  (i.e.  to  low,  +)  of  the  approach 
towards reaching the objectives. The product-specific requirements envisaged under Option 
C3  are  usually  highly  effective  but  as  only  a  part  of  products  used  in  industry  can  be 
addressed  in  practice  its  effectiveness  is  evaluated  as  medium  (++).  The  effectiveness  of 
energy  management  and  'system'  requirements  also  discussed  under  Option  C3  is 
estimated to be lower due to the complexity of setting an effective policy framework, i.e. low 
(+).  Due  to  the  non-binding  nature  of  awareness  and  training  initiatives  (Option  C5),  the 
fact that the information needs to be regularly updated and the limited financing at EU level 
the efficiency of the approach is medium. 

From the point of efficiency, the options on voluntary agreements and training and awareness 
(C2  and  C5)  are  rated  as  moderately  efficient  (++)  because  the  EU  costs  for  their 
implementation  are  relatively  low,  the  investments  will  be  paid  back  and  social  and 

EN 

50 

   EN 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
environmental impact could be positive. The product-specific requirements (Option C3) are 
efficient as they do not require the setting-up of supporting administrative structures (except 
for  market  surveillance)  and  usually  can  be  met  with  readily-available  technology,  i.e. 
medium efficiency (++). Energy management and system requirements do require the setting 
up of often complex administrative solutions and therefore their efficiency is low (+). 

EN 

51 

   EN 

 
6.4. 

Energy sector  

Option D1: No additional EU action (business as usual scenario) 

As mentioned in Section 4.1, three important areas need to be discussed as regards the energy 
sector:  1)  increased  efficiency  of  energy  production  through  increased  generation  efficiency 
and  utilization  of  recoverable  energy;  2)  more  efficient  operation  of  networks;  and  3) 
increased engagement of the sector in end-user energy efficiency.  

Transformation efficiency is already incentivized by the EU internal energy market (IEM) 
and  the  EU  emissions  trading  scheme  (ETS).  Both  frameworks  provide  price  signals  to 
reward  higher  efficiency  in  energy  production,  via  cost  savings  from  reduced  fuel  and 
emissions expenses. They have recently been strengthened90 and it is expected that they will 
in  the  future  trigger  more  investment  in  energy  efficiency.  The  new  Industrial  Emissions 
Directive (IED) would also have some impact, however, Member States have the possibility 
to choose not to apply energy efficiency requirements for units that are covered by the ETS, 
thus significantly limiting its importance for the efficiency of energy generation. 

In spite of these policy developments, at present, price incentives coming from the energy and 
carbon  markets  are  either  insufficient  or  not  suitable  to  overcome  the  barriers  to  improving 
the efficiency of the generation capacity. This is especially the case for the retrofitting or the 
retiring  of  old  and  inefficient  generation  plants.  The  higher  operation  costs  stemming  from 
higher  fuel  input  and  higher  CO2  emission  of  old  power  or  heat  generation  plants  are  still 
lower  than  the  needed  investment  cost  combined  with  the  lost  operating  income  during  the 
refurbishment  or  retiring  process.  This  leaves  important  energy  saving  potentials  un-
exploited. As a hypothetical case, if Europe were to retrofit its coal plants aged between 20-
30  years  to  improve  their  efficiency  by  only  3.5  percentage  points,  re-power  its  gas  fired 
boilers of the same age and ensure that all new coal plants are constructed according to BAT 
by 2020, the annual power sector emissions would fall by 29 Mt, equivalent to 12% of the EU 
ETS emissions reduction required by 2020.  

Some  of  the  remaining  potential  will  be  tapped  from  2013  onwards  in  phase  III  of  the  EU 
emissions trading scheme due to, inter alia, the tighter, gradually decreasing cap on emissions, 
the  use  of  benchmarking  based  on  the  most  emission  efficient  technologies  and  financing 
mechanisms  for  energy  efficiency.  However,  because  of  the  market  based  approach  that  it 
entails  it  is  not  possible  to  estimate  how  many  companies  will  take  advantage  of  the  new 
energy efficiency possibilities.  

The residual heat produced in energy generation, e.g. the recoverable energy, can be used in 
combined  heat  and  power  (CHP)  units  and  district  heating  and/or  cooling  solutions  (DHC). 
The CHP potential is addressed at EU level by the CHP-Directive and the ETS. The impact of 
the CHP-Directive has so far been limited and the share of CHP today is close to the levels 
already  reached  in  the  1990s.  This  is  because  the  Directive  lacks  strong  instruments  for  the 
CHP promotion. Current experience shows that the ETS alone is not sufficient to overcome 
regulatory  and  market  barriers  encountered  by  cogeneration,  and  have  created  additional 
obstacles, especially for new and expanding cogeneration operators. There is no evidence that 
the ETS will provide strong market signals for an increased penetration of CHP.  

90 

The third IEM package will be applied from March 2011 while the revised ETS-scheme introducing a 
tighter emission cap and commending higher CO2 allowance prices will start operation in 2013. 

EN 

52 

   EN 

 
                                                 
At  present,  there  is  no  EU  framework  that  specifically  promotes  DHC.  The  current  EU 
measures are scattered in a large number of different instruments, such as the recast EPBD, 
the  RES  Directive,  the  ESD  and  State  aid  guidelines,  but  do  not  amount  to  a  coherent  and 
targeted framework. The increased deployment of this highly resource efficient energy supply 
solution  is  hindered  by  systemic  and  complex  economic,  as  well  as  regulatory  barriers,  that 
needs to be tackled with a more integrated and comprehensive approach.  

Energy  companies'  role  in  reducing  the  energy  consumption  of  their  clients  is  covered  in 
the  Energy  Services  Directive.  However  the  provisions  are  in  many  respects  unclear;  they 
allow to different interpretations and so far proved to be ineffective in bringing about a more 
developed  energy  services  markets  throughout  the  EU.  The  split  incentives  market  failure 
reduces the willingness of energy companies to realize energy savings at their clients. Energy 
companies  dispose  of  important  information  about  the  energy  consumption  of  their  clients. 
This  commercial  information  could  make  them  an  important  actor  in  the  energy  savings 
market but they do not have stimuli to do so as this would mean less sales and revenues for 
them. 

The majority of the stakeholders consulted were in favour of further measures for the energy 
utilities,  including  stricter  requirement  on  them  to  invest  and  provide  energy  efficiency 
services.  Energy  utilities  were  also  encouraged  by  certain  stakeholders  to  invest  in  Best 
Available Technique (BAT) in their own installations. A lot of the stakeholders were of the 
opinion that cogeneration and district heating have to be further promoted.  

The EEAP pushed forward with the implementation of the CHP Directive, the establishment 
of a legal framework to promote the connection of decentralized generation (Third legislative 
package) and the development of Best Available Techniques for Energy Efficiency. 

Based  on  the  PRIMES  projections  for  the  two  sectors,  the  analysis  of  potentials  and 
challenges, and the EEAP and NEEAPs assessments (as discussed in sections 3.1 and 3.3) 
it can be concluded that the focus should be placed on measures that lead to increased 
retrofit  or  replacement  of  the  existing  energy  generation  capacities,  increased  use  of 
recoverable energy, via cogeneration and district heating, and ensure better engagement 
of energy utilities in energy savings at the demand side. Actions to prioritize increased 
network efficiency should also be considered. It is essential that any proposed measures 
are in line and support the existing policy mix. 

Option D2: Voluntary commitments  

Possible approaches: Energy utilities could be engaged on a voluntary basis to improve the 
efficiency of generation, transformation and also to support their consumers for carrying out 
energy  savings  measures.  Commission  could  provide  recognition  and  promotion  of  their 
efforts,  support  for  the  dissemination  of  best  practices  and  also  develop  guidelines  and 
voluntary standards that would support the utilities in their commitment. Member States could 
also offer preferential fiscal conditions and financial support, where appropriate, easier access 
to environmental permits and technical expertise.  

Impact: Certainly some cost-effective energy efficiency improvements will be steered by such 
voluntary agreements. Limitation to this approach is the lack of strong incentives at EU level 
to  encourage  their  participation  or  threat  of  further  legal  requirements  if  the  targets  are  not 
met. However, the sector is easy to cover and engage: the number of major energy companies 
in the EU is small, they have high media exposure, and could gain trust in their clients and 

EN 

53 

   EN 

 
new ones by promoting a positive image. Transparency and accountability would be essential 
for  success  of  such  agreements.  The  administrative  costs  would  be  low  as  the  companies 
would have the information and resources, and the monitoring of their efforts can be done by 
the civil society. 

Option D3: Regulatory instruments 

Option D3a: Generation efficiency 

Possible  approaches:  For  new  generation  capacity,  regulation  could  be  proposed  to  ensure 
that  only  capacities  that  satisfy  the  performance  requirements  of  at  least  the  best  available 
technologies  (BAT)  are  built.  This  can  be  done  by  mandating  the  benchmarking  of  new 
electricity  and  heat  production  facilities  against  BAT  requirements  by  the  competent 
authorities. As regards existing generation capacities, the competent authorities could be made 
responsible  to  periodically  check  permit  conditions  against  BAT  requirements  and  take 
measures, if they find that the energy efficiency of a facility significantly lags behind certain 
benchmarks.  Such  obligations  could  also  require  that  when  heat  load  exists,  the  new 
capacities should also include co-generation units. 

Impact: Such requirements could bring some energy use and CO2 emissions reductions91. For 
example, if 50% of the total fossil-fuel capacity is to be replaced/built until 2020 assuming an 
average of 10% higher energy efficiency in 2020, total savings of 43 Mtoe in 2020 and 86 Mt 
CO2 emissions reduction could be achieved. Due to the higher efficiency of the power plants 
and to rising energy prices, the extra investment in new power plants is assumed to be cost-
effective. However, the time for return of the investments would depend significantly on the 
primary energy and CO2 emissions permit prices and under the current conditions it may not 
be short enough for the energy companies. The administrative costs are estimated to be low as 
well as the employment impact.  

Option D3b: Higher energy recovery from generation (i.e. promotion of cogeneration -
CHP, and district heating and/or cooling - DHC) 

Possible approach: Strengthened regulatory framework could support the use of residual heat 
produced in energy generation processes. It should be designed to increase the uptake of the 
potential  and  limit  the  remaining  administrative  barriers  (e.g.  preventing  the  access  to  heat 
and electricity networks) and supporting the investments in the infrastructure. This framework 
could  include  requirements  for  integrated  energy  demand  and  infrastructure  planning  by 
national, regional or local authorities, and could contain specific timelines and targets and for 
the  development  of  CHP  and  DHC  at  the  EU  and/or  national  level.  Furthermore,  the 
possibility  for  introduction  of  specific  support  schemes  and  funding  schemes,  as  well  as 
market incentives, such as the extension of an energy saving obligations schemes on CHP and 
DHC could be studied.  

Impact: As regards cogeneration, additional economic potential is around 350 TWh electricity 
output  from  cogeneration.  Assuming  that  this  economic  potential  is  gradually  realized  by 
2020, this could lead to additional 15-20 Mtoe/p.a. primary energy savings in 2020 and 35-50 
Mt/p.a.  avoided  CO2  emissions.  Depending  on  the  stringency  of  the  forthcoming  policy 

91 

Ecorys, Ecofys and BioIntelligence. 2010. Study to Support the Impact Assessment for the EU Energy 
Saving Action Plan 

EN 

54 

   EN 

 
                                                 
instruments  and  the  availability  of  strong  price  signals  possibly  from  20%  to  80%  of  this 
potential could be tapped.  

DHC  provides  the  same  comfort  temperature  to  buildings  with  less  primary  energy 
consumption, and thus CO2 emissions, than individual heating and cooling. Gas-CHP  based 
district heating typically uses three times less primary energy than an individual building heat-
only-boiler; a coal-based district heating system will save at least half of the coal needed for 
the  same  temperature  level  with  individual  coal-fired  boiler.  District  heating  with  waste 
incineration  represents  almost  zero  primary  energy  consumption.  The  higher  energy 
efficiency  of  DHC  translates  into  lower  CO2  and  other  emissions  than  the  conventional 
sources.  For  example,  at  present  the  electric  heating  leads  to  850  g  CO2  being  emitted  per 
kWh92. In Helsinki, due to the district heating system, one kWh heat leads to only 272 g CO2 
emissions.  

The  increase  of  the  CHP  and  DHC  would  require  significant  initial  investments.  These  in 
general are cost-effective and justified on the grounds of the overall benefits to the society but 
would  still  be  a  barrier  and  possibilities  for  their  leverage  should  be  studied  prior  to  any 
concrete proposal in this direction.  The measures would aim at lower administrative burden 
for these installations than at present. The job creation impact would not be significant. 

For  example,  the  cost  of  installing  modern  energy  efficient  district  heating  and  cooling 
systems  based  on  cogeneration  can  have  a  relatively  short  pay-back  time  (6-8  years).  A 
medium-sized  district  heating  system  based  on  a  state-of-the-art  biomass  CHP  Plant  (with 
installed  capacity  of  6-7  MWth,  1-2  MWel)  requires  an  investment  of  about  €7-8  mln 
investment for the plant and €15-16 mln for the  grid. However, the 8-10-year timeframe may 
still be considered too long for certain low-capitalized commercial operators on the liberalized 
markets,  and  may  represent  a  barrier  in  the  absence  of  appropriate  regulatory  framework 
bringing  about  adequate  economic  signals  as  regards  the  true  societal  value  of  this  highly 
efficient and environmentally friendly end-use supply solution.  

Option D3c: Increased role of energy regulators  

The Third Internal Gas and Electricity Market Package provides for a general objective of the 
national  regulatory  authorities  (NRAs)  to  promote  energy  efficiency  as  regards  gas  and 
electricity  93. No specific tasks or powers are however given to the NRAs to implement this 
general  objective.  As  regards  heat  network,  a  large  portion  of  Europe’s  existing  district 
heating system is old and in need of efficiency improving investment but there are no specific 
tasks conferred to NRAs in this regard. 

It  could  be  proposed  that  NRAs  should  have  a  clear  specific  legal  obligation  to  take  due 
regard  of  energy  efficiency  in  their  decisions  and  monitoring  of  the  management  and 

92 
93 

Average emissions calculated on the EU overall fuel mix and 40% efficiency of thermal production. 
See Article 36(d) of Directive 2009/72/EC. In addition, concerning public service obligations, both the 
Gas  Directive  2009/73/EC  in  Article  3(8)  and  Article  3  (11)  of  the  Electricity  Directive  2009/72/EC 
provide  for  Member  States  or  the  regulatory  authority  to  "recommend"  that  electricity  and  gas 
undertakings  should  optimise  the  use  of  gas  and  electricity  for  example  by  providing  energy 
management  services,  developing  innovative  pricing  formulas  or  introducing  intelligent  metering 
systems or smart grids where appropriate. The provisions do not however create any legal obligation on 
the  Member  States  nor  the  NRAs.  Regarding  TSOs,  the  Gas  Directive  only  states  in  Article  13  and 
Article  12  in  the  Electricity  Directive  that  the  TSOs  need  to  operate  the  network  as  an  efficient 
transmission.  For  the  distribution,  Article  25  in  both  the  Gas  Directive  and  Electricity  stipulates  that 
each DSO shall take due regard to energy efficiency for their operation of the distribution network. 

EN 

55 

   EN 

 
                                                 
operation of the infrastructure. Energy regulator could be granted specific tasks and powers to 
give  priority  considerations  to  energy  efficiency  in  their  network  regulations,  tariffs  setting, 
giving appropriate allowances for cost recovery and investments. This would include ensuring 
that all possibilities for cost-effective improvements of the grid are implemented. In addition, 
smart  grids  and  intelligent  metering  systems  that  ensure  peak  shaping  possibilities  and 
optimize the energy demand and supply should be promoted.  

Impact: With the increased role of NRAs generation and transmission losses can be reduced 
and  smart  grids  promoted.  In  addition,  higher  tariffs  could  create  price  signals  for  energy 
efficiency improvements. 

in  electricity 

Losses 
in  2008  for  EU27 
(corresponding to 17.6 Mtoe and 36 Mt CO2eq). If energy regulators could reduce these losses 
by 5% this would lead to energy savings of only 0.9 Mtoe (1.8 Mt CO2eq) in 2020. 

transmission/distribution  amount 

to  6.4% 

However,  more  significantly  more  savings  are  possible  through  innovative,  e.g.  smart  grid 
technologies and smart meters. It is estimated that Smart Grids could reduce almost 9% of the 
EU  annual  primary  energy  consumption  of  the  energy  sector  in  2020  which  equals  to  37.2 
Mtoe  or  148  TWh  of  electricity94.  Based  on  average  prices  for  electricity  in  2010,  this 
amounts almost €7.5 bn/year of saving. Furthermore, the Smart 2020 95 study calculated that 
Smart Grids could reduce global emissions by 15%. The EPRI 200896 expects Smart Grids to 
reduce nearly 9% of the total domestic carbon emissions generated by the U.S. power sector 
in 2006.  

This  option  could  lead  to  higher  transmission  or  distribution  tariffs.  The  tariffs  could  be 
increased  only  until  certain  level  as  very  high  energy  prices  would  have  negative  social 
impacts  and  slow  down  the  economy.  Still,  depending  on  the  level,  this  could  incentivize 
energy  generation,  manufacturing  industry  and  some  companies  in  the  tertiary  sector  to 
implement energy efficiency improvements. Because of the relatively low price elasticities in 
the residential sector small increase in energy prices would not lead to significant investments 
in  energy  savings  measures.  The  increased  role  of  energy  regulators  would  also  require 
certain increase of staff numbers but it is unlikely that this would be a significant burden to 
their budgets. 

Option D3d: Energy companies' role in energy savings of their clients 

Possible  approaches:  A  requirement  could  be  set  on  certain  energy  companies  to  realize  a 
fixed  amount  of  energy  savings  at  their  clients  in  order  to  encourage  investment  in  energy 
efficiency solutions.  

Several  approaches  are  possible  depending  on  the  level  of  harmonisation  and  the  choice  of 
design for the main element of the scheme. The obligation could be introduced as an EU-wide 

94 

95 

96 

Bio  Intelligence  Service.  Impacts  of  Information  and  Communication  Technologies  on  Energy 
Efficiency,  Final  Report.  September  2008.  Supported  by  the  European  Commission  DG  INFSO. 
ftp://ftp.cordis.europa.eu/pub/fp7/ict/docs/sustainable-growth/ict4ee-final-report_en.pdf. 
GeSI and the climate Group. SMART 2020. Cited at: 
http://www.gesi.org/LinkClick.aspx?fileticket=tbp5WRTHUoY%3D&tabid. 
EPRI  2008.  Electric  Power  Research  Institute  (EPRI).  The  green  grid:  Energy  savings  and  carbon 
emissions  reductions  enabled  by  a  smart  grid.  Palo  Alto,  California,  United  States:  EPRI,  accessed 
November 
2009. 
http://www.smartgridnews.com/artman/uploads/1/SGNR_2009_EPRI_Green_Grid_June_2008.pdf. 

EN 

56 

   EN 

 
                                                 
scheme or as a mandatory requirement for each Member State to set such scheme with certain 
minimal EU level harmonization. Some studies97 suggest that the second approach could be 
more  productive  as  nationally  determined  scheme  could  possibly  better  match  the  specific 
national  circumstances.  To  ensure  coherence  with  the  EU  internal  energy  markets  certain 
elements would need to be harmonized. These for instance are: targeted consumption sectors 
and  companies,  common  rules  for  counting  the  savings  and  their  verification,  rules  for 
trading,  if  any.  In  addition,  consistency  of  such  a  scheme  with  the  EU  emissions  trading 
schemes is essential (e.g. it shall not be possible to meet the ETS obligations using tradable 
white certificates produced as a result of the schemes). 

At  present,  such  schemes  already  exist  in  five  Member  States,  i.e.  the  UK,  France,  Italy, 
Denmark  and  the  Flanders  region  of  Belgium.  Reductions  of  2.3%  to  5.6%  of  final  energy 
consumption  have  been  realized  by  the  energy  companies  concerned  (typically  suppliers  or 
distributors) over the duration of the various schemes98. Energy obligation schemes also exist 
in  a  number  of  USA  States.  Encouraged  by  the  success  stories,  several  Member  States  are 
planning  the  introduction  of  energy  savings  obligations  or  to  run  pilots  (these  include 
Bulgaria, Germany, the Netherlands, Portugal, Poland, and Romania). 

Impact: The existing schemes proved that energy saving obligations are an effective tool for 
realizing energy efficiency measures. When energy consumption starts to saturate the interest 
of  energy  companies  will  increasingly  focus  on  service  market.  The  EU  framework  could 
pave  the  way.  Savings  potential  at  EU level estimated with a conservative savings target of 
4% of final energy consumption, based on an average savings targets of the current national 
schemes, would yield up to 46 Mtoe of end-energy savings if all end-use is counted, or 24–34 
Mtoe, if only the residential, the services and the non-energy intensive industrial sectors are 
included. A more ambitious, but still realistic, target of 6% of primary energy savings, based 
on a wider roster of eligible sectors, would yield more ambitious savings in the range of 109 
Mtoe in 2020. 

Evidence  suggests  that  creating  incentives  to  encourage  energy  efficiency  action  by  energy 
companies  is  very  cost-effective  triggering  investments  in  energy  efficiency  in  the  range  of 
about  €1  bn  in  the  bigger  member  states  such  as  France,  Italy  and  UK   99,100.  The  cost  of 
compliance of the realised programs can be put in the range of  1 - 3 Eurocent per kWh  for 
companies, while the cost for households is estimated to be only €2.5 per fuel bill per year for 
households. 

The existing schemes create almost no extra costs for the government as they are in general 
completely  financed  by  either  energy  prices  or  grid  charges,  or  if  certification  and  trading 
exist  by  a  financial  charge  per  certificate  given101.  The  cost  for  the  UK  government  is  a 
£330,000  per  year  (or  less  than  0.3%  of  the  budget  of  the  authority  administering  the 
scheme102),  in  France  –  approx.  €700,000  per  year.  Ho wever,  in  Italy,  where  trading  of 

97 
98 

99 

100 
101 

102 

For example: JRC. 2009. Energy Savings and Tradable White Certificates 
Ecorys, Ecofys and BioIntelligence. 2010. Study to Support the Impact Assessment for the EU Energy 
Saving Action Plan 
IEA. 2009. Progress with implementing energy efficiency policies in the G8, citing Waide & Buchner, 
2008 
Lees, 2007 
Harmelink M., Blok K. Chang M., Graus W. and S. Joosen. 2005. Mogelijkheden voor versnelling van 
energiebesparing in Nederland, Ecofys rapport in opdracht van Ministerie van Economische zaken 
Based on administrative cost for EEC-1 and total expenditure on energy efficiency for EEC-2. 

EN 

57 

   EN 

 
                                                 
savings  certificate  is  an  essential  part  of  the  system,  the  costs  are  slightly  higher,  i.e.  in  the 
range of €1 mln per year 103. Overall, total administrative costs of around 0.002 Eurocent per 
kWh can be assumed which has a negligible impact on power prices (Harmelink et al., 2005).  

Such scheme(s) would also open up new opportunities for businesses in an emerging markets, 
creating a range of high-skilled jobs, and securing accelerated access take-up of innovations. 
It would incentivize the development of a market for energy efficiency services.  

Some  of  the  possible  drawbacks  of  such  scheme(s)  could  include  negative  redistribution 
impact, double counting, additionally. The EU has an important role in drawing the minimum 
design requirements that would tackle these deficiencies. Requirement to implement a given 
proportion of the energy efficiency improvement measures for 'energy poor' households (e.g. 
50%  in  the  UK)  would  ensure  that  there  is  a  positive  direct  redistribution  impact  for  low 
income households. Effective verification and monitoring mechanisms would guarantee that 
additional  savings  to  business  as  usual  are  achieved  and  no  double  counting  occurs.  The 
proper  selection  of  participating  sectors  would  avoid  possible  overlaps  with  existing 
instruments, such as ETS104, the green certificates or industrial permitting procedures.  

Option D4: Financial instruments 

Possible approaches: At present the EU ETS ensures that energy generation companies with a 
net heat excess of 20 MW could profit from realizing energy savings and that the least cost 
possibilities  are  used.  Investment  and/or  operating  state  aid  is  possible  for  energy  savings, 
renewable energy sources and for cogeneration under strict conditions. Also, in many cases, 
these  companies  could  leverage  funding  on  commercial  basis.  Additional  EU  support  for 
companies above 20 MW would contradict the existing policies and would divert funds from 
the sectors that face much bigger challenges in finding the initial investments (e.g. buildings, 
urban  mobility).  However,  support  for  small  distributed  generation  and  sustainable  urban 
generation projects could be provided. The modalities of this support were already discussed 
under  Option  A4a  (Technical  assistance  and  risk  sharing  facilities,  page  36)  and,  to  avoid 
repetition,  would  not  be  discussed  again.  As  a  result,  the  option  is  excluded  from  further 
analysis. 

Option D5: Awareness and training (in particular focusing on the promotion of energy 
services companies) 

The  practice  shows  that  most  of  the  energy  companies  are  well  aware  and  trained  of  the 
possibilities  for  energy  efficiency  improvements.  Therefore,  financing  at  EU  level  of  such 
projects  does  not  seem  good  investment  of  taxpayers'  money.  The  situation  is  completely 
different for the final consumers who in many cases are not well aware about the possibilities 
but this aspect has been tackled under Sections 6.1 (Residential and services sectors) and 6.3 
(Industry  sector).  It  could  also  be  strongly  promoted  by  the  energy  companies  if  energy 
obligation (Option E3d) is imposed on them. 

Specific subsector that would require additional support in terms of information, guidelines, 
exchange  of  best  practices  is  the  one  of  the  energy  services  companies  (ESCOs).  ESCOs 

103 
104 

JRC. 2009. Energy Saving Obligations And White Certificates 
The possible negative effects on carbon and green certificate markets of such a scheme if coupled with 
trading  of  savings  certificates  (white  certificates)  were  analyzed  in  details  in  NERA  Economic 
Consulting. 2005. Interactions of the EU ETS with Green And White Certificate Schemes 

EN 

58 

   EN 

 
                                                 
deliver energy efficiency improvement measures in a user's facility and accept some degree of 
financial  risk  by  tidying  part  or  all  of  their  payment  on  the  achievement  of  savings.  These 
companies  could  serve  as  an  important  interlocutor  between  the  energy  utilities  (even  some 
utilities are developing ESCOs subsidiaries) and the end-users.  

Possible  approaches:  Despite  the  potential  for  energy  services  the  market  development  of 
such services is still poor. Considering the significant heterogeneity of market situation within 
EU-27, the EU value added is in supporting capacity building and defining clear EU energy 
efficiency services concept and approaches. 

The EU could define clearer common definitions and possible harmonized approaches such as 
pan-European  standard  model  processes  for  e.g.  the  selection,  the  procurement,  the 
development  or  the  verification  and  measurement  of  energy  savings.  This  would  ensure  the 
delivery  of  higher  quality  services  in  Europe  and  it  would  avoid  confusion  and  ease  the 
transfer  of  best  practices  across  Europe.  The  EU  could  also  support  the  creation  of  specific 
national (or regional) business support structures in the field of energy efficiency services. In 
addition the EU could promote the setting up of local project support entities (e.g. “one stop 
shop”) that could offer a wide range of services in order to assist project owners implement 
energy savings in their buildings.  

Impact: Energy efficiency services have a great role to play in helping the market tap into the 
large  reservoir  of  energy  savings  potential.  So  far,  the  public  sector  is  where  energy 
performance contracts have been the most used. For example, the city of Berlin in partnership 
with Berlin Energy Agency has used energy performance contracting since 1996. As a result 
so far over 1300 public buildings have been upgraded, delivering carbon reductions of nearly 
68  kt/a  and  cost  savings  of  about  €10,5  millions  or  26%  of  the  baseline  energy  cost  of  the 
buildings  involved105.  Furthermore,  the  IEE  project  “ClearSupport”  has  shown  that  the 
concept  of  Project  Support  Facilities  is  relevant  for  bridging  the  gap  that  exists  between 
building  owners  and  financing  sources.  The  project  established  facilities  to  assist  municipal 
and residential building owners in 5 new MS, with more than 200 renovation projects being 
identified. 

The European market potential for ESCOs has indeed been estimated to be at least €5-10 bn 
per annum and €25 bn in the long-term. The annual amount of energy savings that could be 
achieved through energy efficiency services is estimated to represent 10 to 30% of the overall 
energy  savings  potential  in  Europe106.  As  regards  the  distribution  of  the  costs  and  benefits 
over  time  for  the  different  parties  of  the  contract,  at  the  initial  stage  until  the  investment  is 
paid back the owner of the renovated building will only profit from better comfort levels but 
not  from  reduced  energy  bills.  The  ESCO  will  have  to  make  the  initial  investment  but  will 
have a stable profit over a number of years.  

105 

106 

C40, Best practices - Buildings - Berlin, and Good Practice Examples: Berlin, European Energy Service 
Initiative (EESI) project co-financed under the IEE programme, www.energy-service-initiative.net and 
http://www.c40cities.org/bestpractices/buildings/berlin_efficiency.jsp 
IEE supported project ChangeBest 

EN 

59 

   EN 

 
                                                 
Comparing the options for the energy sector 

The following table summarizes the outcomes of the analysis for each policy option.  

Evaluation criteria

Policy options 

Option D1: No additional EU action (BAU) 

Option D2: Voluntary commitments 

Option D3a: Generation efficiency 

Option D3b: Higher energy recovery from generation 
(cogeneration, district heating and cooling) 
Option D3c: Increased role of energy regulators  

Option D3d: Energy companies' role in energy savings of their 
clients 
Option D4: Financial instruments 

Option D5: Awareness and training (in particular focusing on 
the promotion of energy services companies) 

y
t
i
l
a
n
o
i
t
r
o
p
o
r
p

/
y
t
i
r
a
i
d
i
s
b
u
S

R 

R 

R 

R 

R 

R 

- 

R 

s
s
e
n
e
v
i
t
c
e
f
f

E

= 

+ 

y
c
n
e
i
c
i
f
f

E

= 

++ 

++ 

++ 

++ 

++ 

+++  +++ 

- 

+ 

- 

++ 

e
c
n
e
r
e
h
o
C

C 

C 

NC 

C 

C 

C 

- 

C 

L
L
A
R
E
V
O

= 

+ 

- 

++ 

++ 

+++ 

- 

++ 

All  options  are  in  line  with  the  principles  of  subsidiarity  and  proportionality.  Further 
regulatory requirements (Options D3a, D3b, D3c, D3d) are justified on the grounds that it 
would  create  level  playing  field  for  all  companies  operating  in  the  EU.  Legal  measures  to 
address the potential for energy recovery from generation (option D3b), increased role of 
energy regulators (Option D3c) of energy companies as regards realizing savings at their 
clients (Option D3d) will set the general framework but will also provide enough flexibility to 
Member States to take into account the local conditions. Promoting voluntary commitments, 
financial instruments, and awareness and training (Options D2 and D5) also respect the 
two principles because they aim at supporting MS and various stakeholders in achieving the 
policy objectives. 

As  regards  coherency,  all  options  but  D3a,  are  fully  in  line  and  complementary  to  the 
existing policies. Any further legal measures addressing generation efficiency (Option D3a) 
are clearly not coherent with the ETS and the new IED as regards capacities covered by two 
Directives.  However,  with  the  growing  number  of  small  generation  capacities,  further 
regulatory  instruments  to  ensure  their  high  efficiency  could  be  studied.  As  regards 
effectiveness most of the options, with the notable exception of D1 (BAU), would pave the 
way towards reaching the objectives for the sector. The highest savings can be expected from 
the increased role of energy companies in delivering energy savings at demand side (Option 
D3d),  i.e.  high  effectiveness  (+++)  because  of  the  significant  remaining  possibilities  for 
improvement.  Still,  the  effectiveness  would  depend  on  the  stringency  of  the  obligation 
schemes.  Based  on  the  calculated  impacts,  the  effectiveness  of  options  on  higher  energy 
recovery from generation and increased role of energy regulators (Options D3b and D3c) 
is evaluated as medium (++). The options on voluntary commitments and awareness and 
training  (Option  D2  and  D5)  would  be  beneficial  but  due  to  their  voluntary  nature  and 
uncertainty of the results their effectiveness is measured as low (+). 

EN 

60 

   EN 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
The  efficiency  of  the  option  on  increased  role  of  energy  companies  in  delivering  energy 
savings  at  demand  side  (Option  D3d)  is  the  highest  (+++)  because  small  increase  in  the 
energy  bills  would  lead  to  the  utilization  of  significant  cost-effective  potential.  The 
administrative  burden  is  considered  at  insignificant.  Measures  that  require  significant  bulky 
upfront investments in energy generation capacities or networks (Option D3b and D3c) are 
very  capital  intensive  and  even  though  the  investments  are  cost-effective  their  efficiency  is 
evaluated as medium (++). The options on voluntary agreements and training and awareness 
(D2  and  D5)  are  rated  as  moderately  efficient  (++)  because  the  EU  costs  for  their 
implementation  are  relatively  low,  the  investments  will  be  paid  back  and  social  and 
environmental impact could be positive. 

EN 

61 

   EN 

 
7. 

CONCLUSION: OUTLINE OF THE PREFERRED NEW POLICY FRAMEWORK 

The analysis discussed, first, which is the best way to approach energy efficiency at EU level 
and,  second,  what  types  of  EU  policy  instruments  are  needed  to  support  Member  States  in 
realizing the savings potential.  

Three  main  policy  alternatives  were  analyzed:  (i)  setting  only  targets  and  leaving  it  to 
Member States to develop the policy mix needed; (ii) no targets, but developing detailed EU 
policy  instruments,  inviting  Member  States  to  implement  and/or  supplement  them;  (iii) 
comprehensive policy framework at Member States' level (including objectives/targets), while 
EU develops policy instruments to support Member States. 

Afterwards for each energy consumption sector with significant potential (i.e. residential and 
tertiary, transport, industry, energy sectors) various types of policy instruments were analyzed 
(i.e.  voluntary,  regulatory,  financing,  awareness  and  training)  in  order  to  identify  whether 
their  application  at  EU  level  would  be  needed  so  that  the  specific  policy  objectives  for  the 
sectors are met. 

Preferred general policy approach 

It is essential that a coherent policy mix is developed at Member State level with clear, simple 
and  measurable  objectives.  Well  coordinated  measures  at  EU  level  could  provide  Member 
States with the needed framework on which to further develop their efforts. The Commission 
could  propose  individual  measures  for  each  sector  that  would  provide  for  a  common 
framework and also support Member States in developing their own tools.  

This approach would lead towards the realization of the cost-effective potential and address 
major  barriers  such  as  policy  fragmentation,  lack  of  political  commitment  and  policy 
predictability.  It  would  ensure  that  the  possible  synergies  between  the  various  policies  are 
explored.  

The  Commission  could  in  addition  study  the  best  approach  to  objective  setting  and  the 
interaction  of  such  objectives  with  other  policy  instruments  (especially  climate  targets).  It 
could propose the establishment of NEEAPs as a key document. A strengthened and extended 
(to  all  supply  and  demand  sectors)  National  Energy  Efficiency  Action  Plan  could  give  high 
political visibility to energy efficiency and drive the process. Furthermore, in order to increase 
the engagement of local authorities it is suggested that the successful model of the Covenant 
of  Mayors  supported  by  the  Commission  is  continued  to  keep  it  growing  and  realising  its 
potential. 

Preferred way forward for the residential and services sectors 

The analysis concluded that to address the challenge of insufficiently high renovation rates of 
buildings further strengthening of the current policy framework on buildings (Option A3a) is 
not necessary as the recent modification (especially of the EPBD) is already ambitious and the 
focus  should  be  on  its  implementation.  This  is  not  the  case  for  products  requirement.  To 
increase the uptake of energy efficient products, the scope of Ecodesign and Energy Labelling 
could be further extended to cover more product groups, especially in the tertiary sector, and 
also some construction materials (e.g. windows) (Option A3b). This would further support the 
establishment of markets for energy efficient products and materials. 

Measures on financing would be essential to tackle the serious limitations on the availability 
of liquidity for high upfront costs and also to some extent the landlord-tenant problem. The 
limited  financial  resources  at  EU  level  could  be  particularly  targeted  at  providing  technical 

EN 

62 

   EN 

 
assistance  to  Member  States  and  local  authorities  but  also  provide  risk-sharing  and  project 
guarantee  support  (Option  A4a).  With  the  economic  crisis  it  cannot  be  expected  that 
significant additional public funds would be dedicated to energy efficiency and it is therefore 
essential that these instruments aim at better engagement  of third party financing. Measures 
that could further support the engagement of private investors are energy savings obligation 
on energy utilities (Option D3d) and support for the development of energy service companies 
(ESCOs)  Option  D5).  Furthermore, 
introduction  of  certain  energy  efficiency 
conditionalities for public funding support is considered beneficial (Option A4b). 

the 

The  persistent  lack  of  a  qualified  building  workforce  due  to  the  undeveloped  character  of 
markets is recognised as one of the main non-technological and non-financial barriers to the 
deployment of optimal energy renovations or installation of appliances in buildings. It could 
be tackled at EU level by supporting Member States with tools (e.g. development of national 
qualification  roadmaps,  education  and  training  curricula,  accreditation  and  certification 
schemes) and creation of platforms on the exchange of best practices. 

Additionally,  measures  on  awareness  raising  (A5)  and  increased  voluntary  engagement  of 
private  entities  (Option  A2)  would  be  beneficial  and  could  be  implemented,  if  there  are 
sufficient resources as the EU has a limited role and such measures would remain mainly in 
the domain of Member States or local authorities. From the other sectors, Option D3d and D5 
as mentioned above, will have positive impact on energy savings in the residential and tertiary 
sectors. 

Preferred way forward for the transport sector 

The projected growth in the transport sector until 2020 is the highest of any sectors. In order 
to realize the remaining potential support is needed for the transformation of transport towards 
more  efficient  vehicles,  modes  and  usages.  The  growth  in  the  sector  is  mainly  driven  by 
increase use and need of transport modes, the lack of full internalization of the environmental 
costs into the energy prices and low awareness. The high upfront costs are also a significant 
barrier  which  leads  to  the  difficulty  of  the  realization  of  the  projects,  especially  on  urban 
mobility.  

The  analysis  of  the  already  adopted  EU  policy  documents  revealed  that  a  number  of 
legislative  and  soft-law  initiatives  could  be  proposed,  but  a  number  of  them  are  yet  to  be 
implemented.  It  could  be  expected  that  these  future  policies  would  have  positive  impact 
towards  the  sustainability  of  the  sector.  In  addition,  the  forthcoming  Transport  White  Paper 
(TWP) will give further impetus to the increased decarbonisation and resource efficiency of 
the  sector.  Therefore,  no  detailed  options  were  analyzed  for  the  sector  but  some  of  the 
measures proposed in the TWP that are relevant for EU energy efficiency and savings policy 
will  feature  also  in  the  Energy  Efficiency  Plan  with  special  focus  on  sustainable  urban 
mobility and consumer behaviour.  

Preferred way forward for the industry sector 

the 

though 

industry  has  experienced 

Even 
the  most  significant  energy  efficiency 
improvements, still some potential remains. The EU policies have already partially addressed 
some of the possible environmental impact of the sector. Therefore, the objective as regards 
the industry sector is to support the use of this untapped potential while remaining coherent 
with  existing  policy  instruments  (such  as  the  ETS  and  the  new  Industrial  Emissions 
Directive).  The  barriers  in  the  sector  are  mainly  a  lack  of  strong  price  signals,  lack  of 
awareness  and  training  (especially  for  SMEs),  and  also  lack  of  long-term  policy  planning 
which increases the perception of risk and deters companies from realizing investments. 

EN 

63 

   EN 

 
The  analysis  of  the  possible  approaches  concluded  that  it  is  possible  to  propose  some 
additional  legal  framework  that  would  be  in  line  with  the  above-mentioned  objective  and 
existing  policy  (Option  C3).  To  this  end,  more  implementing  measures  under  Ecodesign 
Directive could be proposed that would cover commonly used products in industrial process 
(such  as  large  pumps  or  furnaces).  Custom-made  equipment  (such  as  machine  tools)  and 
systems  could  be  addressed  with  generic  energy-efficiency  requirements,  which  would  then 
be operationalised by the European Standardisation Organisations. In addition, certain energy 
management requirements (e.g. for energy audits or plans) could be established for all energy 
consumers above a certain threshold, notably large companies. For SMEs information toolkits 
and assistance to manage their energy consumption could be provided (Option C5).  

Important  mobilization  of  projects  in  the  industry  sector  could  come  from  energy  savings 
obligations,  if  imposed  on  energy  companies  (Option  D3d)  and  the  promotion  of  ESCOs 
(Option D5).  

Measures  on  awareness  raising  (Option  C4)  and  increased  voluntary  engagement  of  private 
entities (Option C2) would be also beneficial and could be implemented if there are sufficient 
resources.  Still,  EU  has  limited  role  and  such  measures  remain  mainly  in  the  domain  of 
Member States or local authorities.  

Preferred way forward for the energy sector 

At present, the average efficiency of the generation capacity is considerably lower than best 
available technologies. The main reason for this is the lack of sufficiently strong price signals 
in relation to investment decisions for the construction of new capacities and the retirement of 
old ones. The ETS in its third phase will have a certain impact on this problem for the units it 
covers.  Therefore,  it  not  appropriate  to  propose  further  regulatory  instruments  without 
knowing  its  concrete  effects  (Option  D3a).  However,  with  the  growing  number  of  small 
generation  installations,  the  need  for  further  regulatory  instruments  to  ensure  their  high 
efficiency could be studied.  

The  full  potential  for  residual  heat  use  or  energy  recovery  is  also  not  used.  The  analysis 
showed  that  further  regulatory  measures  for  the  promotion  of  cogeneration  and  district 
heating and cooling units could be developed following further analysis and possible revision 
of the main policy framework in the area (i.e. the Co-generation Directive) (Option D3b). 

National  Regulatory  Authorities  (NRAs)  could  play  an  important  role  in  steering  energy 
efficiency  improvements  of  the  grid,  promoting  smart  grids  and  promoting  intelligent 
metering  systems  that  ensure  peak  shaping  possibilities  and  optimization  of  energy  demand 
and supply. This could be done by conferring more powers on them (Option D3c).  

Energy  companies  dispose  of  important  information  about  the  energy  consumption  of  their 
clients  but  have  no  stimuli  to  use  it  for  reducing  their  clients'  energy  consumption  as  this 
would mean fewer revenues for them. This could be overcome by the introduction of energy 
savings  obligation  schemes  which  would  ensure  that  for  a  small  short-term  increase  of  the 
energy  bill  the  most  cost-effective  long-term  measures  will  be  realized  (Option  D3d).  The 
best methods of doing this need to be studied in further detail. In order not to have negative 
interactions  with  the  ETS  the  certificates  that  prove  energy  reductions  should  not  be  traded 
within the ETS. 

Usually  the  managers  of  energy  companies  are  well  aware  of  the  possibilities  for  energy 
savings  at  their  companies.  However,  the  specific  subsector  that  would  require  additional 
support in terms of information, guidelines and exchange of best practices is that of ESCOs 

EN 

64 

   EN 

 
(Option D5). Voluntary agreements could also lead to energy savings and could be considered 
(Option D2). 

Will the measures be sufficient to reach the 20% objective? 

The preferred options provide for a wide range of supporting instruments that would intensify 
the  uptake  of  the  energy  savings  potential  and  the  related  benefits,  and  the  maturing  of  the 
energy efficiency markets. Quantification was not possible for all options but from those that 
could be quantified it can be concluded that there is good chance that the remaining savings 
gap will be closed. However, the concrete results will depend on the level of ambition of the 
regulatory  and  non-regulatory  initiatives  and  the  pace  at  which  they  are  implemented. 
Therefore, mid-term evaluation and possible updating of the Plan would be essential to ensure 
that there are continuous efforts on energy efficiency. 

8. 

MONITORING AND EVALUATION  

The  Commission  will  monitor  the  progress  inter  alia  via  the  mandatory  and  possibly 
strengthened  National  Energy  Efficiency  Action  Plans  and  the  policy  objections  and 
indicators that would be developed as a result of the new Energy Efficiency Plan. In addition, 
it  will  continue  monitoring  Member  States  progress  and  assisting  them  in  implementing 
existing and new EU regulatory measures, and take any necessary measures at its disposal in 
cases of infringements.  

The Commission will launch specific studies to evaluate in more details the modalities for the 
implementation of the various types of policy instruments proposed (e.g. the role of NEEAPs, 
the  nature  and  levels  of  the  policy  objectives,  the  modalities  for  better  supporting  energy 
recovery,  the  approaches  towards  energy  savings  obligations  on  energy  companies,  the 
concrete  public  procurement  obligations,  and  the  requirements  on  companies  for  energy 
management).  Ex-ante  financial  analysis  would  be  carried  out,  where  required,  to  study  the 
concrete needs for financing.  

The lack of detailed data on energy consumption in all end-use sectors is a major challenge. 
Eurostat has started efforts, following inter alia the requirements of the 2008 Energy statistics 
regulation, to get in refined data for household consumption but with the present speed it will 
take further years before detailed consumption statistics for all sectors will be in place. There 
are no good data also of how much CO2 emission are emitted by the end-use sectors because 
the current statistical reporting procedure assigns the emissions from electricity and heating to 
the energy sector. Furthermore, additional studies to examine the job creation effect of energy 
efficiency  measures  and  the  composition  of  the  EU's  building  stock  could  be  carried  out  in 
order to facilitate the decision making process. 

EN 

65 

   EN