COMMISSION STAFF WORKING PAPER EXECUTIVE SUMMARY OF THE IMPACT ASSESSMENT
Date: 2011-06-22
Institutions: European Commission
Subjects: climate change, energy saving, environmental protection, innovation, investment promotion, reduction of gas emissions, renewable energy

EUROPEAN COMMISSION 

Brussels, 22.6.2011 
SEC(2011) 780 final 

COMMISSION STAFF WORKING PAPER 

EXECUTIVE SUMMARY OF THE IMPACT ASSESSMENT 

Accompanying the document 

DIRECTIVE OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL  

on energy efficiency and amending and subsequently repealing Directives 2004/8/EC 
and 2006/32/EC 

{COM(2011) 370 final} 
{SEC(2011) 779 final} 

 
 
  
 
Europe can reduce its primary energy use by 20% in 2020 simply by applying cost-effective 
energy  savings  measures.  This  would  make  the  EU's  economy  more  competitive  and  create 
jobs  and  new  business  opportunities.  Energy  efficiency  also  means  better  use  of  energy 
resources  and  reduced  import  dependency.  It  means  less  CO2  and  other  harmful  emissions, 
less impact on the ecosystem and better quality of life for citizens. Achieving the 20% energy 
savings  objective  would  in  addition  help  to  realize  the  EU’s  2050  vision  as  outlined  in  the 
Low Carbon Roadmap 20501. 

1. 

INTRODUCTION AND POLICY CONTEXT 

EU leaders have committed to reach the objective of 20% primary energy savings in 2020 
compared  to  a  baseline2.  This  translates  into  a  saving  of  368  million  tons  of  oil  equivalent 
(Mtoe)  of  primary  energy  (gross  inland  consumption  minus  non-energy  uses)  by  2020 
compared to projected consumption in that year of 1842 Mtoe.  
The  Energy  Efficiency  Action  Plan  (EEAP)  of  20063  was  an  important  first  step  towards 
reaching the 20% objective but did not aim at realizing the full economic potential. Despite 
the progress made in its implementation a new impetus is needed to intensify the uptake of the 
remaining potential. To this end a new Energy Efficiency Plan (EEP)4 was adopted in 2011. 

Some of the measures outlined in the EEP need to be implemented through new legislative 
proposal(s). These include the setting of clear political objectives; development of the energy 
services market; increasing the role of the public sector; improving consumers' awareness of 
their  energy  consumption;  and  increased  efficiency  in  energy  supply.  These  measures  are 
closely  related  to  the  scope  of  two  existing  legal  instruments:  the  Energy  Services 
Directive (ESD) and Cogeneration Directive (CHP Directive)5. However, the Directives' mid-
term evaluation shows that in their current form these will not be sufficient to reach the policy 
objective and thus their revision is required. The purpose of this impact assessment (IA) is 
to provide analytical input for the preparation of the Directives' revision.  

2. 

WHAT IS THE PROBLEM? 

The EU's 20% policy objective for energy savings will not be met with present policies - and 
thus the related benefits will not be realised. There is a remaining economic potential in each 
sector (from energy transformation to energy use) but important challenges still remain such 
as  insufficient  political  commitment  and  underdeveloped  markets  for  energy  efficiency 
improvements, low awareness of the possibilities and insufficient of incentives for uptake of 
energy efficiency improvements at demand and supply side.  

3. 

THE EU HAS AN IMPORTANT ROLE 

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). Although much responsibility 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  objectives  requires 
coordinated action and coherent energy efficiency and savings policy.  

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5 

COM(2011) 112 
7224/1/07, REV 1, the baseline is PRIMES 2007 
COM(2006)545 
COM(2011) 109 
2006/32/EC and 2004/8/EC respectively 

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4. 

MAIN POLICY OBJECTIVES  

The  general  EU  policy  objective  on  energy  efficiency  is  to  save  20%  of  the  EU's  primary 
energy  consumption,  compared  to  projections  for  2020.  Because  progress  towards  this 
objective is not satisfactory, the main objective of this IA is to contribute to the closing of 
the gap by exploring measures in all sectors with a remaining economic potential. 

5. 

ANALYTICAL APPROACH  

To  establish  the  baseline  for  each  policy  area  the  PRIMES  general  equilibrium  model  was 
used.  To  analyse  the  detailed  economic,  social  and  environmental  impact  of  the  shortlisted 
policy options the E3ME model was used. A variety of studies were used as sources for the 
input data and assumptions used in modelling the individual energy efficiency options. 

In cases where modelling was not possible bottom-up assessments and individual studies were 
used to establish the possible impact of the options.  

The selection of the best options was based on the progress achieved by the existing policies 
and  on  evaluation  of  the  remaining  barriers,  the  EU  value  added,  possible  impact, 
effectiveness, efficiency and coherence. 

6. 

OPTIONS ANALYZED 

Three  levels  of  policy  options  were  considered  in  the  analysis.  The  first  level  related  to  the 
need for and form of national energy efficiency targets. A second level of analysis related to 
the nature and impact of individual policy measures. Finally, as a third level, the alternative 
legislative approaches were reviewed.  

First-level policy options 

A: National targets/objectives 

A1: Retain the current approach  

A2: Extend the indicative end use target of ESD to 2020 

A3: Comprehensive indicative target for each Member State for 2020 

A4: Binding target for each Member State for 2020 

Second-level policy options 

B: Energy Savings Obligation 
B1: Retain the current approach  
B2: Repeal the current ESD provisions without replacement 

B3: Require all Member States to introduce energy saving obligations while leaving their design for 
determination by Member States 

B4: As B3 but with harmonisation of key design features  

C: Further measures to realise potential at the end-use stage 

C1: Retain the current approach 

C2: Energy saving measures for renovation of public buildings  

C2a: Introduce 3% binding target for renovation of public buildings to cost-optimal levels 

C2b: Introduce 3% binding target for renovation of public buildings to nearly zero energy levels 

C2c: Establish a national financing and technical assistance infrastructure for renovation of public 
buildings. 

C3: Obligatory use of energy efficiency as a criterion in public procurement 

C4: Voluntary measures to promote energy efficiency via public procurement 

C5: Enhanced obligations for smart metering and billing by energy companies 

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C6: Voluntary measures on metering and billing 

C7: Mandatory energy audits and energy management systems for industry 

C8: Voluntary systems to promote energy audits and the use of energy management systems in 
industry 

C9: Obligations for Member States to promote energy service companies (ESCOs) 

C10: Voluntary measures to promote ESCOs 

D: Measures to realise potential at the stage of energy transformation and distribution 

D1: Retain the current approach 

D2: Removal of existing provisions 

D3: Mandatory CHP and district heating/cooling requirement for new electricity and high-heat-
demand industry installations 

D4: Mandatory connection and priority access of high-efficiency cogeneration to the electricity grid 

D5: Voluntary measures to promote CHP and district heating/cooling 

D6: Minimum performance requirements for energy generation  

D7: Energy efficiency obligation on energy network regulators 

D8: Voluntary measures to increase the efficiency of energy transformation, transmission and 
distribution 

E: National reporting 

E1: Retain the current approach 

E2: Require light form of reports 

E3: Require detailed calculation of savings and evaluation of measures across the whole economy 

E4: Reporting only in National Reform Programmes 

E5: Combine reporting with other relevant instruments 

Third-level policy options 

1: Retain the two current Directives (ESD and CHP) as they stand today 

2: Abolish the two current Directives without replacement 

3: Propose two separate revised Directives and extend their scope 

4: Merge the two Directives and extend the scope 

5: Use Regulation legal instrument instead of Directive 

7. 

CONCLUSIONS: PREFERRED NEW POLICY FRAMEWORK 

7.1. 

Preferred Options  

The  analysis  concluded  that  there  is  no  need  to  propose  binding  national  targets  at  the 
present moment. Even though such targets could signify the importance of energy efficiency 
and  raise  it  high  on  political  agendas,  individual  measures  are  the  ones  to  make  a  real 
difference.  Therefore,  only  indicative  targets,  set  by  Member  States,  are  recommended 
(Option  A3).  However,  progress  needs  to  be  monitored  and  evaluated.  If  an  evaluation  in 
2013  shows  that  this  approach  endangers  reaching  the  overall  European  20%  energy 
efficiency target, a move towards binding national targets needs to be made.  

To replace the need for a binding target but ensure the same results the following measures 
could be brought forward.  

The  energy  savings  obligation  (Option  B4)  is  a  key  to  increase  the  uptake  of  energy 
efficiency  measures  and  support  the  development  of  energy  services  market.  Thus  it  is 

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suggested that national energy saving obligation schemes are introduced which will aim 
at an annual final energy reduction of 1.5%. It is appropriate for the obligation to be placed 
by  MS  on  their  energy  utilities  (suppliers  or  distributors),  since  these  entities  dispose  of 
information  about  the  energy  consumption  of  their  clients.  Certain  key  features  of  the 
obligation  schemes  should  be  harmonized  at  EU  level  (e.g.  level  of  ambition  and  counting 
methods), but MS should have the possibility to adjust them to their national circumstances. 
This requirement will put a financial value on energy savings and link the profits of utilities to 
energy efficiency rather than solely to the volume of energy delivered. The expected savings 
are  considerable  (108-118  Mtoe  of  primary  energy  savings  in  2020)  while  the  costs  per 
individual are negligible and evenly distributed amongst final energy consumers. 

The  public  sector  could  be  an  important  actor  in  stimulating  market  transformation 
towards more efficient products, buildings and services because of the high volume of public 
spending and two measures are proposed. First, 3% of the buildings owned by public bodies 
should  be  renovated  annually  to  cost-optimal  levels  (Option  C2a).  This  would  not  lead  to 
especially  high  energy  savings  (approx.  9  Mtoe)  but  is  taken  forward  as  they  have  high 
visibility in public life. Even in cash terms, the benefits of this option will outweigh the costs: 
additional  energy  related  investments  of  €1.6  bn  per  year  between  2010  and  2020  will  be 
offset by savings on energy bills of €1.92 bn. S econd, public bodies purchasing high energy 
performance  products  and  buildings  based  on  the  available  energy  labels  and  certificates 
(Option C3) will drive the market forward. This would lead to a direct impact of 9-18 Mtoe 
saved in 2020. It would require an initial investment increase but would decrease the overall 
costs for public organizations. 

Information  on  actual  energy  consumption  provided  to  households  and  companies  on  a 
frequent  basis  through  their  energy  bills  (Option  C5)  and  on  the  savings  possibilities  for 
large  companies  through  energy  audits  (Option  C7)  are  both  important  for  reducing  the 
information gap that is one of the barriers to efficiency. The analysis has shown that in both 
options the burden for final consumers and companies would be relatively low compared to 
the benefits they will gain. The possible savings of the two options are also considerable and 
could reach up to some 90 Mtoe for Option C5 and up to 30 Mtoe for Option C7. However, 
the  scale  of  savings  would  depend  on  individual  reactions  of  consumers  and  the  interaction 
between these measures and other national measures that would incentivise the consumers to 
make use of the information that will be made available to them. 

ESCOs are an important player that could take some of the burden of the initial required 
investments in energy efficiency measures. However, even in well established ESCO markets, 
transaction  costs  are  too  high  for  potential  customers  to  easily  assess  the  available  service 
offer. Therefore, it is suggested that MS establish structures to carry out market monitoring, 
providing  lists  of  energy  service  offers  and  standard  contracts  (Option  C9).  To  this  end, 
Member States could use the agencies already established to follow energy efficiency policies 
and therefore this option would not pose a significant administrative burden for them. 

To support more efficient energy generation, transmission and distribution it is proposed 
that a number of regulatory measures be brought forward. These include measures to ensure 
that  surplus  heat  from  power  generation  and  industrial  processes  and  other  waste-to-energy 
sources  are  used  first  to  satisfy  heat  demand  in  buildings  and  businesses  and  that  primary 
energy  fuel  is  used  more  efficiently.  This  would  be  achieved  by  requirements  to  equip  new 
generation  capacity  and  high-heat-demand  industry  installations  with  heat  recovery  (CHP) 
units  and  to  ensure  their  connection  to  consumers  via  district  heating/cooling  networks 
(Option D3). Second, to reduce the administrative burden and create a level playing field, it is 
essential to establish clear connection rules and priority access to the electricity grid for high 

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efficiency  cogeneration  (Option  D4).  This  would  put  CHP  on  equal  footing  with  renewable 
energy technologies.  

In  addition,  energy  network  regulators  should  be  required  to  design  tariffs  and  network 
regulations  that  would  enable  energy  efficient  solutions  and  technologies  to  be  offered  to 
consumers (Option D7). Since this would not bring additional tasks for regulators, but would 
instead  put  a  clear  mandate  to  prioritise  energy  efficiency  among  their  tasks,  the  additional 
administrative  burden  would  not  be  significant.  It  is  also  proposed  that  the  Commission 
monitor progress as regards energy efficiency of electricity and heat generation and if it is not 
sufficient, further measures should be proposed after detailed analysis (Option D6bis). 

To  limit  the  administrative  burden  whilst  ensuring  that  proper  monitoring  of  progress  is 
carried out, a light form of reporting is suggested (Option E2). This approach would reduce 
the  administrative  burden  by  eliminating  the  most  expensive  tasks:  ex-ante  and  ex-post 
evaluations of single policy measures. It is estimated that it would reduce costs to about half 
their present level. 

The analysis of the third-level policy options concluded that extending the scope of the ESD 
and CHP Directive would be beneficial. Merging them into one legislative text would provide 
for simplification and better coherence. 

All the options proposed are interlinked and mutually reinforcing. Only if combined in one 
package can they bring the energy consumption reductions required  at a socially acceptable 
cost. 

7.2. 

Overall impact 

The  instrument  mix  put  forward  will  contain  a  number  of  overlaps  and  interactions.  The 
modelling of the whole package showed that primary energy demand in 2020 will be reduced 
by between 19.7% and 20.9% compared to the PRIMES 2007 baseline projection while final 
demand  decreases  by  15.6%  to  19.5%  in  2020.  The  sectors  reducing  demand  most  are 
transport and residential. Reductions are substantial in the tertiary sector, too, due to improved 
appliances and improved heating and cooling. Generation efficiency also improves and some 
of the measrues to reduce final energy demand lead to lower electricity consumption and thus 
lower production.  

Measures  to  achieve  the  20%  energy  saving  target  in  2020  will  support  the  greenhouse  gas 
reduction  target,  in  particular  in  non-ETS  sectors.  According  to  the  Low  Carbon  Economy 
Roadmap 2050 the achievement of the 20% EE and RES targets enables a 25% greenhouse 
gas  emission  reduction.  In  this  context,  the  Commission  has  said  that  it  will  monitor  the 
impact of new measures to implement the 20% energy efficiency target on the ETS6.  

Impacts  on  the  ETS  are  presented  in  the  overall  20%  efficiency  model  runs,  albeit  results 
differ  substantially  depending  on  the  model  used.  While  both  models  project  a  further 
decrease  in  GHG  emissions,  they  show  different  results  regarding  the  impact  on  the  ETS 
price:  the  E3ME  model  run  projects  a  drop  to  zero  of  the  ETS  price  in  2020  whereas  the 
PRIMES scenarios project a much lower impact (a reduction from €16.5/t to €14.2/t in 2020). 
This  lower  ETS  price  impact  until  2020  in  PRIMES  is  explained  among  other  things  by  a 
higher  share  of  modelled  measures  with  GHG  reductions  materialising  in  non-ETS  sectors, 
the  full  market  foresight  assumed  and  an  unlimited  ETS  banking  flexibility  until  2050 
assumed. It is appropriate to monitor impacts of the proposed measures on the ETS. 

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COM(2011)112 

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Additional costs to the total energy system rise by between 2.6% and 4.7% compared to the 
reference scenario7. The increase in energy efficiency will tend to increase electricity prices in 
the  short  term  from  141€/MWh  to  146€/MWh  due  to   the  need  to  finance  the  fixed  costs  of 
energy  efficiency  measures8.  However,  in  the  long  run,  this  increase  pays  off  by  stabilising 
electricity prices through a lower demand.  

It can therefore be confirmed that the package of policy package put forward is capable of 
reaching the 20% objective and reaping additional benefits that remain tangible beyond 
2020.  The  additional  costs  of  achieving  the  overall  20%  target  through  the  set  of  measures 
proposed are proportionately small. The overall economic, social and environmental impacts 
of  the  options  presented  above  will  make  a  strong  positive  contribution  to  EU  policies  and 
serve as a pillar for the success of the Europe 2020 strategy. 

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PRIMES 20% reference scenario 
Ibid 7 

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