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The Third IEB Report of 2019 Focuses on Energy Efficiency

Energy efficiency is one of the important tools to tackle climate change, and one of the fundamental components of the European policy in the field of energy and competiveness of firms. The Barcelona Institute of Economics (IEB) provides this analysis in the latest Report, coordinated by José García-Quevedo, professor at the University of Barcelona and researcher at IEB.

The Report, entitled Energy Efficiency and Climate Change, examines energy efficiency from a range of different perspectives. First, it analyses the determinants of, and barriers to, business decisions to invest in energy efficiency. Second, it considers the role played by policy and evaluates the impact of energy audits. Finally, it discusses recent proposals from the European Union to increase energy efficiency.

One of the conclusions from the study is the clear need to promote energy efficiency and redefine public policy, taking into account the growing demand for energy that Europe has experienced since 2015, causing the EU to fall behind the objectives it has set for itself.


What is Happening with Energy Efficiency?

It is essential to move forward in terms of energy efficiency, however, there are barriers that are making these advances difficult. Credit restrictions are clearly one of the obstacles to investment in energy-saving technologies that would increase the energy efficiency of the production processes of companies.

In the case of Germany, a country that aims to reduce greenhouse gas emissions (GHGs) by 55% by the year 2030, and by 80-95% by 2050, including expanding renewable energy sources and reducing energy consumption by 50% through increased energy efficiency. However, the data shows that household consumption is has not seen considerable reduction, and this is a cause for concern.

Along with credit barriers, the experts also cite the lack of information and knowledge about available energy-saving technologies and best practices in energy management as further elements holding back progress.

As a proposal to be able to move forward, the IEB report notes that “energy audits are likely to be particularly effective if they are linked with financial support (e.g. low-interest loans) for implementing the measures that the energy auditors had identified.” Indeed, the data provided by the study show that subsidizing energy audits in small and medium-sized enterprises favours the adoption of energy consumption reduction measures.


Europe and the 20/20/20 Targets

At the European level, recent directives on energy efficiency establish the objective of ensuring that EU energy consumption is almost a third more efficient (at least 32.5%) by 2030, with a particular emphasis on achieving greater EE in the construction sector. This sector is deemed crucial for the transition to clean energy, since buildings are the largest consumers of energy, representing 40% of final energy consumption and 36% of GHG emissions in Europe.

The primary energy consumed in the EU in 2017 (latest available data) was 5.3 percent higher than the energy efficiency target for 2020, amounting to 1,122 Mtoe (Eurostat, 2019). The demand for primary energy has experienced huge fluctuations in recent years, attributable mainly to the economic crisis, although since 2015 growth in demand has been constant, causing the EU to fall behind the objectives it has set itself and highlighting the need to re-evaluate public actions.

The merger of energy and environmental goals within a single policy that guarantees the achievement of sustainable economic growth resulted in the setting of the “20/20/20 targets”, included in the European directive issued in 2009. The set of milestones seeks a reduction in GHG emissions of 20% compared to 1990 levels, an increase of up to 20% of the share of renewables in the EU’s final energy consumption and a 20% improvement in energy efficiency measured as the reduction in primary energy consumption with respect to the estimated base scenario in 2007 for the 2020 horizon.


A New Energy Model is Essential

Climate change poses a serious threat to both current and future generations. The impact of global warming is already making itself manifest and a notable degree of consensus has been reached on the need to address this situation. However, to do so will require a new energy model that can reduce GHGs while still facilitating economic growth. Although several instruments are available that can help usher in this very necessary energy transition aimed at reducing emissions, energy efficiency is set to be one of the primary tools for tackling climate change and achieving a sustainable model.

The growth forecasts for global population (particularly in the urban areas of developing economies) and the economy over the following years stress the need for ready access to modern and reliable sources of energy.

For this reason, in the current energy context, energy efficiency is gaining considerable relevance in the configuration and definition of the energy and climate policies that should allow us to meet the sustainability objectives laid down in the 2015 Paris Agreement. Energy efficiency – as well as contributing to the reduction of pollutant emissions – increases the security of supply by reducing energy demand, an especially important step for countries dependent on foreign energy supplies, allowing them to reduce their energy bill and, at the same time, improving their foreign trade balance.