ENERGY UPDATES FOR ALL COUNTIRES

1

AUSTRALIA Updated June 2003

BACKGROUND

Energy and the Environment

On 15 August 2002, the Australian government announced its agenda for the development of a forward strategy on climate change, and elaborated the key elements on which that strategy will be based. The major aspects of this announcement included: The government’s commitment to develop and invest in domestic programmes

to meet the Kyoto target of limiting greenhouse emissions to 108% of 1990 levels over the period 2008 to 2012.

A climate change agenda focusing on the short term (next few years) and the longer-term (20 to 30 years).

The development of the strategy to be supported and informed by dialogues with state and territory governments, industry and community groups and underpinned by four key elements: − striving for a more comprehensive global response to climate change; − maintaining a strong and internationally competitive economy with a lower

greenhouse signature; − pursuing a policy balance between flexibility and certainty that allows key

decisions on investment and technology development, and also emphasises cost-effectiveness; and

− policies and programmes that assist adaptation to the consequences of the climate change that is already unavoidable.

The Ministerial Council on Energy (MCE), which comprises energy ministers from all Australian States and Territories and the Commonwealth, was formed in June 2001. MCE’s objectives are: To provide national oversight and co-ordination of policy development to

address the opportunities and challenges facing Australia's energy sector into the future.

To provide national leadership so that consideration of broader convergence issues and environmental impacts are effectively integrated into energy sector decision-making.

As a further commitment to progressing energy efficiency, MCE established the Energy Efficiency and Greenhouse Working Group, which consists of all Australian jurisdictions. The group’s charter is to provide strategic advice on policy direction and programme delivery to significantly enhance energy end-use efficiency. A key task for the group is the development of a comprehensive National Framework for Energy Efficiency.

National Framework on Energy Efficiency

As a commitment to progressing energy efficiency in Australia, all jurisdictions are currently developing a co-operative National Framework for Energy Efficiency. While all Australian jurisdictions have made a considerable contribution to the facilitation of improved energy efficiency, there is still significant potential for further co-ordination and enhancement. In particular, a more co-ordinated national approach to energy efficiency will avoid unnecessary duplication; identify existing and potential gaps; and maximise the impact and effectiveness of resources dedicated to energy efficiency across jurisdictions. The objective of the Framework is to achieve a sustained, measurable improvement in Australia’s energy efficiency. The Framework will focus on approaches to achieve net economic benefits and improve the efficiency and competitiveness of the Australian economy; stimulate investment in sustainable industries; and help reduce Australia’s environmental impacts.

IEA EnergyEfficiency Update

2

The Framework will be strategic in focus and developed co-operatively with all jurisdictions and key stakeholders. Delivery and implementation will be targeted at the most appropriate level and will take into consideration the individual circumstance of particular regions and jurisdictions. The development of the Framework will include: Analysis of energy end-use in Australia. Assessment of current government energy efficiency programmes. Assessment of what energy efficiency improvements are technically viable

within realistic timeframes. Barriers to realising energy efficiency potential. Financial modelling to evaluate the commercial viability of energy efficiency

investment. Economic modelling to determine the economic viability and impact of different

energy efficiency scenarios and recommendations for programmes, initiatives and policy.

Completion of the Framework is expected towards the end of 2003.

Institutional Framework

Australia is a federation of six states and two territories. The Commonwealth government has limited constitutional powers in relation to many aspects of the energy economy. Local governments have responsibility for implementing planning policies and regulations which have an impact on energy use and efficiency at local level. This covers areas such as urban design, road planning, etc., planning regulations which effect energy efficiency in houses and businesses, and in waste management and utilities. These can have large-scale implications for energy use and consequent environmental impacts at the local, national and global levels. A number of programmes administered through the Commonwealth's AGO (Australian greenhouse Office) aimed at improving energy efficiency, are managed through local governments.

RESIDENTIAL/ COMMERCIAL

Energy Efficiency Standards

As part of the National Greenhouse Strategy, governments have introduced minimum energy performance standards (MEPS) for refrigerators, freezers, three-phase motors and air-conditioners and electric storage water heaters. These standards have been developed in consultation with the manufacturing industry and agreed by the Ministerial Council on Energy. The development of minimum energy performance standards for other products during 2002–2004 has been announced in published plans. New MEPS are being considered for electric lamps, distribution transformers, air-conditioners, electric motors and commercial refrigeration. The National Appliance & Equipment Energy Efficiency Committee (NAEEEC) regularly commissions studies to project the energy saving and greenhouse abatement expected to be saved as a result of regulatory decisions made under the National Appliance & Equipment Energy Efficiency Programme (NAEEEP). The latest report entitled “When you can measure it, you know something about it” (projected impacts 2000-2020) covers only those programmes that are generally implemented on a mandatory basis: energy labelling and MEPS. It reviews the likely impacts of labelling and MEPS for a wide range of household, commercial and industrial appliances and equipment. The combined projected greenhouse gas impact of all programmes covered in this study is 134 million tonnes carbon dioxide equivalent (Mt CO 2-e) below business-as-usual over the period 2003-2018. The average impact during the Kyoto Protocol Commitment period 2008 to 2012 is estimated to be about 8.2 Mt CO2-e per annum reduction below business-as-usual. The projected impact is 13.3 Mt CO2-e per annum by 2015 and 14.9 Mt CO2-e per

3

annum by 2020. The programme is expected to save purchasers over A$4 billion1 by 2018. More information can be found at: www.greenhouse.gov.au/energyefficiency/appliances/meps/

Building Codes

Mandatory Energy Efficiency Standards for Buildings

In March 1999, following wide consultation, the federal government and the building industry reached agreement on a comprehensive strategy aimed at making Australian buildings more energy-efficient. This two-pronged strategy encompasses, on the one hand, Commonwealth government and building industry support for voluntary best practices in building design, construction and operation, and the elimination of worst energy performance practices on the other hand by incorporating a single standard for minimum performance requirements into the Building Code of Australia (BCA). Work has begun on developments to define an acceptable minimum level of energy efficiency for new buildings throughout Australia to eliminate worst practice within the industry. Energy efficiency provisions for housing were to be incorporated into the BCA on 1 January 2003, with provisions for commercial and public buildings introduced in 2004. A comprehensive industry education and training programme is being developed to prepare the building industry for introduction of mandatory minimum performance requirements. The AGO estimated in 1999 that in the absence of any such measures, the energy consumption of residential buildings could grow by 40% between 1990 and 2010, leading to a 17% increase in greenhouse gas emissions. The energy use in non-residential buildings could even increase by 91%, leading to a 94% growth in CO2 equivalent emissions, or 62.8 million tonnes of CO2 equivalent from commercial buildings alone in 2010.

Energy Labelling

Under the National Greenhouse Strategy, governments developed, in consultation with industry, a national scheme for mandatory energy labelling for major domestic appliances. Six appliance types have been labelled since 1992 (refrigerators freezers, clothes washers and dryers, dishwashers and air-conditioners). A revision of energy labels for all major domestic appliances was completed in 2001. Australia is the first nation to effectively rebase its labelling scheme. The Australian label has been used as an example of label best practice by CLASP, a UN funded NGO which promotes label schemes to developing countries and it has been used by the Indian government as the model for that nation’s scheme. The Australian Gas Association (AGA), together with the Gas Appliance Manufacturers Association of Australia, developed voluntary energy labelling and minimum performance programmes for the two main gas-using appliances (gas water heating systems and space heaters) in Australia. The AGA is recognised as a standard-setting body for gas issues and the energy programmes have been designed to comply with these standards. While participation in the labelling programme is notionally voluntary, all appliances comply as all suppliers are members of these associations.

Australia’s Standby Power Strategy 2002-2012

Standby power is the energy used by an appliance while it is plugged in but not actually carrying out its central function. In Australia, standby power consumption generally accounts for over 10% of Australia’s household electricity usage, costing more than A$500 million and generating more than 5 million tonnes of carbon dioxide per annum. This is equivalent to the greenhouse impact of more than 1 million cars.

1 On average, in 2002 A$1 = US$0.543.

4

In August 2000, all Australian governments agreed to pursue efficiencies in standby power consumption and the “1 Watt” target for appliances under the banner of the IEA standby power initiative. In its publication ”Things that Go Blip in the Night”, the IEA advocates that members develop long-term plans to reduce standby over time, a recommendation that Australian jurisdictions have embraced. In a process throughout 2002, government agencies consulted with stakeholders about ideas to reduce standby: the Strategy is a result of that dialogue. The Strategy is being developed through a process which potentially has two stages. This staged approach will provide the opportunity firstly to identify the products that need attention and, secondly, provide industry with the opportunity to develop voluntary measures to address standby for the product, and then move to more interventionist measures (mandatory actions) if and when necessary. Stage 1 -- Profiles: identification of major product groups and initial actions (as short as one year and as long as five years): All key products will have a product profile prepared which outlines its current

status with respect to standby power. Australian governments will announce the standby target for each product in the product profile. Generally, this target will be the Energy Star level promoted by the US Environmental Protection Agency or some other previously identified internationally accepted level. The standby target will be included in the relevant Australian Standard to ensure all stockholders have a reasonable opportunity to become aware of the target level and compliances dates. NAEEEC will continue benchmarking surveys each year and gather other market intelligence to monitor standby levels. The data will be used to measure improvement for each product and build on the existing data sources and analysis. This monitoring function will be assisted by industry agreements where suppliers agree to supply government agencies with standby levels for relevant products. A formal review of progress will be undertaken once milestones have been reached. A review will generally result in either “a positive result”, meaning that reasonable progress has been made to date and that voluntary measures in place can continue as proposed, or a “negative result” meaning that insufficient progress has been made (or is unlikely to be made) and that specific mandatory measures under Stage 2 will be necessary.

Initially 40 product types have identified savings of 36 Mt over 15 years. Stage 2 -- Mandatory Action Plans: escalating Government Action (one to five year process) Stage 2 seeks to impose mandatory measure. Government would move to

regulatory intervention ONLY:

1. Where progress by voluntary measures is shown to be inadequate (i.e. a negative review at the end of Stage 1); or

2. The potential for excessive standby is well documented from overseas experience and that regulation appears to be warranted as a pre-emptive measure or voluntary measures are unlikely to be effective; and

3. The Ministerial Council of Energy accepts that regulation is necessary to achieve the standby target.

Any regulatory action would be subject to the usual processes of economic analyses (cost-benefit analysis and public consultation) and would only proceed if it is in the public interest and complies with governmental regulatory requirements. Mandatory measures can be withdrawn if it shown that the relevant industry is responding to standby targets set for Stage 2 or making significant progress toward those targets.

5

House Energy Rating

Governments have agreed to implement a consistent Nation-wide House Energy Rating Scheme (NatHERS). The scheme provides householders with a means of assessing energy efficiency of houses and thereby assists in making more informed choices about housing purchases and renovation. The national scheme and several state-based rating schemes will be co-ordinated to ensure consistency. A graded five-star rating system is used, with the most energy-efficient dwellings receiving the highest number of stars. Implementation of the scheme rests with the state and territory governments who can decide whether or not to make the scheme mandatory. The Australian Capital Territory has a requirement that all new houses achieve at least a four-star rating. Victoria has recently announced that all new residential buildings will soon have to have a five star energy rating. Mandatory energy efficiency measures for houses were introduced in the Building Code of Australia on 1 January 2003. However, the measures were not adopted in all States and Territories at that time, as some administrations need time to resolve administrative issues, including reconciling building control and planning requirements. These changes will make homes more energy-efficient and save greenhouse gas emissions.

Windows Energy Rating Scheme

In 2001 the window and glazing industry, supported by the Commonwealth government, launched a system of energy performance labelling for window products called the Window Energy Rating Scheme (WERS). The scheme, which delivers both an energy performance label for consumers and backup technical support for industry members, was designed to inform consumers and influence purchase decisions. WERS is used by product manufacturers in their promotional campaigns to establish differentiation in the market and encourage the increased use of high performance glazing.

Education, Training and Public Awareness

In 2002, the Commonwealth government, several state governments, and the building and design industries jointly developed and published Australia’s most comprehensive guide to environmentally sustainable housing titled Your Home. The Your Home suite of materials includes a Consumer Guide to raise awareness and a Technical Manual for building professionals and interested owner builders. The Your Home Technical Manual has become the principal reference guide for building industry education and training programmes. Your Home materials are also used in tertiary education for architecture, environment design, and building courses. State and territory governments have focused on their own communities and areas of responsibility to raise public awareness both on energy efficiency and environment protection. Activities undertaken include the production of booklets, journals, books, web sites, demonstration projects and training programmes; some local governments are active in producing publications aimed at increasing public awareness of energy efficiency and environmental issues.

PUBLIC SECTOR The Commonwealth government has made a commitment to lead by example in ensuring that its own procurement practices and operations maximise energy efficiency. State and territory governments are implementing similar programmes.

Government Energy Efficiency Actions

The Australian government is committed to reducing the intensity of energy use in Commonwealth operations, with a consequent reduction in economic costs and greenhouse gas emissions. Annual whole-of-government energy reports are tabled in Parliament and made available to the public. The reports show total energy used by Commonwealth departments and agencies, the intensity of energy use and associated greenhouse gas emissions.

6

The fourth annual report, Energy Use in Commonwealth Operations 2000-01, showed a 10% reduction in total energy consumption and a 10% reduction in associated greenhouse gas emissions largely as a result of reduced energy intensities of government operations. Under the policy for improving energy efficiency in government operations introduced in 1997, budget dependent agencies are required to submit energy consumption data annually to the Department of Industry, Tourism and Resources (ITR). Energy intensities, such as MJ/person, MJ/square metre and MJ/kilometre, are calculated and used to track changes in energy performance over time to allow simple comparisons to be made between similar facilities. All agencies covered by the policy are required to meet energy efficiency targets by 2002/3. Other measures include mandatory minimum energy intensity levels for new and refurbished buildings, and office equipment and appliances, the requirement that new building leases increase the incentive for building owners to improve building energy efficiency, regular energy audits of building space with implementation of cost-effective recommendations, and the application of minimum energy performance standards for new houses, with an energy review of existing stock. New fuel efficiency levels for the government vehicle fleet will be announced in early 2001. Government bodies not specifically covered by the policy are encouraged to adopt the policy measures. The success to date of the central government approach has encouraged states and territories to adopt similar measures in energy reporting, and a national government energy data reporting system has been developed by ITR, in co-operation with the other government jurisdictions.

Local Governments

Cities for Climate Protection™- Australia assists local governments and their communities reduce greenhouse gas emissions. The programme is funded through a commitment of A$13 million over five years, made by the Prime Minister in his statement, Safeguarding the Future, in November 1997. CCP™ is an international trade-marked programme of the International Council for Local Environmental Initiatives (ICLEI) delivered in collaboration with the AGO, under which councils commit to progress through five milestones with the aim of reducing greenhouse gas emissions. Councils that join the programme are provided with assistance, information and incentive programmes to design approaches to reduce greenhouse gas emissions and understand the potential impacts of climate change. With programmes running in a number of countries, Australia has taken the lead. CCP™ Australia now has over 160 local governments representing over 63% of the Australian population – the most of any country. This also represents nearly 30% of local government members worldwide.

INDUSTRY Greenhouse Challenge Programme

The Greenhouse Challenge, announced in 1995, is a joint voluntary initiative between the Commonwealth government and industry to abate greenhouse gas emissions. The Greenhouse Challenge programme was extended through the 1997 Safeguarding the Future statement. Included in the A$180 million package was an additional A$27.1 million over five years for the Greenhouse Challenge programme. The Greenhouse Challenge programme consists of three phases: The commitment (a contract between the Commonwealth government and an

industrial company). The co-operative agreement. Performance reporting.

The co-operative agreement includes an inventory of emissions, an action plan with specific actions to minimise emissions, performance indicators to measure

7

progress, and a forecast of expected abatement of emissions over a set time period. The programme also provides information to members, including technical advice on how to identify, monitor and mitigate emissions in each sector, a workbook to assist participants in developing their co-operative agreement, and workshops and seminars on technical issues and greenhouse actions. Participating organisations amount to 418 members with 250 signed agreements. Another 288 organisations had indicated through Letters of Intent their desire to join the programme. The Greenhouse Challenge achieved emissions abatement of 23.5 million tonnes of CO2 equivalent in the year 2000. The Challenge has almost total emissions coverage in a number of energy-intensive sectors, including electricity generation and distribution, and oil and gas extraction. The Challenge also has good coverage of a number of manufacturing sub-sectors such as machinery and metals manufacturing, iron and steel and aluminium and cement. In 2000, it was estimated that 45% of Australia's industrial greenhouse gas emissions were covered by the Greenhouse Challenge programme. An independent evaluation of the programme undertaken in 1999 recommended that the Greenhouse Challenge be continued as a collaborative initiative, with particular focus on expanding into less well represented sectors and focusing on major emission sources. Specific opportunities for improvement were identified in recruitment strategies, technical support and reporting. The report demonstrated that the Challenge has been effective in achieving greenhouse gas emission abatement and in building the capacity of both government and industry to identify, monitor, manage and report greenhouse gas emissions. The Greenhouse Challenge has demonstrated that it is a flexible programme that can remain effective in a changing environment. Australia Post is the country's largest retail network, with more than 4 000 outlets. Through its Greenhouse Challenge membership, Australia Post introduced a large number of energy efficiency measures. In the first year, the organisation expected a 1.8% reduction in its greenhouse emissions, and a forecast target of 3% by 2005. But the results exceeded forecasts. Australia Post achieved a 14.9% reduction in its first reporting, saving about 50 000 tonnes of CO2 equivalent and an estimated A$3 million a year. The Greenhouse Challenge programme was expanded in 1997 to include hundreds of smaller companies through another programme called Greenhouse Allies. Under this programme, large Greenhouse Challenge members mentor smaller firms through a group process to help them reduce their emissions.

Energy Efficiency Best Practice Programme

The Energy Efficiency Best Practice (EEBP) Programme launched by the Commonwealth government in mid-1998 assists targeted industries to reduce their greenhouse gas emissions while also reducing costs and increasing productivity through improving energy efficiency. A$10.3 million has been allocated by the government over a five-year period 1998-2003 to support the programme. EEBP’s major focus is on innovation and training, applying strategies that have the potential to identify efficiency improvements of up to 50% in key energy-using processes: Through innovation, EEBP brings together expertise from technology, industry

and research to provide a lateral, systems-based approach to specific processes and provides the participating company with support to implement the opportunities identified.

Through training, EEBP provides practical skills to all levels of a company, enabling them to develop the internal capacity sufficient to effectively manage and improve the energy efficiency of their operations.

8

The programme is currently undertaking both sectoral and cross-sectoral work in a number of areas identified as having opportunities for cost-effective improvements in energy efficiency. Sectors engaged in the innovation and training aspects of the programme include bread baking, supermarkets, resource processing, beverage and containers manufacturing, wine making and dairy production. Energy efficiency products include a range of promotional and advisory materials, information dissemination and bench-marking tools (hotels and aluminium sectors). Cross-sectoral activities include the development of products relating to motors, energy performance contracting and vehicle fleet management. EEBP has succeeded in promoting and implementing a range of strategies with participating sectors. Achievements over the past months include: In the baking sector, EEBP facilitated the development and launch of a

showcase best practice bakery with improvements to building fit-out, equipment efficiency and practices targeted at reducing energy use and greenhouse gas emissions by 40%.

EEBP strategies incorporated in the beverage making sector have resulted in substantial reductions in process energy usage. For example, a major brewer has achieved 35% reduction in refrigeration energy consumption and is aiming to roll out energy management training in all its national operations. A major soft drink manufacturer in implementing energy savings of up to 20% in a filling and refrigeration process and a large malt producer has also achieved a 12% reduction across its company wide energy budget.

Five of the major wineries covering over 60% of Australian production have participated in the programme and are implementing actions that are estimated to save between 9% and 43% in process energy applications.

A partnership between EEBP and the Australian Fleet Management Association (AFMA), Greener Motoring, identifies how managers of fleet vehicles can reduce fuel consumption by at least 15%, through successfully demonstrated fleet management practices. The Greener Motoring programme has been targeted at 5 000 organisations representing 65% of the vehicle fleet sector. To date 307 organisations which collectively manage 400 000 vehicles, have registered with the Greener Motoring programme. Fifteen of these organisations have recently been awarded certificate for achieving greater than 10% emissions savings.

A Best Practice Guide (BPG) to Energy Performance Contracts (EPC) has been developed and distributed to over 2 000 organisations. State government programmes are actively promoting the uptake of EPC by state and local government agencies.

Energy efficiency has been incorporated into a technology roadmap process for alumina refining, which identified the technologies, innovation and R&D needed over the next two decades to respond to the pressures of greenhouse and waste minimisation.

The programme and its activities are communicated through the programme's Website, bimonthly newsletter, stakeholder seminars and presentations to governments, key users and industry stakeholders. An independent full-term review of the programme has been conducted, finding the programme to be cost-effective and saving 1.2 Mt CO2 and A$74.6 million in energy costs by 2010 assuming the planned actions are implemented.

Generator Efficiency Standards (GES)

The Voluntary Efficiency Guidelines For Power Generation was launched in the Prime Minister's 1997 Safeguarding the Future statement and subsequently incorporated into the National Greenhouse Strategy. The measure was developed in recognition of the fact that power generation is responsible for more than a third of national greenhouse gas emissions (excluding change of land use). Design of the Guidelines, subsequently referred to as the Generator Efficiency Standards (GES) has been completed and agreed by governments. Based on the model

9

developed by the Efficiency Standards Working Group (ESWG), the government introduced on 1st July 2000 efficiency guidelines for power generators using fossil fuels. The standards apply to new power plants (approved after 30 June 2000) and existing power generators above a minimum threshold on a case-by-case basis. This includes grid-connected power stations, off-grid plant or auto-generators. The minimum threshold is 30 MW capacity, 50 GWh electrical output, and a capacity factor of 5% or more in each of the last three years. Approximately 65% of energy generation capacity in Australia is covered by the GES programme. It is proposed that the measure be implemented through legally-binding, five-year agreements between the Commonwealth and power generators. The contract specifies the approach generators should take in identifying and undertaking agreed actions that improve plant efficiency and reduce greenhouse gas intensity. Generators first sign the agreement. Then they calculate the best practice performance band and current performance of the plant and submit this information, together with a menu of options, to the government for agreement, within six months of signing. The menu of options outlines potential improvements for the plant. The generators must monitor their performance and report to the AGO (Australian Greenhouse Office) on a regular basis. The standards are reviewed every five years. The measure is expected to save about 4 million tonnes of CO2 equivalent a year during the first commitment period under the Kyoto Protocol.

Energy Utilities Information

Some energy utilities have distributed information material on climate change, developed energy efficiency promotional campaigns, conducted building energy management seminars and provided consumer advice.

TRANSPORT

Transport Policy Framework

In May 2000, the Australian Transport Council (ATC) directed the National Transport Secretariat (NTS) to work with Commonwealth, state and territory transport agencies to develop a long term strategy for reducing greenhouse emissions across the transport sector. The ATC provides a forum for Commonwealth, state, territory and New Zealand transport ministers to maximise the contribution of effective transport to Australia’s productivity, quality of life and equity. Ministers requested that particular attention be paid to the impact of urban traffic on greenhouse emissions and to develop an integrated national approach. The Strategy Lowering Emissions from Urban Traffic – An Integrated National Action Plan responds to that request. The strategy may be viewed at www.nts.gov.au/environment . The transport sector needs to make significant changes in order to implement a strategic and co-ordinated programme that will result in lowered emissions across the sector. The ATC, as a group that provides leadership and co-ordination of the transport system, is well placed to facilitate these changes.

National Average Fuel Consumption Target

The government is continuing to work with the automotive industry towards reaching agreement on a satisfactory national average fuel consumption target for passenger vehicles for 2010. The negotiations are being carried out in line with the Prime Minister's call for an improvement of 15% over business-as-usual average fuel consumption for new passenger vehicles by 2010 that was outlined in the 1997 statement Safeguarding the Future: Australia's Response to Climate Change. Fuel Consumption Label A mandatory, model-specific fuel consumption labelling scheme for new passenger cars commenced in January 2001. The scheme will be expanded to include a wider

10

range of vehicles in July 2003. The revised label will also show how much carbon dioxide is emitted by each vehicle.

Government Vehicle Fleets

The government has undertaken to develop options for challenging but realistic fuel efficiency targets from 2003 for government car fleets. A number of states have introduced initiatives to improve the efficiency of government fleets. The Victorian Greenhouse Strategy 2002 sets a target of reducing greenhouse gas emissions from the government passenger fleet by 10% by 2006. In July 2002, the New South Wales government placed the world's second largest order for hybrid vehicles with a decision to buy 200 Toyota Prius sedans. The state's Prius fleet -- second only to New York City's 300 -- will save NSW taxpayers an estimated A$550 000 in fuel costs over the next two years. The ACT Government Greenhouse Strategy released in 1999 stated that the government will aim to reduce the greenhouse gas emissions from the operation of its vehicle fleet by a further 15% by 2008. The Energy Efficiency Best Practice Programme is also targeting vehicle fleets (see separate section on EEBP). Fuel Consumption Guide. The government produces an annual Fuel Consumption Guide, providing reliable comparative data of the fuel consumption of new passenger cars and some classes of four wheel drives and light commercial vehicles. The Guide, available on the Internet at www.greenhouse.gov.au/transport/fuelguide , helps consumers choose the most fuel-efficient vehicle for their needs. Green Vehicle Guide In January 2002, the Motor Vehicle Environment Council, in consultation with the Commonwealth Department of Transport and Regional Services released a proposal for an Australian "green vehicle guide". The internet-based guide will provide information to consumers on the environmental performance of motor vehicles, including noxious and greenhouse emissions. The guide is expected to become available in 2003.

Integrated Transport Planning

The Australian government has released a green paper on fundamental land transport infrastructure reform, AusLink: Towards the National Land Transport Plan. AusLink will result in the development of a more sustainable and higher performing national transport network. It will also improve transport links across regional Australia, with funding specially earmarked for regional areas. The green paper proposes: Establishing an integrated National Land Transport Network -- transport

links of strategic national importance, such as rail and road connections between cities and to major ports and airports.

Developing a National Land Transport Plan -- a rolling five-year national plan with participation from the community, industry and all governments. A longer-term planning horizon of up to 20 years will be used to expand our understanding of the challenges our country will face.

Establishing a national advisory body -- of public and private sector experts to provide transport ministers with strategic analysis and advice on priorities for national infrastructure investment, reforms to support intermodal integration and infrastructure pricing.

Generating the best ideas -- expanding the range of organisations able to propose projects for Commonwealth funding, including state and territory governments, local councils, the private sector, user organisations, regional development bodies and community organisations.

Funding the best solutions -- widening the range of solutions eligible for Commonwealth funding, including new technology that can lead to better management and pricing.

11

Employing a consistent approach to funding -- establishing a single, flexible funding programme to replace the separate programmes for different transport modes. It will help to direct funds to the best projects. Regional funding will be earmarked.

Encouraging reciprocal responsibility -- encouraging the joint and complementary development and funding of projects between governments, and with the private sector, to increase the level of available funding.

The AusLink Green Paper is open for comment until 7 February 2003 and will be supported by a series of consultation meetings in metropolitan and regional Australia. The government will release a formal policy statement, or white paper, next year. AusLink will commence from July 2004.

Further information

For further information, please contact: Ian Cronshaw General Manager, Domestic Energy Policy Branch Energy and Environment Division Department of Industry, Tourism and Resources Canberra Tel: +61 (2) 6213 7879 Fax: +61 (2) 6213 7902 E-mail: [email protected]

1

AUSTRIA Updated June 2003

BACKGROUND

Energy Report 1993 and 1996

The Energy Report 1993 of the federal government was agreed upon in the Ministerial Council in May 1993 and adopted by the National Council after due consideration on 6 April 1994. It laid down the goals for Austrian energy policy which remain unchanged. These are: Security of supply. Cost-efficiency of the energy supply. Environmentally benign energy supply. Social acceptability of the energy supply system.

In order to achieve these objectives the federal government especially makes use of the following strategies: Promotion of the rational use of energy (improvements in energy

efficiency). Promotion of renewable sources of energy.


Austria ratified the United Nations Framework Convention on Climate Change (UNFCCC) on 28 February 1994. The Convention entered into force globally on 21 March 1994 and for Austria on 29 May 1994. The first National Communication entitled National Climate Report of the Austrian Federal Government in compliance with the obligations under Articles 4.2 and 12 of the Framework Convention on Climate Change, Vienna, was issued in August 1994. Austria supports the UNFCCC climate change policies. The government had committed itself in all official reports to a national target of a 20% reduction of CO2 emissions by 2005, based on 1988 emissions. Meanwhile, the target has been adapted to the Kyoto Protocol under the UN Framework Convention on Climate Change, where the European Union as a whole has taken on the commitment of an 8% reduction of the greenhouse gases CO2, CH4, N2O, HFCs, PFCs and SF6 until the commitment period from 2008 to 2012. The percentage reduction is based on the emissions of 1990 (for CO2, CH4, N2O) and 1990 or 1995 (for HFCs, PFCs, SF6). The EU Member States have thereafter agreed on individual reduction targets for each Member State. According to the so-called "Burden sharing-agreement“1 Austria is committed to reduce greenhouse gas emissions by 13% below 1990 levels by the time of the first commitment period 2008-2012. Total Austrian GHG emissions have risen 2.7% from 1990 to 1999, so the country must now reduce emissions slightly more than 15% from 1999 levels in order to meet the Kyoto Protocol commitments. The Austrian Parliament ratified this Protocol in March 2002 and the EU as a whole ratified it in May 2002, making the country's commitment to GHG emissions targets legally binding. The Second National Climate Report of the Austrian Federal Government was published in September 1997 in compliance with the UNFCCC obligations. Austria's Third National Communication to the UNFCCC was finalised in November 2001. It described in detail the National Climate Strategy (Strategie Österreichs zur Erreichung des Kyoto-Zieles -- Klimastrategie 2000 -- 2008/2012) (see below).

1 The Burden-Sharing Agreement covers CO2, CH4, N2O, PFCs, HFCs and SF6.


2

Energy related measures are described in several sections of Chapter 4 of the Third National Communication. They are related to minimum thermal standards for buildings, thermal insulation of dwellings and support schemes for energy efficient constructions and the use of renewable energy in new buildings (see below).

The National Environment Plan (NUP)

The National Environmental Plan (NUP) of the federal government was adopted in 1995 and provided Austria with a long-term concept and integrates these environmental commitments at all political levels — industrial policy, energy policy, agricultural policy and technology policy. In this plan, the major energy related targets were defined as further advances in energy efficiency and a continuing shift to renewable energy sources.

Klimastrategie 2000-2008/2012

In response to climate change challenges, Austria has recently developed the "Strategie Österreichs zur Erreichung des Kyoto-Zieles- Klimastrategie 2000-2008/2012"; this report builds on the ideas and structures outlined in Austria’s Third National Climate Report submitted to the UNFCCC by the federal government in November 2001. It is based on the study “Kyoto-Optionen-Analyse” by the "Österreichische Kommunalkredit“; this study built upon work of the Austrian Council on Climate Change (ACCC) (especially the "Kyoto Technology Package“, which had been proposed as a follow-up to the "Austrian Toronto Technology Programme“) as well as related studies from the business and industry sector and took into account the views of different stakeholders on costs and effects. This is a comprehensive strategy which lays out a series of measures intended to curb the country’s GHG by 13% below 1990 levels by 2008-2012, as stipulated in the EU burden-sharing. The Klimastrategie was released in early 2002 and co-ordinated by the Federal Ministry of Agriculture, Forestry, Environment and Water Management which has responsibility for overall energy policy with respect to climate change. The plan was developed as part of a consultative process among the relevant ministries at the federal level as well as with representatives of all nine Länder and calls for a variety of measures at the federal, Länder, and municipal level. Responsibility for the implementation of the Klimastrategie is shared amongst various federal and Länder government institutions. Austrian policies and measures designed to achieve the GHG emissions reductions required by the Kyoto Protocol which are mainly related to energy efficiency are broken down into seven different categories. These are clearly laid out in the Klimastrategie (Climate Strategy) and the country’s third communication to the UNFCCC. The categories of measures are listed below along with the country’s expectation of how much emissions reduction each set of policies will achieve. The sum of annual emissions reduction from the combined measures listed below would be 13.85 Mt of CO2-equivalent, an amount approximately 1.65 Mt more than Austria’s required reduction from 2000 levels in order to meet Kyoto. Space Heating and Small Consumption This category involves the following activity types: Thermal improvement of existing building stock. Enhanced technical standards for new buildings. Increasing share of renewable energy sources and district heating. Increasing boiler efficiency. Switching to fuels with lower (fossil) carbon content. Demand-side measures to reduce electricity demand.

3

Measures in this category are expected to reduce CO2 emissions by 4 million tons per annum once fully implemented.2 Energy Supply This category deals with all measures related to energy supply with activities falling under one of the following headings: The role of renewable energy sources and efficient district heating

systems. Electricity production and various means of supporting non-polluting

electricity generating systems that are not currently commercially competitive in a liberalised market.

Heat production in the form of maximising benefits of indigenous biomass resources.

Cross-cutting measures which would include energy-related taxes and earmarking for climate change related measures, and intra-national GHG emissions trading schemes.

Measures in this category are expected to reduce CO2–equivalent emissions by 2.1 million tons per annum once fully implemented. Transport This category includes measures to curb emissions from all modes of Austrian transport. Activities include: Financial instruments for motor vehicles (i.e. fuel consumption based

registration taxes and road tolls). Regional and urban rail transport investments. Improvement of fuel quality and promotion of bio-diesel. “Car free” tourism projects (e.g. building public transportation at heavily-

frequented tourism locations). Technology innovation. Traffic management, reducing speed limits, and improvement of spatial

planning. Measures in this category are expected to reduce emissions by 3.7 million tons of CO2 equivalent per annum once fully implemented. Industry Austria has experienced a degree of uncoupling of its production output and its energy demand over the last 20 years. Overall GHG emissions from industry accounted for 22 Mt in 1980 were flat throughout much of the early 1990s and have shown a slight increase since 1997. Policies and measures for the manufacturing industry, therefore, aim at supporting a continuation of efforts undertaken by companies. Such policies encourage the use of renewable energies, greater energy efficiency, and the implementation of an emission trading regime. They are expected to produce GHG emission reductions of 1.25 million tons of CO2 equivalent per annum once fully implemented. For more information on the Climate Strategy, see: http://www.accc.at/pdf/klima-english.pdf

2 The emissions reduction effects from demand-side measures have been included in the Energy Supply category in order to avoid double counting.

4

In the 2002 in-depth review of the energy policies of Austria, the IEA stated: The Government of Austria should: • Conduct regular monitoring of the implementation and actual emission

reductions of the proposed Klimastrategie measures under close co-ordination between relevant ministries and between the public and private sectors.

• Revisit the cost-effectiveness of various Klimastrategie policies as cost experience is gained through their implementation

Austrian Strategy For Sustainable Development

The government has recently announced plans to accelerate the reduction in its national energy intensity. In April 2002, the government published the Austrian Strategy for Sustainable Development (Die Österreichische Strategie zur Nachhaltigen Entwicklung) which establishes goals for the further reduction of the country’s energy intensity (defined as national TPES per unit of GDP). The country is aiming for an average improvement of energy intensity of 1% per year beyond the normal improvements in this area that can be expected without any explicit policy initiatives. The report defines this normal energy intensity improvement to be the average EU decrease of energy intensity in the time period 1990-1997, which it estimates as 0.6% annually. Therefore the total energy intensity improvement target is 1.6% annually. Such a target is identical to that put forward by the European Council for all EU countries in their resolution on energy efficiency issued on 7 December 1998. For more information on Sustainable Development: http://www.nachhaltigwirtschaften.at/english/index.html Policy of the new Federal Government The new Federal government which was sworn in on 28 February 2003 stated in its programme a variety of measures for sustainability and environment protection, for example: Increase of energy efficiency (energy consumption per GDP unit) by 1.6%

per annum. Investment of an additional € 30 million per annum from 2004 to 2006 to

implement the Climate Strategy. Going a further step in the direction of shaping an ecologically oriented tax

system including price signals for the consumption of non-renewable resources and incentives for environmentally benign and sustainable behaviour.

Further expansion of alternative forms of energy, e.g. an increase in the share of green electricity, more solar energy and more biomass.

Contracting programmes for energy saving in public buildings. Increase of the use of biomass by 75% in 2010.

For more information on the government policy statement: http://www.austria.gv.at/e/


Austria is a federal country with nine Länder (provinces). The Länder as well as the municipalities are active players in the energy market. The Federal Constitution allocates responsibilities either exclusively to the federal level, or to both the federal level and the state level. Federal level responsibilities cover issues that require co-ordination between Länder, such as energy security, while the Länder responsibilities involve issues endemic to each state, such as building code efficiency regulations and subsidies for renewable energy, where diverse local conditions require different types of approaches. Co-ordination of various initiatives between the federal and provincial

5

governments is a priority in Austrian energy efficiency policy. In this context, according to Article 15a of the Federal Constitution, an agreement between federal and provincial governments on the efficient use of energy came into force in June 1995. This agreement obliged the parties to adopt a specific set of measures with respect to energy efficiency by 15 June 1998. The Federal Ministry of Economic Affairs and Labour (Bundesministerium für Wirtschaft und Arbeit, or BMWA) is the main body responsible for energy policy on the federal level. Other ministries involved in energy matters include: (i) the Federal Ministry for Agriculture, Forestry, Environment and Water Management, (ii) the Federal Ministry for Transport, Innovation and Technology, and (iii) the Federal Ministry for Finance The instruments for the financial support of energy efficiency measures (by households, enterprises and municipalities) encompass a variety of programmes. Most of them are at the Länder level and in many cases the improvement of energy efficiency is only one of several programme goals. Due to this variety and multi-functionality of the programmes, exact data on financial support granted and investments triggered are not available. In the 2002 in-depth review of the energy policies of Austria, the IEA stated: The Government of Austria should: • Further improve co-ordination among the many bodies and programmes

which address energy efficiency in the country.

Technology, Research, Development and Demonstration

Public funding of research, development and demonstration is another important pillar of Austria's energy conservation strategy. Compared with direct subsidies for the implementation of energy conservation technologies, Austria regards the funding of RD&D as highly conformable to the principle of non-interference with the market-mechanism. Helping technology applications to become competitive is a relatively ”soft” measure. Regarding energy-related fields exclusively, Austria is at a medium level among the EU countries with respect to public spending for research and technology development. In 2000, the government sponsored approximately € 24 million of energy-related R&D funding, or about € 3 per inhabitant. This R&D budget represents a decrease from the period between 1995 and 1999 when energy-related R&D budgets were consistently above € 25 million. Experts within the Austrian government attribute this drop in funding to a decrease in the number of research proposals received rather than to less overall funding available. Many research institutions were assumed to have deferred submitting proposals until 2001 when some of the features of the biomass funding were scheduled to become slightly more attractive. Initial indications from 2001 bear out this hypothesis with preliminary budget figures showing that energy-related R&D public funding for 2001 rose 25% to € 29.9 million. This most recent figure continues the long-term trend in increasing R&D funding in Austria. In 1990, the level of energy-related public R&D funding was slightly less than € 10 million.

6

In the 2002 in-depth review of the energy policies of Austria, the IEA stated: The Government of Austria should: • Further clarify the objectives of the R&D programmes to meet particular

energy and environmental policy objectives and allocate resources appropriately based on its national goal of expanded R&D expenditures.

• Enhance monitoring of progress in reaching the energy-related R&D goals Austria has established.

• Review energy R&D priorities in order to maximise the cost-effectiveness of limited government R&D expenditures needed to realise mid- to long-term objectives in the energy sector.


Measures already existing and/or being improved

Space Heating and Electricity Demand

The strategy to reduce GHG emissions from space heating is based on the following pillars: Thermal improvement of existing building stock, enhanced technical standards for new buildings, increasing share of renewable energy sources and district heating, increasing boiler efficiency, switching to fuels with lower (fossil) carbon content. The most important instruments with regard to these targets are technical construction regulations, housing support schemes (both under sole responsibility of the states) and federal funds to support district heating and entrepreneurial use of renewable energy sources and efficiency improving measures (trade, industry, agriculture). The federal level is also responsible for civil law with respect to the residential matters.

Building Codes

Since legislation for building codes falls under the responsibility of the Länder, an agreement between the federal government and the Länder in accordance with Article 15a of the Federal Constitutional Law was applied to formulate common goals and to co-ordinate future action. This agreement on energy efficiency entered into force on 15 June 1995. According to the objectives stated in the 1993 Energy Report, the following measures were adopted in the agreement: • Harmonisation of federal provinces’ regulations for the realisation of the

agreement’s objectives. • Basic regulations regarding the energy consumption of appliances. • Specific regulations regarding heating systems and building structures. • Increased consideration of objectives relating to environmental policies. Reduction potential by 2010: A decline in heating requirements in new buildings to 50 kWh per square metre a year and in old buildings to 75 kWh per square metre a year has been assumed. In the case of new buildings, energy savings of 3.6 TWh a year (corresponding to 0.5 million tonnes a year reduction in CO2 emissions) and regarding old renovated buildings, energy savings of 21.3 TWh a year (corresponding to an annual reduction of 3.2 million tonnes in CO2 emissions) can be expected by 2010. Minimum thermal standards for buildings Improving thermal quality of buildings is important for reducing energy demand for space heating. Experiences show that construction technologies

7

and techniques undergo continuous improvements and can be influenced positively by strict legal standards. Therefore thermal standards for buildings are defined in the Technical Construction Regulations of the states by way of U-values (=k-values) for different construction components, although most states opened the possibility for a more flexible approach by defining certain energy demand codes for the whole building (per square metre). Almost all states have improved U-values over the past years and in some cases have also gone well beyond minimum standards within the existing “Agreement on Energy Saving” of 1995 on the basis of Article 15a of the Federal Constitution Act between the federation and the nine provinces. In general, technical construction regulations apply only to newly constructed buildings (except, for example, change of windows). As long as no obligatory standards for renovation measures exist, thermal standards of the old building stock therefore need to be influenced mainly by other instruments, especially public support schemes for renovation. Thermal insulation of dwellings Austrian provinces administer subsidies of more than € 2 billion annually for housing support programmes. Therefore, a majority of dwellings is constructed or renovated with public support. Around 75% of financial resources are actually spent for new construction, the rest for renovation of existing buildings. With the largest building stock of the nine Austrian provinces, the city of Vienna is different in this regard. In Austria’s capital, more than 50% of available financial resources are spent for renovation of buildings, in most cases for standard improvement measures (bathroom, central heating systems, windows, consolidation of flats etc.). In all Austrian provinces individual measures, like windows changes, installation of thermal solar systems or replacement of old and inefficient heating systems also benefit from subsidies. Several Länder give special incentives for biomass heating systems (e.g. wood pellets) and/or phased out support schemes for renovation or replacement of fossil fuel heating systems.

Heating Costs Accounting

The Heating Cost Accounting Act (Heizkostenabrechnungsgesetz, Federal Law Gazette 827/1992) regulates the accounting of heating costs based on actual consumption instead of usable floor space. More precise and cheaper heat measuring instruments (a relatively cheap measure) and rehabilitation in terms of heating technology of buildings and heat supply installation (a relatively expensive measure) are being developed to prevent the trend towards accounting as a percentage of usable floor space and the 15-20% higher energy consumption observed in this connection. A 15-20% reduction of heating consumption is expected from this measure.

Electric Appliances and Others

The agreement on efficient energy use based on Article 15a of the Federal Constitution between the Federation and the Länder contains the following elements: Labelling and description of specific energy consumption of household

appliances. Legal requirements to provide information for comparison of household

appliances. Ceilings regarding maximum consumption of household appliances.

All EU directives regarding labelling of energy consumption of household appliances have been implemented through national law within the Elektrotechnikgesetz (ETG).

8

Energy Agencies

Eight regional and local energy agencies have been created since 1994. They are funded by the Federal Ministry for Economic Affairs and Labour, the Länder and municipalities.

Subsidies for Insulation

The Bürges Förderungsbank, a specialised bank in charge of the administration of ERP funds provides financial support inter alia for energy efficiency measures. Support granted in 1998 (for insulation of buildings and other energy efficiency measures) was approximately Sch 1.3 million3, the resulting investments amounted to about Sch 25 million.

Support Schemes

In the past, public support programmes for construction of new dwellings have had rather counterproductive total impacts on CO2 emissions, as they have lacked quality standards. Over the past years most Austrian provinces started to introduce specific incentive schemes for energy efficient construction (improved insulation, zero energy houses, etc.) and the use of renewable energy sources, such as heating systems based on biomass and solar installations. Generally, subsidies under the housing support schemes of the Länder in the new construction sector are segmented into different components. All Länder give basic subsidies for new houses built in conformity with existing technical construction standards. Most Länder give supplementary subsidies, either on social grounds or for specific measures to improve the quality of buildings well beyond legally binding standards. Supplementary supports, differentiated along energy-related specifications, led to significant decreases in CO2 emissions from new dwellings since 1995. The schemes also had positive impacts on the construction industry in terms of technically improved building standards at competitive costs. Energy efficiency measures, i.e. insulation, other energy saving measures and connection to district heating, are supported by all nine Länder in the context of housing improvement in various ways: loans, subsidies, sureties. In 1998, 41,803 dwellings benefited from such measures resulting in € 431.8 million of total expenditures leveraged by € 112.9 million of government support. In 1999, 33,736 dwellings benefited from such measures resulting in € 228.8 million of total expenditures leveraged by € 81.4 million of government support. In total for households there are 26 programmes for the support of various energy efficiency measures and 21 programmes for financial support in connection with district heating. No comprehensive monitoring is carried out to show the amount of energy that was ultimately saved through these programmes.

Building of Tomorrow

The Austrian Federal Ministry of Transport, Innovation and Technology (BMVIT) in co-operation with a network of experts and with the assistance of the Austrian Industrial Research Promotion Fund has developed the Austrian Programme on Technologies for Sustainable Development. This five-year research and technology programme initiates and supports trend-setting research and development projects and the implementation of exemplary pilot projects. The sub-programme "Building of Tomorrow" makes use of the two most important developments in solar and energy efficient building: the passive house and the low energy solar building method. "Buildings of Tomorrow" are residential and office buildings and differ from current construction practice in Austria in that they fulfil the following criteria:

3 On average in 2001, Sch 1 = US$0.065. In 2002, Sch1 = € 0.07267.

9

Higher energy efficiency throughout the whole life-cycle of the building. Greater use of sustainable raw materials and efficient use of materials in

general. Greater use of renewable energy sources, especially solar energy. Increased consideration of user needs and services.

However, the costs should be comparable with conventional building methods. The "Building of Tomorrow" sub-programme includes the following elements: Technology and component development. Development of innovative building concepts for residential and office

buildings. Setting up and evaluating demonstration projects. Market diffusion of the "Buildings of Tomorrow".

Since 1999 projects have been supported with an amount of some € 7 million of public funding. This released innovative projects with an overall budget of some € 120 million. Web site: www.hausderzukunft.at

INDUSTRY Measures already existing and/or being improved

The Austrian government has not established regulatory constraints on industry which mandate minimum energy efficiency standards in the industrial sector. This is partly due to the diversity of production processes in the sector itself and the consequent difficulty in establishing standards which can be applied to different systems. It is also due to the government’s federal structure and the corresponding authority held by the Länder government which makes it difficult to sustain such standards nation-wide. While industry is subject to environmental laws which can effect energy efficiency, the government’s greatest influence in this area is through the financial support of energy auditing and investment in efficient systems. These support systems are described below.

Information/ Technical Assistance

In 1980 an audit consultancy service for industrial enterprises was created and financed by the Federal Ministry for Economic Affairs and Labour in collaboration with the Austrian Energy Consumer Association (ÖEKV). The underlying service contract (between ÖEKV and the ministry) for the year 2001 was the 13th of its kind. Since the programme's inception in 1980, more than 550 companies were audited and impressive potentials for improving energy efficiency in industrial companies were identified. As ÓEKV also proposes concrete measures for improvement it is demonstrated to companies that the payback periods are in many cases less than two years. These audits are free of charge for the interested companies. From 1998 through 2001, this programme has worked with 89 companies. These audits have identified 171 GWh of annual energy savings potential, an amount equal to 8.1% of the firms’ total energy use. For the period from 1998 to 20004 the audited firms consumed a total of 2 297 GWh, an amount equal to 1% of the total energy consumed in the industrial sector over that time and 0.3% of the country’s total final consumption. The targeted potential savings from this programme are equal to 0.8% of the country’s total final energy consumption. No comprehensive monitoring system has tabulated data on the actual realisation of these potential projects or the amount of energy that was ultimately saved.

4 Statistics on total Austrian industrial energy use have not yet been prepared for 2001, so one can only look through 2000. Nevertheless, there is no reason to believe that the three years of data from 1998 to 2000 are not representative.

10

Austria disposes of a network of energy auditors covering all Länder. In order to facilitate access to this useful service, the Energy Efficiency Agency (EVA) has published a brochure listing all the energy auditors. To ensure minimum qualification standards, the ARGE Energie-beraterausbildung has developed a multi-level training programme including the possibility of a university degree (post-graduate). In addition, in order to improve the communication skills of auditors, EVA holds seminars entitled Energy Auditing —Train the Trainer.

Demand-Side Management (DSM)

The Association of Austrian Electricity Utilities carries out different demand-side management activities to improve efficiency in energy supply. The major activities are as follows: Consumer information and advice: to increase consumer awareness of the

rational use of energy by giving concrete advice. Examples include advertising campaigns for the replacement of old electrical appliances by new more efficient ones, establishment of a Club for the Conservation of Energy, the promotion of heat pumps, an annual prize for companies that succeed in improving their energy efficiency.

Load management to improve the utilisation of production capacity to reduce peak demand. Price differentiation (different tariffs for different seasons and times), special tariffs for interruptible electricity supplies and load management as a service to major consumers are some examples of these measures.

Partly as a result of the liberalisation of the electricity sector, these utilities have cut back on these programmes drastically.

Combined Heat and Power (CHP)

District heating (DH) and combined heat and power (CHP) plants are widespread throughout Austria, and are often instrumental in meeting the heating and power needs of medium and large cities. District heating schemes produce approximately 12% of the country’s heating and hot water and 27% of the country’s electricity. The city of Vienna has the most extensive system which provides 50% of the city’s power and 40% of its heat and hot water. In 2001, the four CHP plants that serve WienStrom, the Viennese energy utility, had a combined electric capacity of 1 050 MW. They operated at a 35% capacity factor over the year and produced 3 255 GWh of output. In additional to such municipal facilities, industrial plants also make use of CHP technology. CHP has long been supported by the regulatory structure in Austria. In order to survive financially, the majority of Austrian CHP plants require tariffs per kilowatt-hour of electricity above pure market prices. The Austrian Energy Liberalisation Act implemented on 1 December 2000 includes the Federal Act providing new rules on the organisation of the electricity sector, "ELWOG 2000" (Electricity Act 2000). This Act stipulates that the executive laws of the nine Länder can impose on grid companies the obligation to purchase electricity from CHP plants, provided that they serve public district heating supply. It also stipulates that a minimum payment per kWh can be granted to CHP generated electricity, also provided that they serve public district heating supply. As a result, the Austrian Energy Liberalisation Act allows the Länder to pay CHP plants for their power at rates higher than those of other generation options. Industry experts estimate that the average cost of CHP-provided power would be approximately 5 € cents / kWh while system marginal cost throughout the year would average 3 € cents/kWh. The regulations allow the utilities to recover these additional costs through tariff supplements imposed on all electricity grid users. These payments are in a per kilowatt-hour form. The Länder of Vienna makes the most extensive use of CHP plants. To support this system, each Viennese customer pays an additional 0.7427 €

11

cents per kWh of electricity consumed, which goes into a fund used to pay for power coming from CHP facilities. Based on the average retail residential rates for electricity in Vienna of approximately 15 € cents/kWh, the CHP surcharge represents a 5% increase in customers’ electricity bills. While the original Liberalisation Act gave the Länder full discretion in setting these rates as they chose, legislation making its way through the Austrian parliament establishes one CHP tariff for the entire country. However, neither the original law nor the 2002 update make provisions for the continuation of this system after 2004. No alternative policy for the support of CHP facilities has gathered sufficient political momentum to be considered as a possible replacement of the current support scheme. In July 2002, the new Green Electricity Act was passed by the National Council and Federal Council (announced in mid-August 2002). Most of its clauses came into effect on 1 January 2003. The Green Electricity Act governs the aid for green energy and combined heat and power generation throughout the country. This means that all end consumers and electricity dealers in Austria contribute to an equal extent to the financing of the aid required. The Green Electricity Act lays down a budget limit on aid based on calculations of the expenditure required for cost-effective implementation. The expenditure is financed as two components: firstly the electricity dealers must reduce their proportion of cost to an internal price of 4.5 cent/kWh (this is greater than the sales proceeds for the electricity dealers). Secondly, the end purchasers must pay a supplement to the network tariff (probably around 0.25 to 0.30 cent/kWh). As of 1 January 2003, this supplement replaces the former federal state supplements which are between 0.05 cent/kWh and 0.8 cent/kWh and would have had to be increased anyway to finance the Green Electricity Act. In the 2002 in-depth review of the energy policies of Austria, the IEA stated: The Government of Austria should: • Review the support scheme for CHP plants, including its continuation after

2004. Maximise CHP’s cost-effective contribution to meeting environmental goals through such measures as a gradual lowering of the support levels in accordance with a benchmarking system which includes minimum efficiency standards.

Benchmarking In a number of Austria's Länder (Upper Austria, Salzburg, Styria, Tyrol,

Vorarlberg, Vienna) energy efficiency benchmarking projects have already been initiated. In a first step, industry branches are carefully analysed with a view to assessing their energy efficiency standards and potential for improvements. Based on this know-how, companies can compare their own performance against industry leaders and can derive valuable information on how to increase their energy efficiency.

Subsidies: “Umwelt- förderung” Programme

Within the framework of the Umweltförderung in accordance with the Environmental Support Act (Umweltförderungsgesetz, UFG) which is managed by Österreichische Kommunal-kredit (ÖKK) (a specialised bank) on behalf of the Federal Ministry of Agriculture, Forestry, the Environment and Water Management, companies can obtain subsidies for thermal improvement of buildings, for other energy efficiency measures, for connection to district heating and for CHP. From 1998 through 2000, total subsidies issued through the ÖKK were € 12.4 million. Total investments in energy efficiency resulting from these supports amounted to € 55.0 million. No data exist on the energy efficiency improvements realised from these investments.

12

In 2000, subsidies were: Thermal improvements in buildings 1.8 million Euro Other saving measures 0.4 " " Connection to district heating 0.5 " " CHP plants 0.3 " " The investments resulting from this support amounted to € 6.8 million, € 1.4 million, € 1.7 million and € 1.1 million respectively. In addition to the two schemes, Energy audits and the Environment Support Act, there are about 30 programmes -- mainly run by the Länder -- for the support of various energy efficiency measures in the manufacturing industry.

Co-operation on Research, Energy and the Environment

The so-called Bund-Bundesländer-Kooperation auf dem Gebiet der Rohstoff-, Energie- und Umweltforschung (co-operation of the Federal State and the Länder in the research on raw materials, energy and environment) was founded in 1978 as an informal platform of co-operation between several federal ministries and Länder. Potential projects of common interest are discussed and, if selected, funded and implemented in co-operation with Austrian research institutions. Examples of recently funded projects are electricity-powered taxis in the city of Graz and a study on the use of sterling-motors in electricity generation using biomass.

Research Co-operation in the Electricity Industry

In 1991 the Verbundgesellschaft (the Austrian electricity industry, the Länder electricity companies as well as the municipal and other electricity utilities) established the Energieforschungsgemeinschaft (EFG) within the framework of the Verband der Elektrizitätswerke Österreichs, VEÖ (Association of Austrian Electricity Utilities). EFG’s general aim is to improve the generation, distribution and use of electricity in terms of cost-effectiveness, efficiency and environmental compatibility. Its research activities focus on: Environment. Renewable sources of energy. Innovative energy technologies. Energy efficiency. Social, economic and political framework.

As a member of the European Union, Austria also participated in the energy programmes of the Fourth and Fifth EU Framework Programme for Research, Technological Development and Demonstration (RTD). Austrian enterprises and universities mainly participated in projects of renewable energies and energy efficiency.

Sub-programme "Factory of Tomorrow"

In the framework of the Austrian Programme on Technologies for Sustainable Development, the sub-programme "Factory of tomorrow" addresses trade and industry as well as service enterprises that produce and provide products of tomorrow using materials of tomorrow to meet future needs. The following aspects have to be taken into consideration: Aiming at zero-waste and zero-emission technologies and methods of

production. Increased use of renewable raw materials for materials and products. Increased use of renewable sources of energy in the production process

and in the enterprise as a whole. Development of new partnerships and co-operation as well as in-house

models for further training and participation of employees in order to achieve these objectives.

13

Since 2001, additional energy-related projects, such as a survey for the potential for the use of solar-thermal energy in industry, have been carried out by this sub-programme.

Energy Technology Programme

At the beginning of 1993, at the federal state level, a programme on energy-technology was created within the Innovations- und Technologiefonds, ITF (Innovation and Technology Fund) for a period of five years. After its expiration at the end of 1997 the programme was extended to 1998 – in particularly to synchronise with the Fourth EU framework programme on RD&D. Follow-up activities were initialised within the ITF programme on “technology transfer”. The main emphasis was given to the stage of market introduction of innovative technologies, processes and products (pilot plants, integration into grid based systems, monitoring of these phases), taking account of the huge investments necessary and the problems of co-operation with grid operators. As a consequence of the restructuring of the federal state technology programmes, the ITF was replaced by the so-called Kompetenzzentren, Impulsprogramme, Regierungsinitativen, KIR. Special emphasis is given to centres of excellence in the field of energetic use of biomass; both the thermal use of biomass and conversion to electricity are seen as important options.

Measures under Consideration

Long-term Agreements

From June 2000 until the autumn of 2001, EVA, the Energy Efficiency Agency, together with partners from Italy and Norway worked on a project concerning the implementation of long-term agreements (LTA) on energy efficiency in industry (energy intensive industry, except energy industry). Various forms of LTA were examined with regard to their effects and the elements necessary for success as well as the possibilities for implementation in Austria. The purpose was to find out how LTAs have to be designed to enable their integration into the mix of Austria's energy efficiency policy instruments. For Austria, a country with no LTA tradition in the energy efficiency field, the study's results are certainly a valuable input for discussion should LTA be chosen as an option for energy efficiency measures.

PUBLIC SECTOR In March 2001, the Federal Ministry of Economic Affairs and Labour together with the Federal Ministry of Agriculture and Forestry, the Environment and Water Management, started an initiative on third-party financing (TPF) of energy efficiency measures in (federal) public buildings, following a successful pilot project in 64 federal schools with a usable floor-space of more than 500 000 square metres. A management group consisting of representatives of Bundesimmobiliengesellschaft (the company which owns the federal public buildings and leases them to the user Ministries), user Ministries, the Federal Ministry of Economic Affairs and Labour and external consultants was set up and has so far accomplished the following tasks: Selection-based on relevant data and analyses-of those buildings which

are in principle suitable for TPF. Grouping these buildings. Definition of specific projects, of specific objectives, of tendering criteria

and of framework conditions for the future contractors. The potential annual savings of energy costs after the implementation of the projects is estimated at € 6.5 million. The potential for reduction of CO2 emissions is estimated to be between 70 000 and 100 000 tonnes.

14

TRANSPORT


Vehicle Taxation

Vehicles in Austria are subject to two different types of taxes: a fuel consumption tax (Normverbrauchsabgabe/NoVA)) and a car registration tax (Kraftfahrzeugsteuer). The fuel consumption tax NoVa was introduced in 1992. This tax has to be paid at the time of purchasing a new car and is based on the fuel consumption specifications of the car. The Structural Adjustment Act in 1996 led to an increase in this tax rate of about 1% by changing the way fuel consumption is measured. At the same time, the maximum tax rate was raised from 14% to 16%. Since the fuel consumption tax increases the tax burden depending on the vehicle’s relative fuel consumption, this measure offers incentives for the purchase of energy-efficient vehicles. In recent years a strong trend towards diesel powered vehicles reduced the average fuel consumption. In 1996 diesel powered vehicles accounted for 50% of all new registrations compared to 22% before the introduction of the fuel consumption levy. Diesel vehicles currently hold a share of 40% to 50% of the total passenger vehicle fleet compared to 5% in the mid-1980s. The car registration tax has to be paid for each month in which a vehicle is registered and has a number-plate, the prerequisite to use public roads. The level of the tax depends on engine specification and it is paid to the insurance company together with the liability insurance premiums. The tax is then forwarded by the insurance company to the tax authority.

Road Traffic Regulations

Some provisions of the Road Traffic Regulations have been amended to implement a general night-time driving ban for non-low noise trucks and a 60 km/h speed limit at night (in force since 1 January 1995) and to implement enhanced monitoring of adherence to existing speed limits (in force since 1 October 1994).

Annual Check-up

In order to maintain vehicles in a satisfactory technical state, every car must undergo an annual check-up. (EU legislation calls for a maximum of two years between check-ups.)

Master Transportation Concept

The 1991 Master Transportation Concept adopted the goal of reducing CO2 by 20% by the year 2005 (from 1988 levels) and formulated appropriate measures to bring about this reduction. These measures are based on the following principles: Avoid unnecessary traffic. Shift traffic to more energy-efficient and environmentally compatible means

of transport. Undertake technical innovations in motor vehicles to optimise energy. Use real costs.

Combined transport is supported under a programme managed by the ERP fund with an annual budget of about € 2.9 million.

Road Pricing

To better utilise the available infrastructure of motorways and express ways and to improve traffic distribution, a road pricing system has been set up. In 1997 an annual fee for motor vehicles to use motorways and express ways was introduced. This fee is paid via the purchase of a sticker (vignette) which has to be stuck onto the windscreen. The price of the vignette until the end of

15

2002 is € 73 (passenger vehicles) and € 727 (HGV up to 12 tonne) per year. The introduction of a toll depending on mileage for motor vehicles exceeding 3.5 tonne is being discussed.

Transport Demand Management for Companies

To promote environmentally acceptable commuting and company-related mobility, the Austrian Federal Ministry of Agriculture, Forestry, Environment and Water Management, together with the Austrian Federal Economic Chamber in co-operation with three large enterprises, carried out a model project for "Transport Demand Management for Companies" which have shown encouraging results (e.g. -17% emissions). The following measures, mainly related to energy efficiency improvement, have been implemented: information events, information via internet, special travel offer, improved booking possibilities for business trips by railways, presentation of car-sharing, purchase of office bicycles, etc.

Public Transport

The following measures have been taken to promote municipal, local and regional public transport: Limit individual traffic, especially in downtown areas — limit entry to city

centres by such measures as pedestrian zones. Manage parking space. Promote the creation and enlargement of municipal, local and regional

public transportation networks. In 1996, the Technical University of Vienna published the study Creation and Financing of Public Transportation Networks. Its main conclusions were the need for a network system covering Austria as a whole; the creation of a planning authority; changes in the system of concessions.

Bilateral Agreements

In order to promote the use of buses and trucks with low emissions and low consumption, Austria has concluded bilateral agreements with a number of Central and Eastern European countries (Slovenia, Croatia, Bosnia, Lithuania, Moldavia and Russia) on a quota system for vehicles which do not meet certain emission and consumption standards.

RD&D Programmes

In the framework of the Austrian Programme on Technologies for Sustainable Development, developed by the Austrian Federal Ministry of Transport, Innovation and Technology (BMVIT), there are some energy related activities for transport. For example, some € 7 million will be spent in the new A3-Technology Programme (Austrian Advanced Automotive Technology) for new propulsion systems, energy efficient auxiliary devices and alternative fuels. The programme "MOVE -- Mobility and Transport Technology" promotes research and development projects in the field of transport and mobility by funding demonstration projects capable to trigger innovation in the transport system. For this programme, about € 2.9 million are budgeted annually.

Energy Taxation

In 1999, the Tax Reform Commission proposed a number of measures for an ecological tax reform including higher taxation on energy. In mid-2000 the existing tax on electricity was increased from 0.1 Sch per kWh to 0.2 Sch per kWh.

MONITORING/ ASSESSMENT

For measures which are taken in the context of the EU, it can be assumed that cost-effectiveness is seriously taken into account because – as a rule – initiatives taken by the Commission and negotiated and adopted by the Council are thoroughly analysed beforehand. Decisions on measures at both the federal and Länder levels are based on thorough preparatory work. At the project level, monitoring is done on a case-by-case basis, where beneficiaries of subsidies have to report on the use of the money. In many cases this micro monitoring is not exclusively focused on

16

energy efficiency because programmes often pursue objectives other than just energy efficiency improvements. So it can happen that a measure chosen may appear sub-optimal from a mere energy efficiency perspective and differently from a global point of view. Ex-post assessment of the results of implemented measures is probably an area with room for improvement. But the cost of an assessment scheme has to be in reasonable relation to the results which can be expected of it. Given the complexity of Austria's landscape of instruments promoting energy efficiency and given the fact that energy efficiency is often only one of several goals (as is the case in many financial support schemes) an assessment structure can be assumed to be extremely resource consuming. The effects of implemented and planned GHG mitigation measures on economy and emissions have been assessed in the energy scenario calculation until 2020 carried out by the Austrian Institute for Economic Research. The National Climate Strategy contains provisions for the monitoring of the mitigation effect of measures with co-operation of the Länder. In the 2002 in-depth review of the energy policies of Austria, the IEA stated: The Government of Austria should: • Institute an effective monitoring scheme for government-sponsored

energy efficiency programmes to measure their efficacy in order to both improve them and ascertain their cost-effectiveness.

Further Information

For further information, please contact: Bundesministerium für Wirtschaft und Arbeit, Sektion IV Schwarzenbergplatz 1 A - 1015 Wien Tel: +43 (1) 711 00 Fax: +43 (1) 714 35 83 E-mail: [email protected]

1

BELGIUM Updated August 2003

BACKGROUND

Constitutional Framework

The fundamental factor affecting the evolution of Belgium’s energy policy in the last decade has been the Special Law of Institutional Reform of 8 August 1988 which made Belgium a federal state. Under this law, responsibilities for energy efficiency, including related R&D activities, were fully transferred from 1 January 1989 to the three regional governments of Flanders, Wallonia and Brussels-Capital. The federal government remains responsible, for example, for energy tariffs. The energy consultation group CONCERE/ ENOVER (Concertation état-regions pour l’énergie/Energie-Overleg Staat-Gewesten inzake Energie) is a co-operative structure created by the central and regional governments and operational since 1992. One of the main tasks of the Cellule CONCERE/ENOVER is to gather information and promote its exchange among the regions and the federal government and internationally. Policies (regional, national and international) relating to energy efficiency are discussed in the monthly plenary meetings of the group and in the thematic working groups. In the 2000 in-depth review of the energy policies of Belgium, the IEA stated: The Government of Belgium should: • Promote improved co-ordination activities between the regions and with

the federal government in all areas of energy efficiency. • Given the diverse circumstances within the different sectors, ensure that

those who have the best knowledge and the capacity on particular areas should be chosen as implementing bodies to improve energy efficiencies in these respective areas.

The following web sites address these areas: Federal level Federal Public Service – Economy – Division Energy: www.energie.mineco.fgov.be CREG (Commission for Electricity and Gas Regulation): http://www.creg.be Federal Planning Bureau: http://www.plan.be Brussels-Capital Region Brussels Institute for Management of the Environment, IBGEBIM, http://www.ibgebim.be Flemish Region Natural Resources and Energy Department: http://www.energiesparen.be VREG (Flemish Electricity and Gas Regulatory Commission): http://www.vreg.be Sustainable Energy Agency, ODE-Vlaanderen: http://www.ode.be Energy and Environment Information System: http://www.emis.vito.be Walloon Region Administration for Energy: http://energie.wallonie.be and http://mrw.wallonie.be/dgtre CWAPE (Walloon Electricity and Gas Regulatory Commission): http://www.cwape.be Information site on renewables: http://www.erel.org Energy desks: http://energie.wallonie.be (click on "particulier") Renewable Energy Agency: http://www.apere.org


In June 1991 the Council of Ministers adopted a target to reduce CO2 emissions by 5% between 1990 and 2000. This target refers to total anthropogenic CO2 emissions; there is no specific target for the energy sector.


2

To achieve it, the regional governments in June 1994 and the Council of Ministers on 1 July 1994 approved the Belgian National Programme for Reducing CO2 Emissions (PNBRE94). This programme selected 14 categories of measures concerned essentially with energy conservation.

Review of the PNBRE94 programme

In March 1996, the different working groups that produced the PNBRE94 carried out a detailed review to assess the results achieved by implementing these 14 categories of measures. The review recommended that to overcome the difficulties of implementation, it would be necessary, inter alia, to: • Allocate more financial resources, in particular to the regions, to support

the implementation of the energy efficiency measures. • Give high priority to the measures in the CO2 programme, particularly for

the rational use of energy. • Take the political decision at the highest level of government on the

conclusion of voluntary agreements with industrial sectors, notably with the electricity sector.

• Include the measures into a broader framework, particularly in the context of European Union Directives.

Following the detailed review of PNBRE94, an Interministerial Conference on the Environment, grouping the federal and regional ministers, confirmed the national environment target to reduce CO2 emissions and decided to elaborate a new programme before the end of 1999. Belgium ratified the UN Framework Convention on Climate Change (UN FCCC) in January 1996 and submitted its first national communication at the beginning of 1997. The Second National Communication according to articles 4 and 12 of the Convention (updating of the first communication) (Deuxième Communication Nationale conformèment aux articles 4 et 12 de la Convention [mise à jour de la première communication]) was submitted in August 1997. After the Kyoto commitment of December 1997, the European Union Council of Ministers agreed on 17 June 1998 on the Burden-Sharing Agreement1 towards achieving the 8% European Union commitment to reduce emissions. In this context, Belgium is committed to reducing its emissions by 7.5% for the 2008-2012 period over the 1990 levels. Following a decision at the Council of Ministers of 14 June 2001, the Federal Planning Bureau will draft an annual report. This report will comprise a series of economic and social indicators to monitor the impact of the National Climate Plan on the Belgian economy (for example, on the different sectors, on purchase power, on employment and on sustainable economic development) and on the competitiveness of Belgian companies. The first Federal Plan for Sustainable Development, submitted to the general public and to organisations for consultation, was approved by the federal government on 20 July 2000. The Plan is available (in French and English) at http://www.icdo.fgov.be/pub/rapports.stm).

National Climate Plan 2002-2012

At the Belgian federal level, the "Plan National Climat 2002-2012" was finalised on 6 March 2002. The Plan available on the web site http://www.energie.mineco.fgov.be/ of the Federal Public Service – Economy – Energy Division (http://mineco.fgov.be/redir_new.asp?loc=/energy/home_fr.htm) considers measures in the field of energy, mobility, fiscality and product standards such as defined in the Federal Plan for Sustainable Development, especially with

1 The Burden-Sharing Agreement covers CO2, CH4, N2O, PFCs, HFCs and SF6

3

respect to the “green” taxation reform. It will create a Climate Commission consisting of representatives from the federal government and the three regions, and supported by a permanent secretariat. It will make an annual assessment of national co-operation and the implementation of the measures taken in the framework of the National Climate Plan. It will advise on Belgian positions in the international context of climate change and ensure information exchange between the parties involved. Co-operation between the federal and regional bodies will be achieved to implement flexibility mechanisms. It integrates the measures foreseen in the plans in the Regions, in particular the “Plan d’Action de la Région wallonne en matière de changements climatiques” and the corresponding “Plan pour la maîtrise durable de l’énergie” (draft available at http://daras.wallonie.be/). The regional plans include energy efficiency measures (e.g. voluntary agreements) and portfolio standards for renewables and CHP. In 2003, an international consortium lead by the Fraunhofer Institute finalised a study on DSM for the federal government (see http://mineco.fgov.be/energy/home_fr.htm). In the “benchmarking scenario”, where savings are derived from a comparison with other countries, CO2 reduction would be sufficient to meet Belgium’s Kyoto target by lowering energy-related CO2 emissions to 100 Mt CO2. The “economic potential scenario” assumes extensive use of demand reduction potentials, going beyond the current international best practices, and implementing investments with zero net costs (so-called “win-win” measures). Under this scenario CO2 emissions would be cut down considerably more, opening the potential for a possible second commitment period in the Kyoto process, and partly compensating the impact of nuclear phase-out after 2015. The study makes concrete proposals for DSM that could be included through co-ordinated federal and regional policies according to their administrative feasibility and national or European constraints and priorities. With respect to the deployment of energy technologies, the plan presents some new elements. For the energy sector (according to the decision of the Council of Ministers approved on 7 December 2001), a draft decree foresees the introduction of a green certificate scheme (GCS) implying a quota for the suppliers connected to the transport grid (>70kV- 6% in 2010). GCS will be operational in the regions for the distribution grid (<70 kV, the targets being 3% and 5% respectively in 2004 and 2010 in the Flemish Region, the corresponding figures being 5% and 12% in the Walloon Region, where the green electricity also takes into account high quality CHP, the CHP also being supported in the Flemish Region with a target of an additional 1 200 MW from 1995 to 2005). The indicative plans for the equipment in the gas and electricity sectors will be integrated. The Brussels-Capital Region will support energy audits, and energy certification. The Walloon Region also aims to introduce more transparent tariff forms to promote energy efficiency and to set up a fund fed by the penalties paid by suppliers not having reached their GC quotas to support sustainable energy use. The use of standards and energy voluntary agreements will also contribute together with a new fiscal exoneration for energy efficient equipment installed in households.

4



Thermal Insulation Standards

The main insulation standards for new buildings and retrofitting in the residential and tertiary sector currently being implemented in the three regions are as follows: Wallonia For new lodgement buildings (residential, but also hospitals, hotels, boarding schools, barracks, prisons) either the K552 standard or the Be 4503 standard is enforced. In both cases, k4 max values for various building shells and a ventilation rate are enforced. For new non-commercial tertiary buildings (offices, schools) K65 standard, k max values and a ventilation rate are enforced. In the case of retrofitting of lodgement and non-commercial tertiary buildings with change of allotment, the K65 and K70 standards respectively are enforced, together with k max values and a ventilation rate. When retrofitting the above type of buildings with no change of allotment, only k max values for the retrofitted elements are enforced. For rooms with retrofitted windows, a ventilation rate is enforced. Flanders

For new residential buildings in the Flemish Region, the K55 standard is enforced as well as different k max values for various building shells. For new buildings in the tertiary sector, i.e. hospitals, hotels, boarding schools, barracks and prisons, the Flemish Region enforces the K55 standard and k max values. In retrofitting residential buildings, the Flemish Region implements k max values. For buildings the use of which is changed the Flemish Region enforces k max values. Brussels-Capital Since 1 January 2000, in the Region Brussels-Capital, the thermal insulation standards of buildings are similar to those in force in Wallonia. To inform architects and other actors in the construction field, a seminar was organised in June 2000 by the Brussels Institute for the Environment.

2 The K ratio concerns the total level of thermal insulation calculated on the basis of a technical standard established by the Belgian Institute for Standardisation (IBN). It takes into account mainly the insulation of the various shells but neither solar heat, nor occupant behaviour nor the efficiency of heating. The lower the K factor the better the total insulation of a dwelling. 3 The Be ratio concerns the calculation of the net needs for energy for heating, which means taking into account the free inputs of solar heat. The calculation of the Be ratio is published in the "Arrêtés" of the Walloon Government of 15 February 1996, "Moniteur belge" of 30 April 1996 and 9 May 1996. 4 A “k value” designates a heat loss coefficient of a wall system of a building. It allows the calculation of the specific heat loss of a wall while the K65 or K55 (note the capital K) is the heat loss value of a whole building. The current regulation in Belgium refers to a “k maximum value” for every type of wall used in a building. Consequently, it is easier to use a “k value” for a wall in the case of a renovation project as the regulation would apply only to the walls that were renovated.

5

Before a building permit can be issued, the calculation of the K ratio is checked by the regional administration of town planning. The monitoring process, however, is insufficient, and there are no official inspections to check compliance with this regulation. The Flemish government has issued an energy policy document for the period 2000 to 2004 which stated the objective of reducing energy consumption in the residential sector in 2004 to the 1998 level. It is considering the introduction of an energy performance standard following the Dutch experience for new buildings (dwellings and office buildings) and efficient control and motivation activities to enforce the existing legislation concerning insulation of buildings. For industry and the service sector, the objective is to increase energy efficiency by 2004 compared to 1998. This objective calls for a wide range of measures, such as the creation of benchmarking covenants with energy-intensive industries, a new Decree creating a global framework for funding energy efficiency projects and the development of a coherent communication strategy to promote energy efficiency. The Walloon Region checks the application of the legislation at the stage of the building permit but also at the beginning of the construction site. Nevertheless, the inspections are insufficient and better ways to carry out controls are being studied. Interregional collaboration Interregional collaboration on inspection of the insulation and ventilation regulations takes place in the framework of the Belgian Building Research Institute. The goal is to produce a manual for a uniform inspection procedure throughout the country and standardisation and legislation to elaborate an Energy Performance Standard (cf. the Netherlands). In the framework of this collaboration, a website with information on ventilation and insulation legislation in the three regions has been created. This initiative was co-funded through the CONCERE/ENOVER group. The website was inaugurated during a national seminar in December 1999. Recently, the parties within the CONCERE/ENOVER group decided to co-operate and co-fund several project in the building area. In the field of energy certification of buildings a national study on the implementation of a system of energy certification of dwellings, including a test phase of some 15 to 20 different buildings (individual dwellings and apartment buildings), was completed. A seminar on the results was held on 4 May 1999. As a follow up the group co-funded Belgian participation in the Save II project "BELAS" on the same subject. The project ended in June 2001 and will lead to the introduction of the system in 2002. Belgian participation in Annex 35 of the IEA Buildings and Community Systems Implementing Agreement on hybrid ventilation is also co-funded by ENOVER/CONCERE. The most recent decision of the group is on Belgian participation in the SAVE II project EnPeR on Energy Performance Regulation. In order to monitor the different projects and to exchange information on regional policy and action plans a new ENOVER/CONCERE working group was created in the spring of 2001. In the Belgian National Programme for Reducing CO2 Emissions, it is planned to strengthen the thermal insulation of new buildings through the mandatory

6

adoption of the K55 insulation standard in the residential and tertiary sector of the three regions. Severe problems are associated with the enforcement of the building standards. According to a study carried out in Flanders, only 1/8 of the individual houses and 1/3 of apartment buildings constructed after the introduction of the standard meet the requirements. To address the problem of poor achievement, the number of inspections has been increased and additional measures are under consideration to ensure rigorous enforcement of the standards. As the Flemish Region has decided to introduce energy performance regulation in the near future, this problem will be tackled within this system from the start in order to avoid the errors of the past. In the 2000 in-depth review of the energy policies of Belgium, the IEA stated: The Government of Belgium should: • Establish systematic control activities and a system of penalties to reduce

the number of building code violations.

Heating Appliances

Following a European SAVE study on the regular inspection and timely replacement of central heating installations, all regions are planning actions in this area. In Flanders a revision of the existing regulation is almost ready. Following consultation in the framework of CONCERE/ENOVER, the other two regions are studying a similar initiative.


To comply with EU Directive 92/42 on minimum energy efficiency standards for hot water devices and boilers, the Federal Ministers of Economic Affairs and the Environment, in co-operation with the regional ministers, have adapted national legislation: the Royal Decree on energy efficiency standards on hot water devices and boilers of 18 March 1997 was published in the Moniteur belge of 20 June 1997.

Energy Labelling

Belgian legislation is also being amended to comply with EU Directive 92/75 on energy labelling of household appliances. For refrigerators, freezers and combinations, energy labelling was implemented by Ministerial Decree of 20 November 1996 (Moniteur belge dated 25.01.1997). For washing machines, dryers, combinations and dishwashers ministerial decrees that introduce energy labelling were approved on 01.12.1998 (Moniteur belge 13.01.1999); lighting bulbs: ministerial decree 01.12.1999, Moniteur belge 31.12.1999.

Information/ Motivation

Energy Information Kiosks

In the Walloon Region, 13 energy information kiosks provide practical information and audits to individuals who would like to save energy through improvements in thermal insulation of their dwellings, heating, solar panels for sanitary hot water, lighting, electric appliances, etc. The kiosks also provide information on energy savings for heating, thermal insulation of buildings and lighting in small and medium-sized enterprises. Practical information about well identified RUE products is being prepared. The kiosks also house the technical managers of the MEBAR programme (see below, under "fiscal incentives"). In the Flemish Region, VITO (Vlaamse Instelling voor Technologisch Onderzoek, Flemish Institute for Technological Research) raises energy awareness in the industrial sector and among the public through the Information System on Energy and Environmental (EMIS). This system

7

contains three main pillars: figures and statistics related to energy and environmental matters; contacts (databases containing information on organisations in the public and private sectors, and general information); and processing (a technology database will be established containing technological and economic information about clean and cost-effective technologies in processes which can be applied in the industrial sector). The residential sector is of great importance in the Brussels-Capital Region. The energy balance of the Region, which was drawn up in 1991, shows that energy consumption is divided among the sectors as follows: 42% housing, 21% tertiary, 23% transport and 10% SMEs. The rest is consumption by large industry. The Brussels Energy Agency, l’Agence Bruxelloise de l’Energie-Brussels Energie Agentschap (ABEA), was set up in 1996. It is open to the general public and disseminates informative brochures, undertakes thermal assessments of dwellings and organises thematic workshops. Practical questions concerning energy savings and the application of renewables in dwellings are answered.

Information/ Motivation Activities and Events

Various brochures providing information and motivation on energy savings have been issued by regional governments. The Brussels-Capital Region issues various brochures on house insulation, the use of high-efficiency light bulbs, electricity and gas savings, etc. The Quinzaine de l’Energie en Région de Bruxelles-Capitale took place in October 2000. This 15-day event on energy had the general pubic and schools as target audiences. In Flanders, the Flemish Institute for the Rational Use of Energy (RUE), VIREG, Vlaamse Instelling voor het Rationeel Energieverbruik, created in September 1997, is now fully operational. Its goal is to involve actively the different actors in RUE policy, to co-ordinate Flemish initiatives in the field of RUE and ensure that available funds are used in the best possible way. More particularly, the tasks of VIREG are to determine the energy saving potential within the Region, plan and executive concrete actions in energy efficiency and monitor these actions. One of the most important actions of VIREG is the annual organisation of the “month of RUE” in October. An ambitious calendar of events is developed each year including seminars on RUE in the different sectors, numerous conferences, workshops, advertisement in newspapers, magazines and Flemish television. Every year, the Walloon Region launches a general multimedia motivation campaign for the residential sector on energy savings in housing. The Region organises several training programmes for energy managers in public buildings, teachers in vocational schools for carpenters and bricklayers to improve the quality of thermal insulation, and for architects. A handbook for energy managers has been published. A CD-ROM on lighting efficiency design is being prepared.

Financial/Fiscal Incentives

Subsidies for Retrofitting

Various financial incentives have been introduced by the regions for the retrofitting of buildings (excluding R&D). The Walloon Region through the

8

MEBAR programme allocates a maximum subsidy of BEF 55 0005 to low-income households to improve the energy efficiency of their dwellings. To promote the rational use of energy, two regions allocate subsidies to municipalities and other local bodies, hospitals and schools. The Walloon Region implements two subsidy programmes to promote energy efficiency, AGEBA for municipal, provincial and regional buildings and ECHOP for schools and hospitals. These two programmes will be harmonised under a new scheme, called UREBA. The Walloon Region allocates a subsidy to municipalities for the replacement cost of inefficient public lighting (EP-URE programme). The subsidy covers some 70% or more, depending on the energy efficiency of the replacement. The Brussels-Capital Region allocates subsidies to municipalities, local public bodies, schools and hospitals. Subsidies amount to 20% of the investment costs if they are considered to be of an energy efficient nature. Energy audits are subsidised up to 50% of the cost to a maximum of BEF 50 000.


Fiscal Deduction

At its meeting on 17 October 2000, the federal Council of Ministers decided to promote energy efficiency measures in the residential sector through a fiscal deduction. An article that foresees a tax deduction for energy efficiency measures in the residential sector has therefore been inserted in the new law that modifies the taxation of physical persons. Eligible measures are the replacement of old boilers, the installation of solar boilers and PV systems, the use of double glazing and thermostatic vans and the insulation of roofs. In June 2001 it was decided that the fiscal deduction of energy efficiency measures will enter into force for the revenues of 2003 (tax declaration 2004) with an annual budget of 1.5 billion BEF (€ 37,184 million). The measures are deductible for a percentage of the real costs. The deduction rate is 15% for the replacement of old boilers by new condensation boilers, and for solar energy. The rate is 40% for the installation of double-glazing, roof insulation, the installation of a central heating regulator, plus energy audits. The total cumulative amount per dwelling may not exceed € 500 the first year but might be increased the following years. In this framework the federal authority and the Regions are working together to prepare software for evaluating the energy efficiency of a building.

Discouraging Direct Electric Heating

To discourage direct electric heating and promote the use of natural gas heating, the regional energy ministers will launch consumer information campaigns (leaflets, energy information kiosks, advice from architects, technical brochures, etc.) on the real costs of using the different heating systems and on their impact on the environment.


Information and Technical Assistance

In Flanders, the Flemish Institute for Technology Research (VITO) raises energy awareness among industrial companies in particular through the Information System on Energy and Environment (EMIS). The Flemish

5 On average in 2000, BEF 1 = US$ 0.023.

9

Institute for the Rational Use of Energy (RUE), VIREG is in fact a discussion platform between the Flemish government, the energy production and distribution companies and the industrial and residential energy users. Flanders has also established energy efficiency consultancy departments for small and medium-sized enterprises in each of the five regional development companies. Industries can benefit from a 15% subsidy for energy audits that are part of an overall investment project. The Walloon Region finances an annual inventory of energy balances for Wallonia, prepared by the "Institut Wallon". It also finances a detailed "monitoring board" of energy consumption, carried out by ECONOTEC. A Newsletter, "Le REActif" (Le Responsable Energie Actif), which is targeted at the tertiary sector, is published, but specific information is designed for the industrial sector. COGENSUD is a non-profit organisation in charge of the promotion of combined heat and power (CHP). It collects and provides information to potential users, with the support of the Walloon Region. Last but not least, the Walloon Region organises an awareness action aimed at the SMEs: the RUE Broker: • In agreement with the SME, the RUE Broker analyses the energy balance

of the enterprise and detects the major problems. He proposes solutions and provides information about the incentives and accompanying measures available from the Walloon Region.

• In a few cases, the RUE Broker makes a deeper analysis (Energy Potential Scan method, which was developed in the Netherlands) and proposes more elaborate solutions.

• This action is sustained 100% by the Walloon Region, the SME assuming responsibility for its own human and material participation.

Energy Audits

For industry, the Walloon Region intends to promote the CAFE (Comptabilité Analytique des Fluides et des Energies) or analytical accountancy for fluids and energies used in industrial processes which is composed of data collection, analysis, reporting and communication. It also promotes energy audits by bearing 75% of the cost of expert advice. In 1999, the Walloon government adopted a decree concerning environmental permits. The permit applicants will be obliged to perform an energy audit and energy accountancy. However, the procedure does not include setting requirements for energy efficiency and the permit cannot be refused because of low energy performance. The Brussels-Capital Region subsidises feasibility studies for energy efficiency investments and energy audits to cover 50% of the cost. Flanders provides a subsidy of 15% to small and medium-sized industries if the audit is carried out in connection with an investment project, and a 10% subsidy for all other industrial energy audits. In addition, the Flemish government employs five energy consultants who carry out pre-audits and their services are free for the user.

Voluntary Agreement

Flanders will introduce voluntary agreements to energy-intensive industries. For large energy-intensive industries (energy consumption <0.5 PJ), the agreements are based on the principle of benchmarking. In these benchmarking agreements, participating companies commit themselves to bring their energy efficiency up to world top level by 2012. Negotiations have taken place, or are ongoing, with the iron, steel, paper and cardboard sectors and with the chemical industry. The Flemish Economic Federation (Vlaamse Economisch Verbond, VEV) took part in these talks. The Flemish region is building the tools to implement benchmarking agreements for the energy-

10

intensive industry, the other industries being invited to make any energy saving investments with a pay-back time less than five years. Periodic energy audits will define the suitable investment programmes. Wallonia has already taken the first steps to adopt voluntary agreements with different industrial sectors. The first sectors to sign a letter of intent were the chemical and paper industries in July 2000. In 2001, three industrial sectors (cement, limestone, and non-ferrous) signed a letter of intent. These letters of intent will lead to voluntary agreements to reduce energy consumption by 2010. In the Brussels-Capital Region, the industrial sector is small: therefore, instead of voluntary agreements, the region has introduced a voluntary labelling programme called Eco-dynamic enterprise. To obtain the label, the entrepreneur signs a charter with the engagement to respect a number of principles of ecological management. Several of these principles are closely linked to RUE.

DSM/IRP in the Electricity Sector

All regions have introduced policies and measures to promote energy efficiency. The 2002 Flemish decree for the promotion of energy efficiency sets the grid manager energy saving targets to be realised at customer level. Certificate markets to support combined heat and power (CHP) have been introduced in Flanders and also in Wallonia where they are imbedded into its green certificates system. Brussels-Capital is in the process of preparing its own certificate scheme to promote CHP. Flanders is establishing a quota-based certificate system for the promotion of CHP with a target to install an additional 1 198 MW by 2005. Flanders and Wallonia have introduced voluntary agreements for energy-intensive industries. The Flemish agreements are based on “world top benchmarking” of energy efficiency whereas the Walloon government subsidises energy auditing and monitoring in industry, as well as technical certification of products contributing to a better control of energy consumption. Projects are under way in all regions to improve energy efficiency in buildings in line with the EU directive on the Energy Performance in Buildings. The Flemish region is also preparing a law to establish a legal framework on which specific implementing measures will be based related to energy efficiency, renewables and the implementation of flexible mechanisms and emissions trading.


Investment Abatement in the Regions

A system of fiscal abatement (depreciation) for investments by industrial, commercial and agricultural businesses has been in operation since 1982. It currently offers an abatement at the general rate of 13.5% on taxable profits. An additional 10% abatement is given for investments aimed at improving energy use in industrial processes and, in particular, recuperating energy used in industry. Since 1990, the regional executives monitor the viability of the investments. The system is being adapted to take account of trends in energy efficiency policy, particularly environmental concerns. • Flanders: tax abatement – 13.5% of energy saving investments can be

deducted from taxable income. • Wallonia: tax abatement – 13.5% of energy saving investments can be

deducted from taxable income. • Brussels: Article 69 of the Income Tax Code 1992 (CIR92): "deduction for

energy saving investments".

Economic Development Subsidies

General legislation enacted in 1959 and amended in 1970 created a structure for financial support for economic expansion. This support is now the responsibility of the regions, and has been diversified according to each

11

Region’s needs. The financial support consists of subsidies, reimbursable or not, which are allocated by the regions before the realisation of the investment. The level of subsidy varies according to the type of enterprise and other criteria such as the promotion of RD&D, the introduction of new energy efficient processes and the development of employment. In Flanders, subsidies for energy saving investments amount to 20% for SMEs and 10% for large enterprises. In Wallonia, financial incentives for socio-economic development allocated to promote renewable energy sources and energy saving include a wide range of measures (subsidies, reimbursement of loans guaranteed, tax exemption, accelerated write-off) and vary according to different criteria (direct or indirect job creation, importance of the activity, etc.). The "Arrêté du gouvernement wallon" of 16 September 1993 grants enterprises which invest in renewable energy sources a subsidy of 15% of the investment. The "Arrêté de l'exécutif régional wallon" of 19 December 1984 enables enterprises to benefit from a subsidy for a wide range of measures: expenses for expert advice prior to an investment, technical agreement expenses, studies, promotional activities, etc. In Brussels-Capital, subsidies of up to 20% of the investment cost may be allocated to enterprises for investments undertaken on the territory of the Region and aiming at, for example, energy efficiency and environmental protection (ordinance of 1 July 1993 concerning the promotion of economic expansion in the Region Brussels-Capital). Preparatory studies (e.g. energy audits) receive a premium of 50%.

Technology Subsidies in the Regions

A Royal Decree of 1983 allocates subsidies for the development, demonstration and commercialisation of new products and processes for energy efficiency. However, this legislation overlaps with some regional initiatives. In Flanders, the VLIET programme – Vlaams Impulsprogramma voor Energietechnologie (Flemish programme for the promotion of energy technology) – is managed by IWT6. The multi-annual programme ran from 1993 to 1996 and had a budget of BEF 800 million. At least 10% of this amount had to be devoted to research projects in support of Flemish energy policy and VIREG – the Flemish Institute for Rational Use of Energy. As the VLIET budget was not entirely spent, the VLIETbis programme was started in 1997. Mid-1997, calls for proposals were launched for both parts of the programme (namely policy support research and research in the field of RUE and renewables). Mid-1998 the Flemish government agreed to support 12 policy support research projects and 16 research projects on RUE and renewables. Budgets amounted to, respectively, BEF 84 and BEF 197 million. The typical project duration is two years, which means that, currently, final reports on the projects are being prepared. Under the new government, no decision on the continuation of the VLIET programme has yet been taken. Demonstration projects are supported financially by the ANRE division of the Ministry of the Flemish Region.

6 Vlaams instituut voor bevordering van het wetenschappelijk technologisch onderzoek in de industrie – Flemish Institute for the promotion of scientific and technology research in industry.

12

The Walloon Region operates various programmes in support of innovative technologies, including energy technologies. The most important of those programmes, the “Decree” (which refers to a Decree of 5 July 1990 by the Walloon regional government granting financial support for R&D) applies to all fields (i.e. energy, telecommunications, new materials and biotechnology). The Decree defines basic industrial research as being an original theoretical or experimental activity to acquire new knowledge for possible application to an industrial sector or to the activities of a specific company. Applied research consists of investigation or experimental activities aimed at gaining greater knowledge so as to facilitate the development of new products, processes or services, and development consists of developing and improving products, processes or services for industrial and commercial exploitation including pilot projects and demonstration projects. The “Plan d’Action pour préparer la Wallonie au Futur” (“Action plan for preparing Wallonia for the future”) was presented on 25 January 1996 and consists of guidelines to be followed by the DGTRE. Thus, this Plan reflects the new RD&D policy that the Walloon government intends to promote in the future. Efforts by the regional government will be orientated towards clearly identified technological niches through a yearly inventory that will be developed through consultation with all the stakeholders. The different types of support provided by the Region will be restructured and RD&D regional policy will be better integrated into European research and development programmes. In the same way, the Walloon Region regularly launches "Programmes Mobilisateurs" or calls for RD&D proposals on well-defined targets (e.g. cogeneration in the energy field). In Brussels-Capital, in recent years, budgets formerly spent on energy RD&D projects have shifted towards studies in support of energy policy. In the 2000 in-depth review of the energy policies of Belgium, the IEA stated: The Government of Belgium should: - Assess the feasibility of promoting energy efficiency by giving subsidies or

by tax abatements.

Combined Heat and Power

The promotion of CHP is a regional affair. Nevertheless, as energy pricing policy is a matter of federal competence, the federal government has an important role to fulfil. Federal policy to promote CHP 1. CHP in the federal framework law to liberalise the electricity market Article 20, §4 foresees the possibility to fix minimum tariffs for the purchase of electricity generated by quality CHP installations. At the interministerial conference of 5 May 2000, the ministers responsible for energy matters agreed the following: • Suppliers responsible for delivering electricity to captive clients will be

obliged to buy surplus electricity and to deliver additional electricity to autoproducers (inclusive of back up).

• The purchase of surplus electricity and delivery of additional electricity has to take place at published and reasonable tariffs.

• The ENOVER/CONCERE group must propose concrete measures to

13

promote CHP by 1 January 2001. In order to develop such a list of measures, the consultation group will collaborate with the Belgian organisations responsible for the promotion of CHP (Belgogen and Cogensud).

Regional policy to promote CHP 1. Promotion of CHP in the regional decrees for a liberalised electricity

market: Flanders

• All regional decrees foresee rules to promote ‘high quality’ CHP. • The Flemish decree enables producers with a CHP installation to deliver

electricity directly to the consumers. (In the past they were obliged to sell their surplus electricity to a distribution company at a fixed low resale tariff.) Furthermore, the Flemish decree offers CHP producers access to the liberalised market according to their electricity production. A Decree is under preparation as to create a certificate system for quality CHP.

Wallonia The decree on the green certificate system includes the high efficiency CHP on the basis of the avoided emissions. Brussels-Capital The holders of a supply permit, with the exception of the distribution grid managers, are obliged to buy the surplus electricity produced by auto-producers by means of good quality CHP installations, installations for green electricity generation and installation for thermal production from domestic waste, at the price fixed by federal legislation. A system of green certificate will be introduced which guarantees the origin and quality of the green electricity and defines the source of energy from which the electricity is produced. The certificates are tradable. The government can oblige the suppliers, with the exception of the distribution grid manager, to deliver a minimum amount of certificates to the "service". The "service" defines the fine which is to be paid in case of non-compliance with the minimum amount of certificates. 2. Other instruments Flanders One of the instruments that Flanders will use to reduce emission of GHG is the increased use of CHP. In an earlier objective, the Flemish government set a target to install 1 200 MW additional CHP capacity by 2005. The new government has added to this target an extra 600 MW of high-quality CHP plants between 1999 and 2004. The special body BELGOGEN was created in 1997 (50% funded by the Flemish government and 50% by the private sector) to stimulate market penetration of CHP. Wallonia COGENSUD is a non-profit organisation in charge of the promotion of cogeneration to potential users. It collects and provides information, with the

14

support of the Walloon Region.

PUBLIC SECTOR


AGEBA In the Walloon Region, in the framework of the programme AGEBA (requirement for energy management in buildings), before applying for a subsidy for energy efficiency investments, the calculation of the energy efficiency register and/or of the energy efficiency value for municipal, provincial, social or intermunicipal buildings must be produced.

Subsidies for Non-Commercial Bodies

In order to promote the rational use of energy, two regions allocate subsidies to municipalities and other local bodies, hospitals and schools. Wallonia implements two subsidy programmes to promote energy efficiency, AGEBA for municipal, provincial and intermunicipal buildings and ECHOP for schools and hospitals. These two programmes will be harmonised. Wallonia allocates a subsidy ranging from BEF 12 000 to 14 000 to municipalities covering about 85% of the replacement cost of inefficient public lighting (EPEE programme). From 1988 to 1995, a total of 166 000 luminaries were replaced, resulting in electricity savings of about 25%. To fully implement the EPEE programme, a total of 350 000 luminaries must be replaced in the 262 Walloon municipalities.

Third-Party Financing

To promote energy efficiency investments in the public sectors of the three regions, the mechanism of third-party financing (TPF), through which the economic risk of investments in the rational use of energy is undertaken by a third party (generally an energy service company) instead of the end-user, is widely used in the framework of regional energy efficiency policies. This is the case, for instance, in the Walloon Region with the AGEBA programme. In the Flemish Region it was used in the 1998 relighting programme of a government building in Antwerp, and in the Brussels-Capital Region which has budgetary provisions for TPF in public bodies. In the 2000 in-depth review of the energy policies of Belgium, the IEA stated: The Government of Belgium should: - Ensure that there are no obstacles for increased use of third-party

financing for energy efficiency Ensure that there are no obstacles for increased use of third-party financing for energy efficiency.

TRANSPORT The Belgian National Programme for Reducing CO2 Emissions contains

several energy conservation measures for the transport sector. A new national plan should be ready by mid-2001.

General Situation

A broad survey, held in 1999, on the mobility of persons in Belgium, gave the following shares of the respective modes in total mobility:

• use of private car: 65.1%; • walking: 19.9%; • motor cycling: 8.4%; • public transport: 3.4% (approximately 8.7% of the Belgian population uses

public transport -- regularly or from time to time); • other: 3.2%.

15

As in other European countries, freight transported by trucks on roads increased substantially in the past 10-20 years. European and intercontinental air traffic arriving at or departing from the airport of Zaventem (near Brussels) has not only more than doubled in the past seven to eight years, but is also an important source of road traffic. As a result, total road traffic increased dramatically in the past 10-15 years (on some motorways: >100%), causing structural congestion problems, mainly in the larger cities (Antwerp, Brussels, Ghent) and on most motorways surrounding or interconnecting those cities A “business as usual” scenario forecasts a further strong rise of road traffic during the next ten years. This would result, on already saturated roads, in longer rush hour periods and in a substantial increase of fuel consumption (35-40%) and emissions. The measures and actions described hereafter, aim at a stabilisation (and in the long term, even a reduction) of energy consumption and emissions by road traffic. They can be summarised as follows: • Measures and actions to stimulate the replacement of old cars, vans or

trucks by more fuel-efficient models and with lower emissions. This implies the use of new vehicles equipped with improved engines (diesel or Otto-engine) or alternative propulsion systems, improved or alternative fuels, on board multimedia road/traffic information systems, etc.

• Measures and actions to stimulate the application of fuel saving and safe driving styles (which are in principle possible in all existing vehicles).

• To offer real alternatives for road transportation of individuals and freight, such as public transport systems, freight transport by rail, or inland-waterways, or combined/multi-mode transport systems.

Vehicle Tax Schemes

The federal government, in consultation with the regional governments, is defining a new vehicle taxation system which should stimulate the purchase and use of new cars and other vehicles with a relatively low energy consumption and with emission values in accordance with the Euro 3 or Euro 4 emission standards. These new taxation schemes would partly replace the existing vehicle and fuel taxes. The current major fiscal parameter for vehicles is the so-[called “fiscal (horse) power” (FP), which is an almost linear function of the engine displacement value (active cylinder volume). As a result of this definition, a diesel car gets a higher FP-value than a car equipped with an Otto-engine giving the same engine power (in kW). The vehicle registration tax is based on the FP-value or on the maximum power of the engine. This tax increases sharply above the FP-value = 10. The annual circulation tax is based on a term which is (an almost quadratic) function of the FP-value. An additional term (also function of the FP) is applied to LPG cars and diesel cars. Heavy duty vehicles (trucks, buses) pay a supplementary circulation tax (the so called “Eurovignette”). Taxes on fuels:

16

• Excises: depending on the fuel type: 0 for LPG and CNG, higher for gasoline than for diesel.

• 21% VAT. There is a tax (9.25%) on vehicle insurance payments and 21% VAT on all invoices (purchase, maintenance, etc).

Consumer Information on Fuel Consumption of cars

The transposition of the European Directive 1999/94/EC concerning the availability of consumer information on fuel consumption and CO2 emissions of new passenger cars in a Royal Decree is the responsibility of the Federal Administrations of Environment and Economic Affairs. This is also the case for monitoring the correct implementation of the different measures to inform the public about fuel consumption and CO2 emissions of every new car model available on the Belgian market, namely labelling, a general information guide, printed publicity material, brochures and posters. The Regions can take the initiative to implement large-scale information actions, such as the editing and distribution of brochures and creation of an Internet Web Site. As a project financed by ANRE (Ministry of the Flemish Community), VITO developed a database with wide information on all new car models available on the Belgian market, which is accessible since December 1998 on Internet www.emis.vito.be/mobiliteit/autoverbruik . Since then, it is regularly updated and improved. It gives, by model, all official technical data, such as the fuel consumption. It also applies the concept of comparative fuel consumption labelling, whereby every model is compared with other cars of the same “dimensional class”. It also contains a module with information and advice on fuel saving driving and car loading techniques. The Walloon Region intends to develop a similar database for the French speaking part of Belgium. Given the total volume of new cars sold in Belgium7 and the increased interest of the public in fuel efficient cars because of rising fuel prices, it is almost certain that large-scale and intensive information actions, such as those described above, will have a beneficial effect on the purchase behaviour of consumers. The introduction of “green” car taxes will have an important leverage effect on these information actions.

Fuel Efficient Driving Styles

Extensive measurement campaigns carried out by VITO (and financed by ANRE) on different types of cars and in real traffic conditions, have shown clearly and objectively the important influence of traffic conditions and driving styles (from anticipating, defensive driving, to a nervous, “sporty” style) on the fuel consumption and emissions of the cars tested. Based on this information and on the experience of European colleagues (such as TNO, Netherlands, MOTIVA, Finland, EVA, Austria) VITO started in 1999 a series of pilot projects concerning fuel efficient and safe driving. About 130 people participated in these projects, on a voluntary basis, using their own car or a car/van owned by their employer (a large telecom network operator). The reported energy savings were somewhat lower than expected (in foreign experiments, fuel savings of up to 15-20%, compared with “average, normal driving” were reported). This can be explained by the fact that most participants were probably experienced and motivated drivers.

7 490 000 in 1999, and 530 000 forecast for 2000.

17

The response to a questionnaire by most participants was positive. Their remarks will help improve the course material. An effective technical improvement would be the use of a display (on the dashboard) showing the fuel consumption in real time (some cars have it already as a standard feature).

As a participant in a European SAVE II-98-project, VITO organised a symposium on this subject in January 2000 (during the National Car Show in Brussels), which was mostly attended by high level professionals (representing fleet owners, driving schools, federal and regional administrations and institutions). VITO and a Belgian driving school (run by the Belgian importer of the Volkswagen group, whose clients are mainly drivers of company cars) will be active participants in a new European SAVE II-2000 project (which started in January 2001), called “Ecodriving Europe”. The aims of this project are: to gain more experience with ecodriving-training courses and to improve their effectiveness, to stimulate the organisation on a larger scale of such courses, and to integrate the testing of these fuel saving driving techniques into the official examinations for obtaining a driving licence (which up to now, concentrates on traffic codes and road safety).

Public Transport Systems

Some ten years ago, the Belgian National Railway Company (NMBS-SNCB) greatly increased its investment programme in railway infrastructures for national and international train lines and in rolling stock (new locomotives, carriages). The public company VVM-De Lijn, responsible for regional and local public transport in Flanders, is also investing heavily in new buses, low-floor tram cars (in the cities of Antwerp and Ghent), and in the associated infrastructure (such as the extension of tramlines, bus stations, passenger information systems). The total investment budget for 2000 was BEF 5.237 million while the prevision for 2001 is BEF 5.811 million. De Lijn also started in 1998 an experiment with free public transport (in the city of Hasselt). From the beginning of last year, this free service was extended to all Flanders for certain classes of users (seniors ≥65 years, the personnel of the Ministry of the Flemish Community, who can also get free train tickets, children ≤12 years). The federal government followed this example by reducing train fares for certain users. Since 1996 the Flemish Region concludes so-called “Mobility agreements” with individual or groups of municipalities. Up to now, some 80% of the municipalities in Flanders have signed the Framework (“Mother”) agreement, by which they commit themselves to draw up a “Mobility Plan”. This has to cover a broad range of mobility and road-safety measures, such as promoting and giving priority to public transport, limiting (or freezing) the number of car parking places, and the construction of bicycle-tracks. These study and implementation projects are financially supported by the Flemish Region (in the period 1997-1999: BEF 962 million). Several Walloon pilot communities have signed mobility charters (chartes de mobilité) which are similar to the agreements in Flanders The Walloon Region is lowering public transport fares, and will equip the buses with particle filters. It studies how to promote "mobility services" such as taxis (new version). The Walloon Region has made the commitment to reopen trans-frontier railway connections and to promote the railways in general.

18

Transport Planning in Businesses

The Walloon regional authorities do carry out some activities to improve energy efficiency and to reduce emissions, focusing on a sustainable infrastructure and mobility policy. The "Plan d’environnement pour le Développement durable en Région Wallonne” (PEDD) (Economic Plan for the Sustainable Development of the Walloon Region) of 9 March 1995 identifies a wide range of measures including land-use planning, carpooling, promotion of public transport, use of alternative and cleaner fuels such as natural gas and biofuels, traffic management, information and motivation campaigns for drivers, promotion of railways and inland waterways, the development of intermodal alternatives for road transport of goods and the development of international transport for passengers and goods. In particular, the Walloon Region invests in car sharing and participates in a European project in this field. In 1998, the Brussels-Capital government approved an ordinance concerning the assessment and improvement of air quality. The ordinance contains the following measures in the field of transport and mobility: each private or public body with more than 200 employees per site has to introduce transport planning; for events assembling over 3 000 participants an action plan to promote the use of public transport and of energy efficient and environmentally friendly means of transport must be instigated; regional public bodies and institutes with a car fleet of over 50 vehicles: within five years after the entry into force of the ordinance 20% of these vehicles have to use environmentally friendly technologies. For public transport companies under the authority of Brussels-Capital and with at least 50 vehicles, 5% of the fleet must be environmentally friendly vehicles within a period of five years. Other actions within Brussels-Capital are initiatives to limit access to the city centres, instruments for and study on transport management. In 1992 the Flemish Region started an action programme to promote Company Transportation plans. These plans mainly consist of bus services and carpooling, on the level of the individual company or several neighbouring enterprises. Mainly large companies situated in urban areas participated in this programme on a voluntary basis (about 20 companies during the period 1994-99) and received financial support from the Flemish Region. In Wallonia the introduction of transport planning in industry and administration is being prepared. Following a campaign led by IBGE, which started in the spring of 1997, several Brussels administrations are currently elaborating transport plans. In the beginning of 1999, a proposal for a law which was intended to make company transportation plans compulsory for medium-sized businesses (>50 employees) was introduced in the Federal Parliament, but it did not complete the procedures (the proposal was accepted by the Chamber of Representatives, but was blocked in the Senate, and because of the elections in June 1999 it expired; it was also firmly opposed by the Belgian Federation of Enterprises). The Federal Minister of Mobility announced that a new proposal for a law would be introduced in the autumn of this year. Carpooling has been promoted for many years in Flanders. The initiative was in fact originally taken by a non-profit organisation called “Taxistop”. Since 1998 the Flemish Region promotes carpooling in a more structured way, namely through : • An improved carpooling database (initiated and operated by Taxistop),

intended for individuals (for whom it is a free service) and companies.

19

• The construction of specific parking lots (in April 2000, 40 parking lots, with a total capacity for 2 400 cars, were open); this number should increase to 47 by the end of the year.

But, as with the voluntary company transportation plans, the carpooling initiatives in Flanders are considered so far to be a “limited success”. The Brussels-Capital Region concluded in 1999, for the “Icaro” project, a two-year-contract with Taxistop (with co-financing from the European Commission) to operate a carpool-centre (database) in Brussels. This initiative is intended for individuals and about 300 medium and large-sized enterprises.

Promoting Energy Efficient Freight Transport Modes

The maritime ports (Antwerp, Ghent, Ostend and Zeebrugge) process vast amounts of all forms of freight to be transported to, or coming from, their hinterlands. Antwerp is not only the second largest maritime port in Europe, but also the most important industrial area in Flanders. Antwerp and Ghent have long been connected to a vast network of inland waterways, with access to other industrial areas in Belgium and to the waterway networks in the Netherlands, Germany, France, the south of Switzerland (Basel), Austria, Central and Eastern Europe. Antwerp is also a modal point of several pipeline networks (for petroleum products, natural gas, industrial gases). The four ports are also well connected to the railway network of the NMBS. While the total freight traffic volume of the four ports increased at a moderate rate (in the period 1980-99, it has grown from 118 million tons to 178 million tons), the growth rate of the container traffic and Ro-Ro-traffic (“Roll on – Roll off” = cars, trucks, trailers) has been spectacular in the past 15-20 years. But although these types of freight (and especially containers) are very well suited to transport by rail or inland-vessels/barges, even over relatively short distances, between well equipped terminals, in reality a large share of container-traffic is carried by trucks (even to neighbouring countries, the Netherlands, Germany, France). The substantial growth in traffic between the region of Antwerp and its hinterland, has over the past 10-15 years, created increasing problems of traffic congestion, mainly on the roads but also on certain sections of the railway network of the NMBS. The Flemish government and the NMBS therefore jointly decided to invest massively in new or improved transport infrastructures: • New infrastructures for container-traffic: docks, quay-walls, container

terminals with direct access to the railway network. • The reactivation of the “Iron Rhine” railway line, connecting Antwerp with

the German Ruhr area (to be operational in 2002). • A new main railway access to the right bank of the port of Antwerp (a 25

billion BEF project, to be operational in 2007/2008). • The construction of several “missing links” in the motorway network in the

Antwerp area. The total investment of the Flemish Region in maritime infrastructure for the four ports and in their maritime access ways, amounted to BEF 85.420 million during the period 1989-99.

Enforced Speed Limit

Unmanned cameras have been installed throughout Belgium to control speed limits, the majority of them being in Flanders. The speeding fines were harmonised and increased all over Belgium as of 1 January 1999.

20

Other Measures

Employees who cycle to their work place are rewarded BEF 6 per kilometre. In the 2000 in-depth review of the energy policies of Belgium, the IEA stated: The Government of Belgium should: • Promote effective measures in reaching the energy efficiency targets in all

applicable sectors including industries, public and private sectors and transport.


In Flanders, the SENVIVV study was undertaken in the framework of the VLIET programme in the building area. The subject of the study was the testing of 200 recently built (1990-1997) individual dwellings and apartment buildings for application of the insulation regulations, the heating system installed and the glazing. Results are as follows: When looking at buildings constructed since the introduction of the K55 standard, only one-eighth meet the standard. For apartment buildings, the result is somewhat better: one out of three meets the requirements. Given this result, the Flemish government is considering increasing the number of control visits to buildings under construction and changing the existing procedure. At the moment, the building owner has to prove the K value of the building when beginning the procedure to receive the building permit. The Flemish government considers that it would be preferable to oblige the owner to prove the K value of his property in the final stages of construction. In the 2000 in-depth review of the energy policies of Belgium, the IEA stated: The Government of Belgium should: • Establish an effective monitoring system, with collaboration with the

regional governments, in light of meeting national energy policy objectives, in particular, energy efficiency targets.

Further information

For further information, please contact: ir. G. Michaux Federal Public Service Economy, S.M.E.s, Self-employed and Energy Energy Policy Division North Gate III, 16 Bld du Roi Albert II, 1000 BRUXELLES - BELGIUM Tel: +32 (0)2 206 4261/4545 Fax: +32 (0)2 206 5732 e-mail: [email protected] Site : http://www.energie.mineco.fgov.be/

IEA ��

CANADA Updated September 2002

BACKGROUND Responsible and increasingly efficient energy use is given considerable policy attention in Canada. In 1994-95 the federal government conducted a comprehensive review of its programmes, including energy efficiency. The review emphasised the importance of federal programmes that support improvements in energy efficiency, particularly as they relate to fulfilling Canada’s climate change goals. Energy efficiency is a key component of Canada’s National Action Program on Climate Change (NAPCC) approved in February 1995 by federal and provincial ministers of energy and environment. In October 2000, Canada’s National Implementation Strategy (NIS) and the First National Climate Change Business Plan (FNBP) were released with the agreement of federal, provincial and territorial Ministers of Energy and the Environment. The NIS is a framework for a co-ordinated, comprehensive and phased approach across jurisdictions to address the issue of climate change and to reduce the uncertainties to the extent possible. The FNBP, which outlines climate change, related policies and measures will be produced annually and updated on a three-year basis. Based on the Energy Efficiency Act of January 1993, the cornerstone of the federal energy efficiency effort is the Efficiency and Alternative Energy Program (EAE). It encourages investment in economic efficiency and alternative energy opportunities by employing a mix of information, persuasion, financial incentives, R&D and regulatory measures. Energy efficiency activities are carried out in co-operation with provincial governments, utilities, industry (suppliers of energy-using equipment) and non-governmental organisations. Major programme expansions occurred in 1997 and 2000 (see below).


In 1992, Canada signed the United Nations Framework Convention on Climate Change (UN FCCC) and in February 1994 tabled its first national report to the Conference of the Parties of the UN FCCC entitled Canada’s National Report on Climate Change: Actions to Meet Commitments under the UN Framework Convention on Climate Change. Its responses to climate change were outlined in the NAPCC, which demonstrated the importance given to energy efficiency to address the climate change challenge. Canada’s Second National Report on Climate Change: Actions to Meet Commitments under the United Nations Framework Convention on Climate Change, dated May 1997 and updated November 1997 updates Canada’s situation and responses to climate change. In February 2002, Canada’s Third National Report on Climate Change: Actions to Meet Commitments under the UN Framework Convention on Climate Change was released. The report discusses Canada’s most recent responses to climate change. In the framework of the Kyoto Protocol, Canada is committed to reducing its greenhouse gas emissions by 6% from 1990 levels by the 2008-2012 period.

National Action Program on Climate Change

The National Action Program on Climate Change (NAPCC) launched in 1995 governed Canada's national effort on climate change. It covered federal, provincial and municipal initiatives already announced, or likely to be announced, with a focus on energy efficiency, alternative energy, and reductions of GHG emissions. Some provinces also took action with stakeholders in their own jurisdictions.

2

The NAPCC gave particular attention to voluntary undertakings (for example, by industry) registered with Canada’s Voluntary Challenge & Registry Inc. -- www.vcr-mvr.ca -- established in 1994 and privatised in October 1997. The organisation registers voluntary commitments to reduce GHG emissions. More than 790 organisations, including federal and provincial government bodies, have registered, accounting for over 75% of Canada’s GHG emissions from business and industrial sources.

Government of Canada Action Plan 2000 on Climate Change

On 6 October 2000, the Government of Canada Action Plan 2000 on Climate Change was announced and the major features of the initiative outlined. It includes new and expanded measures to reduce GHG emissions by 65 megatonnes per year during the commitment period 2008-2012. Funding for the Action Plan was set at C$500 million over five years, which is in addition to the C$ 600 million over five years announced in Budget 2000 to support the Government of Canada’s climate change-related activities. The Government of Canada outlined a series of measures in Action Plan 2000 on Climate Change that are projected to reduce Canada’s greenhouse gas emissions by about 65 megatonnes annually during the Kyoto Protocol’s 2008-2012 commitment period. The projected 65 megatonnes reduction would cover about one-third of the gap between Canada’s projected emissions in that year and its Kyoto target. Since 1995, the federal government has spent or committed a total of C$1.95 billion on climate change related initiatives. More information can be found in the document Canada’s National Implementation Strategy on Climate Change at the following website: http://nccp.ca/NCCP/pdf/media/JMM-fed-en.pdf The Office of Energy Efficiency (OEE) of Canada’s Federal Department of Natural Resources took a lead role in the implementation process, including implementation of all the measures in the buildings sector and most of the measures in the industry and transport sectors. In the 2000 in-depth review of the energy policies of Canada, the IEA stated: The Government of Canada should: � Consider establishing clear objectives possibly as quantified targets, for

the contribution of end-use policies and programmes to reducing greenhouse gas emissions.


Canada is a federation of ten provinces and three territories. Federal and provincial governments share political authority and jurisdiction. The division of powers in the Canadian Constitution means that federal, provincial/territorial and municipal governments share jurisdiction over policy areas relevant to climate change. Many provincial and territorial governments and other stakeholders have announced programmes and action plans to improve energy efficiency and promote greater use of alternative energy and thus contribute to the response to the issue of global warming. In the 2000 in-depth review of the energy policies of Canada, the IEA stated: The Government of Canada should: � Develop closer relations between federal and provincial energy efficiency

programmes, and assist provinces wishing to develop energy efficiency policies and programmes.

3

NRCan The Federal Department of Natural Resources (NRCan) has primary responsibility for formulating and implementing energy policy in areas of federal jurisdiction. Its energy efficiency activities are delivered by two groups: the Office of Energy Efficiency (OEE), formerly the Energy Efficiency Branch, and the CANMET Energy Technology Branch. The OEE has a mandate to renew, strengthen and expand Canada’s commitment to energy efficiency in order to help address the challenges to climate change with specific emphasis on the Kyoto Protocol. The CANMET Energy Technology Branch (CETB) works in partnership with industry and all major stakeholders in the Canadian energy and R&D sectors. Its mandate is to develop and deploy energy-efficient, alternative energy and advanced hydrocarbon technologies. Some 77% of its total budget of C$44.5 million1, goes to energy efficiency and alternative energy R&D. The CETB staff of 400 conducts R&D in oil sands and heavy oils; R&D in energy efficiency in buildings, industry, communities, renewable energy and alternative transportation fuels; and R&D in heat management and photovoltaic technologies. Natural Resources Canada (NRCan) has 17 market-related energy efficiency initiatives that target all types of consumers and emphasise partnerships and economic investments. Their objective is to overcome the market barriers of inadequate information and knowledge, institutional deterrents in the energy market, and financial and economic constraints on energy users. NRCan’s initiatives use the following policy instruments: leadership, information, voluntary actions, fiscal incentives and regulations.

Community Energy Systems Program

The Community Energy Systems Program works in partnership with Canadian communities and businesses to help them meet their energy needs with greater energy efficiency and increased use of renewable energy. The programme identifies and develops opportunities to use district heating and cooling, combined heat and power (cogeneration), waste-heat recovery, thermal storage and local sources of renewable energy, particularly biomass. The programme provides planning and implementing services for projects in both urban centres and remote communities, development of software for system design, and analysis of the improved performance of district cooling systems. It also promotes and fosters the adoption of integrated energy systems. The programme’s laboratory, which houses an ice-slurry-based district cooling system, develops and tests district energy technologies.


Measures already existing and or being improved

National Energy Code

The Model National Energy Code for new residential and commercial buildings (MNECRCB) consists of two parts, namely the Model National Energy Code for Houses (MNECH) and the Model National Energy Code for Buildings (MNECB). The MNECRCB aims to increase energy efficiency by specifying minimum performance standards for new Canadian houses and buildings. It provides this customised energy standard by allowing for regional climate and energy and construction cost variations. Published by the Canadian Commission on Buildings and Fire Codes in 1997, its development was supported by NRCan in collaboration with energy utilities, provincial and

1. On average in 2001 C$1 = US$ 0.65. Note – the C$44.5M is the federal budget which is leveraged through

in-house (cost recovery) and contracted-out (partnership) projects. The ability to recover costs and to leverage external funds are obviously dependent upon the base funding identified. Cost recovery increases the programme size by about C$7M/a. The contracting-out budget varies, ranging between C$17M/a and C$18M/a. CETB: Partners contribution ratio target is 40:60.

4

territorial governments, and the National Research Council Canada (NRC). NRCan provides software, training and implementation materials to support the adoption and implementation of this model code by relevant housing/building authorities (i.e. provinces, territories and municipalities). The department also monitors and analyses the impact of this code. This programme was very influential during consultations under the National Climate Change Process in 1999-2000, when the provisions of the MNERCB provided a strong basis for considering measures to improve the energy efficiency of the Canadian housing and building stock.

R-2000 Home Program

The voluntary R-2000 Home Program, first introduced by the Government of Canada in January 1982, encourages Canadians to build houses that are more energy efficient and environmentally responsible. Certified R-2000 homes meet minimum standards for windows and doors, insulation, HVAC (heating, ventilation and air conditioning), lighting systems, air quality, recycled materials and water conservation. Certified R-2000 new houses are up to 50% more efficient than homes built to current building codes. R-2000 targets home building companies through education and training schemes. The R-2000 Standard is available across Canada and is delivered through agreements with Home Builders Associations in the provinces of British Columbia, New Brunswick, Nova Scotia and Newfoundland and Labrador, and by private companies in Ontario and Alberta. Three provinces/territories (namely, Manitoba, the Yukon, and Quebec) deliver the programme in their regions. When provinces or utilities have given grants to home buyers or builders, there has been a much higher adoption rate of the ambitious R-2000 Standard in new buildings than might be expected on a purely voluntary basis. The R-2000 Standard has had a strong influence on building practice in Canada; houses built today are about 30% more efficient than those built in 1980, before implementation of R-2000.

Building Energy Technology

Given climate change concerns and the need to adopt sustainable development concepts, the goal of this programme is to establish an industry capacity which will allow a 50% improvement in energy performance in buildings. The programme addresses both technology development and deployment in both new and retrofit applications. Technology development will focus on improved cost-effectiveness and life cycle performance, and on the next generation of products. Market acceptance and adoption will be addressed through the development of specific technologies (e.g. computer design tools) and facilitating awareness (e.g. best practices).

Efficiency Standards

Canada’s Energy Efficiency Act authorises minimum energy efficiency standards to phase out less efficient energy-using equipment and household appliances from the Canadian marketplace. The first regulations under the Act came into force on 3 February 1995. To date, regulations have been established for more than 30 products, including residential energy-using products, electric motors and lighting products. Regulations apply to products that account for over 75% of residential energy demand. Federal regulations on imported products and products traded between provinces complement provincial regulations for intra-provincial markets, and generally parallel regulations in the US. Possibilities for additional regulations are electrical distribution transformers and the strengthening of the performance levels of currently regulated products such as refrigerators, freezers and washing machines. Ontario (1988), British Columbia (1990), Quebec (1992), Nova Scotia (1991) and New Brunswick (1995) have all implemented minimum energy efficiency

5

standards for specific equipment sold or leased within their respective jurisdictions.

The Accelerated Standards Action Program

& Energy Star Promotion

As one of the measures in the Government of Canada’s Action Plan 2000 on Climate Change, the Accelerated Standards Action Program (ASAP), will improve the energy efficiency of appliances through the development of standards for residential, commercial and industrial equipment. It will accelerate the market penetration of high-efficiency products by providing marketing and product certification assistance to encourage the purchase of "best in class" products. In line with ASAP, the Energy Star Promotion was started in July 2001. The Energy Star� symbol – an internationally recognised endorsement label – allows the consumer to very simply identify the most energy efficient products available based on a standard set of criteria.

Energy Labelling

The EnerGuide for Equipment labelling programme supplements the minimum performance requirements and seeks to stimulate consumer awareness and to influence purchasing decisions. It covers household appliances and air conditioners. This labelling scheme is mandatory for new products and gives a comparative assessment of energy efficiency and energy consumption for a range of appliances on the market. It is supported through directories for consumers, information and education campaigns, and training for retail sales staff. Marketplace audits revealed that over 80% of the regulated parties complied with the labelling requirements. A voluntary Window Labelling Program (rating and labelling) similar to EnerGuide for Equipment is administered by an association of manufacturers. It applies to windows and doors.

EnerGuide for Houses

EnerGuide for Houses, established by the Minister of Natural Resources on 1 April 1998, is a labelling and certification programme which seeks to persuade and assist homeowners to make energy efficiency investments in their houses, and to consider energy efficiency when purchasing a house. During the 1999-2000 fiscal year, NRCan expanded the EnerGuide for Houses programme to reach 80% of the Canadian population. The initiative builds on the EnerGuide for Equipment labelling programme by using a similar label to guide home energy improvement and purchasing decisions. Participating homeowners receive an on-site inspection and energy analysis of their houses, complete with recommendations for energy efficiency improvements. After the improvements have been made, the EnerGuide for Houses rating offers evidence of the investment, which enables prospective buyers to compare the energy performance of similar houses.

Energy Innovators Initiative

The Energy Innovators Initiative (EII) promotes energy efficiency upgrades and building retrofits in the commercial and institutional sector. The initiative recruits Canadian organisations to enrol as Energy Innovators and make a corporate commitment to energy efficiency using an Energy Management Plan. An Energy Innovator can ask to have its plan, which includes its commitment to reduce greenhouse gas (GHG) emissions from its operations, registered with Canada’s Climate Change Voluntary Challenge and Registry Inc. (VCR Inc.). The EII helps organisations plan, finance and implement comprehensive energy efficiency improvements by providing a wide range of products and services. Through an approach called “savings financing,” public and private sector organisations can use energy savings to pay for the projects they implement. EII offers a pilot retrofit incentive, expanded partnerships and benchmarking. The pilot retrofit incentive, which is provided in the form of a contribution, is

6

available to Energy Innovators implementing comprehensive energy efficiency pilot retrofits. NRCan contributes up to 25% of project costs to a maximum of C$250 000. Participants agree to replicate their pilot project in at least 25% of similar facilities that they own or occupy. NRCan works in partnership with key sectoral associations such as the Hotel Association of Canada and the Association of Canadian Community Colleges. These partnerships help to recruit Energy Innovators, stimulate energy management plans and projects and develop sector-specific tools. Benchmarking and best-practice guides allow organisations to measure their efficiency against similar organisations and identify where to obtain better performance. The EII, as part of Action Plan 2000, will be offering two new incentives for commercial and institutional members: one for retrofit planning services and the other for energy-intensive retrofits in organisations with fewer than four buildings.

Information Programmes designed to improve the availability of information on opportunities for reducing energy use in existing buildings are common in Canada. These initiatives include publications, seminars, workshops, operating and maintenance training programmes and building audits. NRCan supports public exhibits that focus on energy efficiency initiatives such as the R-2000 Home Program, EnerGuide, EnerGuide Month (May), national energy codes, Energy Innovators initiative, etc.

Commercial Buildings Incentive Program

The Commercial Building Incentive Program (CBIP), established by the Minister of Natural Resources in April 1998, provides financial incentives to builders and developers to incorporate energy-efficient technologies and practices into the design and construction of new commercial, institutional and multi-unit residential buildings. CBIP seeks to encourage a permanent change in the way such buildings are designed. It is intended to offset the extra cost of designing energy-efficient buildings and thus encourages designers and developers to consider efficiency options in their designs of commercial and institutional buildings. To qualify for the incentive, buildings must be at least 25% more efficient than buildings that meet the requirements of the Model National Energy Code for Buildings (MNECB). CBIP provides a one-time grant based on the difference in estimated annual energy costs between an approved CBIP design and an MNECB design. In addition to financial incentives, CBIP provides design software and guidelines, case studies and training for architects and engineers. NRCan, in 1999-2000, provided incentive payments for 34 building designs (up from 12 in the first year of the programme) at an average payment of C$30 000. The average design was 30% more efficient than the Model National Energy Code for Buildings.

Industrial Building Incentive Program

The Industrial Building Incentive Program (IBIP) established by the Minister of Natural Resources in July 2001 extends the precepts of CBIP into the industrial sector. The programme aims to increase the energy efficiency of newly constructed buildings used for manufacturing and other industrial activities. IBIP will offer an incentive to companies building new industrial facilities to offset additional design costs inherent in the initial attempts at energy-efficient design, primarily focusing on affecting the market through information programming.

7

PUBLIC SECTOR Measures already in place and/or being improved

Federal Buildings Initiative

The Federal Buildings Initiative (FBI), co-ordinated by NRCan, is designed to facilitate comprehensive energy efficiency upgrades and building retrofits for departments, agencies and Crown corporations of the Government of Canada, through mechanisms such as public-private partnerships with energy management firms. The FBI provides a full range of products and services for implementing comprehensive energy efficiency improvements within an organisation. FBI account managers work with departments from project inception, through contract development and award, celebration and recognition, to monitoring and tracking. The FBI supports partnerships with energy management firms that provide a turnkey service which includes engineering, third-party private-sector financing, comprehensive training packages and performance guarantees. Project data are collected annually from departments and evaluations, and programme results are published in the Government of Canada’s annual report to Canada’s Climate Change Voluntary Challenge and Registry Inc. (VCR Inc.).

The House in Order Initiative

The House in Order Initiative is designed to accomplish two main objectives of the Government of Canada. The first objective is to demonstrate environmental leadership to the rest of Canada (i.e. all other levels government and sectors of the economy). The second is to reduce total GHG emissions resulting from Government of Canada activities by a factor that is as stringent as that expected of the country as a whole under the Kyoto agreement. The initiative provides a set of tools which departments can use to reduce emissions in their facilities. Several tools are explored and evaluated for their potential impact on GHG reduction, as well as for cost-effectiveness and feasibility of implementation. The tools are meant to assist in reducing emissions from energy production, distribution and consumption activities, employee behaviour, procurement activities and fleet management practices. The House in Order Initiative has set an emissions-reduction target of 31% below 1990 levels by 2010 for Government of Canada operations.

FleetWise Launched in October 1995, the FleetWise programme — the Federal Fleet Initiative — is a government leadership initiative that targets federal vehicle fleets to reduce energy use and promote the use of alternative transportation fuels. The objectives of the programme are to: improve the operational efficiency of fleets; reduce greenhouse gas emissions from fleets and accelerate the use of alternative transportation fuels. The initiative provides fleet managers with an assessment of fleets at little or no cost and technical advice on using alternative transportation fuels (ATFs) and acquiring alternative fuel vehicles. In addition, it campaigns to encourage vehicle operators to select alternative fuels. Four departments — Treasury Board, NRCan, Environment Canada, and Public Works and Government Services Canada — manage planning, implementation and reporting under the FleetWise initiative. NRCan is responsible for implementing FleetWise.

Leadership Challenge

The Leadership Challenge will encourage all federal departments and agencies to participate in emission reduction efforts. Best practice information

8

will be provided in the areas of employee awareness, staff training, solid waste management, GHG-responsible procurement practices, and by supporting public transit and green commuting.

INDUSTRY


Industrial Energy Efficiency Commitments

The Canadian Industry Program for Energy Conservation (CIPEC), a sector-level programme, and the Industrial Energy Innovators Initiative (IEII), a company-level programme, both address barriers to planning, implementing and tracking energy efficiency projects in industry. Key elements of both programmes are: the establishment of energy efficiency improvement targets; the preparation of energy efficiency action plans; the tracking of energy efficiency improvements on a per-unit-of-production basis; the reporting of results; and the development and delivery of products and services which overcome barriers to continued energy efficiency improvements. CIPEC relies upon the collective support and action of more than 38 trade associations representing over 90% of secondary industrial energy demand in Canada. Overall direction is provided by an executive board made up of CEOs and vice-presidents of some of the largest energy users in industry. CIPEC task forces in 23 sectors use events, publications, training sessions and networking to promote energy efficiency. Through these two industrial initiatives, Natural Resources Canada (NRCan) provides support services directly to individual organisations establishing energy efficiency programmes. These services include assistance in energy management planning, tracking and regular reporting; workshops dealing with all aspects of energy management; and various technical, financial and information services. By March 2001, NRCan had 295 companies signed up as innovators. In the 2000-2001 fiscal year, NRCan employees participated in community and employee awareness events at four Innovator facilities in the provinces of Ontario and Quebec. At these events, which were attended by more than 25 000 people, NRCan provided information on its industrial and consumer energy efficiency products and services.

New Technologies for Industrial Energy Efficiency

In part through funding provided by the Program on Energy R&D, the CANMET Energy Technology Branch works in partnership with the private sector, academia and other levels of government to reduce the overall intensity of Canada’s industrial and utility sectors and, consequently, GHG and other emissions, while improving productivity and providing Canadian companies with potential economic opportunities. The objectives of the programme are to provide S&T to develop advanced industrial energy efficiency products, processes and systems; to reduce fossil energy intensity and emissions of selected Canadian resource and related industries; to advance generic energy related technologies and processes; to increase the proportion of Canada’s electricity supply from distributed systems and renewables, and to reduce environmental impacts from centralised, combustion-based electricity power generations systems.

9

In the 2000 in-depth review of the energy policies of Canada, the IEA stated: The Government of Canada should: � Strengthen commitments made under voluntary agreements in industry. � Consider supplementing and integrating current sectoral programmes with

economic incentives in order to maximise the uptake of efficient practices.

TRANSPORT Measures already existing and/or being improved

Fuel Efficiency Standards

The Motor Vehicle Fuel Efficiency Program, in effect since 1978, delivered by NRCan and Transport Canada, promotes improvements in new vehicle fuel efficiency by encouraging motor vehicle manufacturers to meet voluntary annual company average fuel consumption targets for new automobiles sold in Canada. Average fuel consumption targets are patterned after the US CAFE standards, although compliance is voluntary in Canada. NRCan works with the vehicle manufacturers through a voluntary Memorandum of Understanding (MOU) on fuel efficiency. The programme focuses on opportunities to improve vehicle fuel technology by providing information to consumers on the fuel efficiency on new vehicles. The annual Fuel Consumption Guide, which lists fuel consumption ratings for new vehicles, is produced through information obtained under this initiative. The current actual average fuel consumption ratings are 8 litres/100 km for cars and 11.4 litres/100 km for light trucks. As part of Action Plan 2000, the Government of Canada is to launch negotiations with the automobile industry and the United States to achieve new voluntary fuel efficiency improvement targets for model year 2010 and phase in a significant improvement – starting as early as 2004.

Energuide for Vehicles

Since 1999, vehicle manufacturers have been attaching a fuel consumption label to their cars, vans and light duty trucks. The label is standardised across the industry and appears on its own or is combined with the vehicle options and price label on the side window of each new vehicle.

FleetWise Launched in October 1995, the FleetWise programme — the Federal Fleet Initiative — is a government leadership initiative that targets federal vehicle fleets to reduce energy use and promote the use of alternative transportation fuels. FleetWise is described in more detail under the Public Sector section.

FleetSmart FleetSmart — the Commercial Fleet Initiative — announced in March 1997, encourages Canadian private fleet operators to reduce operating costs through energy-efficient practices and the use of alternative fuels. FleetSmart provides information materials, workshops, technical demonstrations and training programmes to help fleet operators assess opportunities to increase energy efficiency in their operations. FleetSmart is delivered in partnership with associations, private industry and other levels of government. FleetSmart tool kits have now been distributed to 1 643 registered clients, representing more than 132 000 vehicles.

Auto$mart Auto$mart encourages and assists motorists to buy, drive and maintain their vehicles in energy-efficient ways that save fuel and money, and emphasises how such efforts also reduce vehicle emissions. Its main tool is the Auto$mart Guide, which offers useful information and tips on purchasing, operating and maintaining personal vehicles. The programme also provides resource materials to driver educators for fuel-efficiency training to novice drivers and

10

provides Web-based communications tools that support and encourage the development of new initiatives of local governments, industry and associations to promote fuel efficiency. Auto$mart also offers information on opportunities to use alternative fuels.

Freight Efficiencies and Technology Initiative

The goal of the Freight Efficiencies and Technologies Initiative is to increase the freight transportation industry’s participation in voluntary climate change initiatives by: increasing the operating efficiency and environmental training and awareness among freight operators and shippers; and demonstrating and encouraging the take-up of innovative environmental technologies and best practices within the freight transportation sector. This is a joint NRCan-Transport Canada initiative.

Alternative Transportation Fuels R&D

The Transportation Energy Technologies Program works in partnership with industry to develop and deploy leading-edge transportation technologies that minimise environmental impacts, increase the potential for job and economic growth and extend the lifespan of Canada’s energy resource base. Programme areas include: the development of alternative fuels and advanced propulsion systems (gaseous fuels, alcohols, hydrogen, fuel cells, electric vehicles and hybrids and related systems); advanced energy storage systems (lightweight cylinders, adsorption technologies and flywheels); emissions control technologies (for diesel and alternative fuel engines, lean-burn catalysts and enhanced combustion chamber design); vehicle transportation system efficiency (advanced materials and processes, auxiliaries and regenerative breaking systems); and fuelling infrastructure (fuelling station hardware, hydrogen systems and battery charging systems). The programme works in co-operation with stakeholders in the domestic and international transportation industries, including original equipment manufacturers, industry associations, fleet managers, transit authorities, utilities, provincial governments, research organisations, universities, other federal departments, the US Department of Energy and the International Energy Agency.


Data gathering on energy consumption has been significantly improved through the creation of a National Energy Use Database, launched in October 1991. The rationale is that by improving understanding of where and how energy is used in Canada, resulting analyses will identify opportunities to improve energy efficiency. As well, the data and analysis help Canada track the effectiveness of efficiency programmes. This monitoring supports federal data collection activities in each end-use sector. The Demand Policy and Analysis Division of the Office of Energy Efficiency (OEE) produces various policy and analysis reports to give a picture of the current energy efficiency policies and the results achieved. These include: Emissions Reductions from Federal Operations-Progress Report to the Climate Change Voluntary Challenge and Registry; Energy Efficiency Trends in Canada, 1990 to 1999; A Review of Secondary Energy Use, Energy Efficiency and Greenhouse Gas Emissions; The State of Energy Efficiency in Canada, Report 2001; and the Report to Parliament Under the Energy Efficiency Act-1999-2000. These reports are updated annually. In July 2001, the OEE published Energy Efficiency Trends in Canada: An Update (see: http://oee.nrcan.gc.ca/general/trewnds/index_e.htm ), its sixth annual review of energy efficiency in Canada. This report covers the period 1990 to 1999. The OEE Index shows a decline in value between 1990 and 1997, indicating that the various sectors of the economy have generated energy efficiency improvements of about 1% per year during this period.

11

An evaluation of the OEE’s performance measures in 2000, conducted by the Office of the Auditor General (OAG), concluded that NRCan has made satisfactory progress in addressing the 1997 OAG recommendations on NRCan’s energy efficiency initiatives. While progress continues, the OAG follow-up noted improvements in the performance information (both expectations and achievements) as well as an increased effort to link changes in energy use to changes in greenhouse gas emissions.

Further information

For further information, please contact: Kwaku Agyei Office of Energy Efficiency Natural Resources Canada 580 Booth Street Ottawa, Ontario Canada K1A OE4 Tel. +1 (613) 943 1785 Fax +1 (613) 947 4120 E-mail: [email protected]

1

CZECHREPUBLIC

Updated December 2002

BACKGROUND


The Czech Republic acceded to the UN Framework Convention on Climate Change(UN FCCC) on 7 October 1993 on the basis of the Government of the CzechRepublic Resolution No. 323 of 16 June 1993. On the basis of Resolution No. 530,passed on 18 October 1995, the Minister of Foreign Affairs on 17 November 1995requested the UN Secretary General and the FCCC depositor to take the followingmeasures:

� Delete Czechoslovakia from Annex 1 of the UN FCCC because Czechoslovakiano longer exists and was never a Party to the Convention.

� Include the Czech Republic in the list of Annex 1 countries.

The Czech Republic presented on 17 October 1994 its First National Communicationto the Secretariat of the UN FCCC. In May 1995, the country received the in-depthreview mission of the Secretariat, which issued a report stressing that thisCommunication outlines a set of measures to mitigate the impact of climate change.

On 23 November 1998, the Czech Republic signed the Kyoto Protocol (CzechRepublic Resolution No. 669/1998). During the 2008-2012 commitment period, thecountry is committed to reducing total emissions by 8% compared to the 1990 level.Today, total GHG (greenhouse gases) from fuel combustion are 20% below the1990 baseline.

The Czech Republic's Second Communication on the process to comply with thecommitments under the UN Framework Convention on Climate Change was issuedby the Ministry of the Environment in May 1997. It outlines various measures ("noregret measures") that have been applied to solve the country's economic andenvironmental problems. These measures are defined in the document entitled TheState Environmental Policy of the Czech Republic approved by GovernmentResolution No. 472/1995.

This communication included a projection of total GHG emissions of 192 Mt CO2equivalent in 2010 compared to 188 Mt in 1990. Emission projections were updatedagain in 2000 for three different economic growth scenarios. According to theseprojections, under new macro-economic parameters the emission reduction from1990 by 2008-2012 should be between 12 and 32%. In all cases, a potential reservemay be available for possible emissions trading.

The Czech Republic's Third National Communication on the UN FrameworkConvention on Climate Change was issued by the Ministry of the Environment on28 December 2001. It analyses current circumstances in the area of climate changein the country and documents the state of compliance with obligations following fromthe UN FCCC and the Kyoto Protocol. In the 2001 in-depth review of the energy policies of the Czech Republic, the IEAstated: The Government of the Czech Republic should: � Intensify efforts to develop a comprehensive multi-sectoral climate change

strategy, giving priority to enhancing energy efficiency.

State EnvironmentalPolicy

In May 1999, the government of the Czech Republic approved the document entitledThe Strategy of Protection of the Climate System of the Earth in the Czech Republic(Resolution No. 480/1999) which places protection of the climate amongst top-

IEAEnergyEfficiencyUpdate

2

priority environmental issues and sets out the main tasks for the individual sectors,which should lead to fulfilling the quantitative tasks of the Kyoto Protocol. Keyemphasis is placed in the document on a wide range of measures related to energyefficiency and on renewable energy.

A new Clean Air Act came into force on 1 January 2002. The main reason forrestructuring the current air protection legislation in the Czech Republic lies inharmonisation and transposition of the relevant legislation of the European Union inrelation to the preparation for accession of the country to the European Union. Thenew Act is comprehensive and includes protection against pollutants, protection ofthe ozone layer and of the climate system of the earth in the sense of the UN FCCCand of the Kyoto Protocol.

The new Clean Air Act will also provide a legislative basis for the NationalProgramme to Mitigate Changes in the Climate of the Earth, approved by thegovernment to replace the above-mentioned Strategy of Protection of the ClimateSystem of the Earth in the Czech Republic. The Act will set up reduction targets forsubstances affecting the climate system and deadlines for achieving them.

NationalEnergy Policy

The National Energy Policy was approved by government decision No. 50 of12 January 2000.

This basic document indicates the targets in the area of energy managementaccording to the needs of economic and social development, includingenvironmental protection. The long-term strategic targets of energy policy include agradual reduction of the volumes of energy and raw materials needed by the Czecheconomy to meet the level of advanced industrial countries. The new sub-objectivesup to 2020 on the demand side are to remove price subsidies and distortions, tocreate competitive markets for electricity and gas, to achieve freedom of choice forconsumers, and to ensure energy efficiency enhancement.

EnergyManagementAct

The Energy Management Act (Act on Energy Management of the Czech RepublicNo. 406/2000) was adopted by the Parliament on 25 November 2000 andimplemented on 1 January 2001. Chapter III of this framework law, entitled NationalProgramme for Economical Energy Management and Use of Renewable andSecondary Energy Resources, deals, inter alia, with the various types of subsidiesfrom the state budget for specific programmes. Chapter IV, entitled Measures toEnhance Economical use of Energy, deals specifically with the ways to promoteenergy efficiency, such as minimum energy efficiency requirements, conditions forhouse occupiers to fulfil determined thermal and technical properties of buildings,energy efficiency labelling, energy audits, energy auditors and co-generation of heatand power (CHP).

State Programmeto SupportEnergy Savingsand Use ofRenewable Sources of Energy

The State Programme to Support Energy Savings and Use of Renewable Sources ofEnergy (the State Programme) is a one year programme set up by the Ministry ofIndustry and Trade which has been announced each year since 1991. It includesenergy saving measures in the sphere of production, distribution and consumption ofenergy, wider use of renewable and secondary sources of energy and developmentof CHP, counselling, implementation of new low energy consuming technologies,education, public education and promotion leading to more economic use of energy.To carry out the State Programme, the Ministry of Industry and Trade hasestablished the Czech Energy Agency (see below). In the 2001 in-depth review of the energy policies of the Czech Republic, the IEAstated: The Government of the Czech Republic should: � Make energy efficiency in the various consuming sectors a policy priority.� Ensure that energy efficiency be given priority among energy policy objectives.

3

National Circumstances

The Czech Republic became an independent country on 1 January 1993, as a resultof the division of the former Czechoslovakia into the Czech and Slovak Republics.Since 1990, the country's economy has been undergoing transition from a centrallyplanned to a market economy; the country's economic development has also beeninfluenced by the division of Czechoslovakia. The first stage of economictransformation was marked by a deep recession as GDP decreased by about 22%.The economy revived in 1995 and its growth has been encouraged by industrialrestructuring and revitalised investments.

The environment was seriously damaged during the 40 years prior to 1989: duringthis period of controlled and centrally directed economy, there was an attempt toachieve maximum production with no regard for the environment or naturalresources. The situation was aggravated by an excessively high energy demandand uneconomical use of raw materials; imperfect or non-existent environmentallegislation, etc. This distorted economy resulted in disproportionately high emissionsof principal pollutants and a considerable waste of energy.

Profound changes in environmental protection and thus in energy economy beganafter the political changes of November 1989. The Ministry of the Environment, theFederal Committee on the Environment and various other environmentally linkedinstitutions were established. The first objective report on the state of theenvironment was published. At that time, the foundations were laid for legalprotection of the environment. Reports on the status of the environment have beenpublished annually since 1993 showing that the deterioration seen in the 1970s and1980s has been stopped or stabilised; the quality of the environmental is nowimproving. In 1995 and 1996, annual emission inventories for 1991 through 1995were worked out according to IPCC methodology. These inventories show that in theperiod 1990-1995, the aggregated emissions of the three basic GHG gases (carbondioxide, methane and nitrous oxide) were reduced by 23.3% from 193.2 milliontonnes of CO2 equivalent to 148.2 million tonnes of CO2 equivalent.

The Czech Republic became a Member of the OECD on 21 December 1995. At theend of October 1999, the IEA Governing Board invited the Czech Republic to accedeto the 1974 Agreement on an International Energy Program (IEP). On 22 February2001, the Czech Republic officially become a full member of the IEA.

Czech Energy Agency

The Czech Energy Agency (CEA) was founded by the Minister of Industry and Tradeon 1 September 1995, as a publicly funded organisation carrying out the work of theformer Energy Agency which existed in Czechoslovakia and then in the CzechRepublic. The CEA's main mission is to encourage and carry out activities aimed atenergy savings and mitigate negative environmental impacts caused by theconsumption and conversion of all kinds of energy. The CEA is in charge ofimplementing the above-mentioned State Programme. In 2000, there were 19 staffmembers at the CEA' s headquarters. CEA implements programmes which:

� Save energy in industry, agriculture and transport.� Optimise energy supplies of residential areas.� Implement co-generation in small and medium-sized heat production sources.� Reduce energy consumption in public and residential buildings, as well as

education and healthcare sectors buildings.� Increase the use of renewable and alternative energy sources.

Other programmes focus on consultation, advertising, creating educational materialsfor experts and for the general public; they also support the formulation andestablishment of energy concepts for towns and regions.

A total budget of Kcs 1 523 million was allocated to the Ministry of Trade and

4

Industry programmes from 1991 to 1995 (before the creation of the CEA). From1996 to 1999, when the CEA was operational, the state budget totalled Kcs 1 226.5million. The state budget, which was Kcs 362.6 million in 1997, decreased toKcs 341.9 million in 1998 and again to Kcs 315 million in 1999; because of budgetconstraints, the budget for 2000 was Kcs 209.0 million and decreased to only 102.2million in 2001. Government support is provided as financial grants and theresources provided must be used within the given year on the basis of a selectionprocess. The realisation of the projects supported must occur within 18 months. In the 2001 in-depth review of the energy policies of the Czech Republic, the IEAstated: The Government of the Czech Republic should: � Provide adequate funding to the Czech Energy Agency for its energy efficiency

programmes and co-ordinate it with other initiatives, especially those of the StateEnvironmental Fund.

SEVEn SEVEn, the Centre for Energy Efficiency, is an independent organisation, which isnot affiliated through ownership or in any other way to any domestic or foreigncompany. From its creation until 1998, SEVEn functioned as a foundation but in1999, owing to a change in Czech law on foundations, it was registered as a publicbenefit corporation. SEVEn covers the costs of its activities through its contractwork, proceeds from consulting, and grants (in exceptional cases and to a limitedextent).

SEVEn focuses on overcoming barriers to the use of the cost-effective potential ofpractical energy savings in the residential, industrial and commercial sectors. Whenadvising clients on energy efficiency options, SEVEn combines its technicalexpertise with economical analysis, an overall assessment including the projectedenvironmental impact, proposals for the optimal method of financing and thepreparation of business plans for actual projects.

SEVEn has developed relationships with similar energy efficiency centres in othercountries and participates in many international projects. It co-operates withdomestic and foreign governmental bodies and organisations, financial institutions,private companies, cities and other municipal governments, schools and hospitals,various energy suppliers, NGOs and individuals.

State EnvironmentFund

The State Environment Fund of the Czech Republic (SEF), established in 1991, is aspecifically focussed institution for financing the preservation and improvement ofthe environment. In 1999, in implementing its programme for air protection, whichwas not primarily concerned with decreasing energy consumption, SEF did realiseenergy savings. All cases concerned the replacement by gas units of old coal-burning furnaces or co-generation units which did not comply with the emissionsstandards set by Decree No. 117/1997b of the Ministry of the Environment. This notonly led to considerable benefits for environmental protection but also to importantenergy savings. In 1999, energy savings were not a condition for implementation ofspecific programmes by SEF, but a secondary effect. However, from 2000, the SEFprogrammes for air protection contain a requirement for an energy-saving approach,to make it clear that energy saving is essential in an environmental project.

Energy Efficiency Funding

PHAREEnergy SavingFund

Financing for energy savings projects is difficult to obtain because of the lack ofcommercial financial resources and the lack of interest by private investors infunding such projects. To obtain this support, the European Commission hasestablished the Energy Savings Fund backed by the European Union PHARE

5

resources. The Ministry of Industry and Trade has contracted the CzechoslovakTrade Bank (CSOB) to operate and manage this fund. SEVEn co-operated in 1997in developing the methodology for the management and administration of the EnergySavings Fund, the procedures for realising funds and the documents subsequentlyused by the CSOB.

PHARE funds (ECU 4.5 million) will be granted after a standard evaluation of aclient's credit rating and a technical and economic evaluation of the project. TheCSOB has funds at its disposal for ten years to extend loans at preferential rates forsmall and medium-sized energy saving investments, in accordance with specificqualification criteria, using its own resources on a 50/50 co-financing basis withPHARE. These projects include the introduction of monitoring and regulation ofheating systems, double-glazing of windows, reduction of heat losses through wallsand roofs, improvements of lighting, etc.

Global EnvironmentFacility

The Global Environment Facility (GEF) provides grants and concessional funds todeveloping countries and those with economies in transition for projects andactivities that address some aspects of the global environment. In August 1998, theWorld Bank approved a Global Environment Facility grant of $5.8 million for theKyjov Waste Heat Utilisation Project to improve the efficiency of the CzechRepublic's energy sector. The project will reduce emissions of greenhouse gasesfrom the district heating system by increasing the energy efficiency and reliability ofheat and power supply to the Vetropak Moravia Glass factory and heat supply to thecity of Kyjov.

RESIDENTIAL/COMMERCIAL

EnergyLabelling

The Minister of the Environment launched in 1994 an Environmentally-FriendlyProduct Labelling Programme. Almost 200 products are labelled; they includethermal insulation made of recycled paper, water-based paints limiting VOCemissions, and small gas boilers for heating apartments and houses. Theseproducts with limited GHG emissions account for more than 80% of all labelledproducts

The Energy Management Act implemented on 1 January 2001 plans the introductionof energy labels. Energy labelling is in preparation for those appliances for which theEuropean Union has introduced labels: refrigerators, washing machines, tumbledryers, combined washer-dryers, dishwashers and lamps.

Thermal Insulation

Stricter insulation standards for buildings have been in effect since 1994. They arenot mandatory, except where state money is invested. Most standards areharmonised with the EU standards, if they exist, within one year of their introduction.The enforcement and monitoring of building codes is considered insufficient.Assuming that these standards result in a 30% decrease in energy consumption andthat roughly 15 000 apartments are built and retrofitted yearly, this measuredecreases annual CO2 emissions by about 40 000 tonnes of CO2.

A similar estimate is not available for commercial and administrative buildings,however it is thought to be in the range of a few tens of thousands tonnes of CO2.

There is at present no retrofitting programme for individually-owned houses.However, a programme for energy savings in individual house (modernisation ofapartment buildings) is being designed by the MRE which has made use of CEA'sexperience. The programme includes both the building insulation and heatingsystems and it mainly based on a soft loan scheme. The currently low cost-effectiveness of thermal insulation measures discourages investments in therenovation of buildings.

6

In the 2001 in-depth review of the energy policies of the Czech Republic, the IEAstated: The Government of the Czech Republic should: � Strengthen current insulation standards for buildings, as well as labelling and

energy efficiency standards for appliances in line with European Unionlegislation and progressively make them compulsory.

Energy EfficientLighting

A one-off programme subsidising the sale of compact fluorescent lamps wasfinanced by CEZ, the electric power company and SEVEn funds. Almost 155 000lamps were sold in two waves, costing about Kcs 20 million, which resulted in a CO2emission decrease by an estimated 9 000 tonnes per year. This programme has notbeen repeated.

Measurementof Energy consumption

The Ministry of Economy Decree No. 186/1991 stated that landlords of houses usingheat from a central source must measure heat consumption at the building's entry.Energy/heat consumption (quantity of heat for all consumers in building) was thendivided pro rata, according to individual consumption.

This Decree was replaced by the Trade and Industry Ministry's Decree No. 245/1995 accompanying Act No. 222/1994 "on the conditions of enterprises andadministrations in the energy sector". The first Decree was mandatory; the secondDecree which was originally only a recommendation has been mandatory since2001.

According to the Energy Management Act, house owners/occupiers, under the threatof sanctions, must not exceed the determined standards for consumption of energyfor heating. If house occupiers do overheat, they run the risk of financial sanctions bythe state through a state-controlled institution, the State Energy Inspection.

Energy Audits

One condition for receiving financial support from the Czech Energy Agency (CEA)is that an energy audit be made which documents the energy conservation potentialthat could be achieved. The audit methodology for residential, public and industrialbuildings has been drawn up by the CEA. Presently, about 300 energy auditors areoperational. Energy savings achieved on the basis of the audit range between 20and 40%.

The energy audit and observation of its recommendations are mandatory for allbuildings owned by the state which is one of the largest landowners (offices,schools, hospitals) and for buildings in which energy supply is financed by the state.

An individual energy audit of a residential house, without any immediateimplementation of proposed measures, can benefit from subsidies up to a maximumof 80% of the cost. Proposed no-cost measures must be implemented within threemonths of the finalisation of the energy audit. According to Sub-programme I of theGovernment Programme for Support of Energy savings in 2000, a total of 132projects for energy audits has been selected, the allocated subsidy amounting toKcs 4. 56 million.

Heat Pumps

The total capacity of heat pumps installed after 1990 is about 35 MW. They aremostly used for heating apartments. However a number of projects have beenimplemented in industry, mainly in drying plants and in the food and woodworkingindustries. Annually, they account for 55 GWh of savings and a 20 000 tonnesreduction of CO2 emissions.

District Heating

District heating is an important part of the energy system in the Czech Republic as30% of the 10 million households are connected to a local district heating network,providing 20% of the sector’s final energy consumption. Heat also accounts for 12%of energy consumption in the service sector and 14% in the industry sector.

7

Household consumption is subject to large seasonal variations and minor dailyvariations while that of industry is more constant. Space heating is the main energyuse of households for which the market share of district heating has been estimatedat 35% (1997 survey).

District heating systems are organised locally and operate in some 50 cities.Individual heating companies are also power producers. The sector was fullyprivatised in 1992-1994 through a voucher privatisation. A few units belonging to thearmy, schools, state hospitals and other health care facilities remain under stateownership. There have been significant foreign acquisitions of companies.International Power (UK) gained control of EOP 748 MWt (363 MWe), the mainindependent power producer (IPP) and holds a majority share in PrazskaTeplarenska, the Prague district heating company. Dalkia (France), a subsidiary ofVivendi and EDF controls major companies in North Moravia with a capacityexceeding 3 000 MWt. Cinergy, a US utility, controls over 1 440 MW of CHP powergeneration facilities. Horizon/United Energy in the United States has three plantstotalling 1 200 MWt. Most important producers are members of Teplárenskésdružení, the association based in Pardubice.

New Energy Act

The 1994 Energy Act, which previously regulated the sector, was replaced inJanuary 2001 by the New Energy Act (No.458/2000). The construction of newheating plants above 30 MWt capacity has to be approved by the Ministry of Industryand Trade and units below this limit by regional authorities. Criteria for approval inboth cases include the use of domestic and local energy sources, energy efficiencyand conditions of solvability of the investing company.

According to current legislation, there is no compulsory buy-back tariff between heatgenerators and heat distributors; prices are fixed by contract. As electricity salesmake up an important part of the district heating revenues (up to 80%), liberalisationof the electricity market is likely to lower electricity prices and reduce the revenue ofCHP operators. To offset this, the new Energy Act includes an obligation of purchaseto transmission and distribution networks for the electricity generated by CHP.However, the buy-back tariff is not set by the New Energy Act so co-generators andbuyers (distribution company or national grid) will have to negotiate the prices. Alongthe same lines, the New Energy Act also contains an obligation of purchase for heatgenerated from CHP, industrial process, renewable energy and environmentallyclean incineration. However, there are exemptions from the obligation where theend-consumer will not accept a higher tariff or for non-compliance with technicalparameters.

The Ministry of Finance regulates the household tariff for each network on a cost-plus-fees analysis method. Since 1994, regulation on prices for industrial heat usershas been lifted.

As 50% of households have individual meters and flow regulation, household tariffsfor the remaining consumers do not reflect actual consumption of heat but are basedon the size of the apartment and/or the number of persons per apartment. This tariffstructure appears complicated and inaccurate in evaluating effective heatconsumption and providing effective energy-saving incentives. Heat subsidies wereabolished in 1996 but the VAT rate remained at 5%. With the New Energy Act whichcame in force in January 2001, the Regulatory Energy Office is in charge of pricingand licensing.

Activities Implemented Jointly

In 1996-1999, five Activities Implemented Jointly (AIJ) projects were approved andimplemented by the Ministry of the Environment, two of which took place since 1998:

� A district heating plant burning biomass in the municipality of Hostetin in co-operation with the Netherlands government.

8

� Modernisation of a CHP plant in the Skoda Mladá Boleslav automobile companyin co-operation with the German government.

The annual benefits of these projects led to a decrease in CO2 emissions of 49 ktand 179 kt respectively.

In the 2001 in-depth review of the energy policies of the Czech Republic, the IEAstated: The Government of the Czech Republic should: � Promote cost-effective cogeneration and metering at building level.� Reconsider the obligation for electricity distribution companies to purchase

electricity from CHP.

FinancialIncentives

The Czech Energy Agency (CEA) is preparing a draft for MIT of the allocation ofstate subsidies to support various energy efficiency measures for apartment buildingsand houses. This concerns the use of active solar systems which could reduceenergy consumption for water heating by 30%. A subsidy of up to 30% of the totalinvestment cost can be granted for demonstration of the systems, up to a maximumof Kcs 5 million per project. The subsidy is limited to Kcs 250 000 per apartment. Forresidential buildings built by traditional brick technology with low energy efficiency, asubsidy can be granted for energy-efficient measures including the installation ofinsulation and the reconstruction of existing heating systems aiming at an energysaving of at least 45%. For demonstration actions, the subsidy amounts to 15% ofthe total investments, up to a maximum of Kcs 10 million. The subsidy is limited to amaximum of Kcs 30 000 per apartment in a residential house and to Kcs 80 000 perhouse.

Under Programme I of the State Programme for 1999, a total of Kcs 81.54 millionwas allocated through the CEA for 87 energy efficiency projects in residentialbuildings. This resulted in energy savings of about 107 000 GJ/year (762 Kcs/GJ). In2000 76 projects were supported, the subsidy amounting to Kcs 61.6 million withenergy savings 84 000 GJ/year (ratio 734 Kcs/GJ or 770 $/toe.

The Ministry of Regional Development (MRE) provides support for the repair,reconstruction and modernisation of apartment buildings constructed using theconcrete panel technology, of which there are more than 1.1 million apartments inthe Czech Republic. Financial subsidies are provided along with contributions tocover interest and guarantees for activities related to repairs and reconstruction ofconcrete panel apartment buildings. Preference is given to economically depressedareas and areas with disturbed environment. Support is also provided for insulatingbuildings, improving heating systems, distribution pipes and sources of heat and hottap water, and use of renewable energy sources in buildings which could have afavourable effect on energy efficiency, and thus on GHG emissions. The budget ofthe programme for reconstruction of concrete panel buildings for 2001 equals aboutKcs 300 million and support is expected for the repair of about 20 000 apartments,and then for about 50 000 apartments annually. The duration of the programme islimited by the volume of financial means available.

Education and Public Awareness

One of the main activities of the CEA is the organisation of seminars and trainingsessions and publication of materials for energy consumers. Private energyconsumers are targeted through the network of 60 Energy Advice and InformationCentres (EKIS) installed by the CEA. They cover the entire country, offering freebrochures, guidebooks and software (products of advisory service) and provide apractical advisory service.

Most of the EKIS centres are operated by private consultants selected by the CEA togive energy information to the public. These firms specialise in one specific area buthave general knowledge on other subjects. SEVEn also provides free basic

9

consulting on energy savings in households and issues a quarterly information letter"News at SEVEn". A country-wide information campaign on energy conservationhas not been carried out since 1990.

In the framework of Programme VIII. B, Public awareness, Processing of Productsfor Consulting, of the Government Programme for Support of Energy Savings for1999, funds were used to finance the following activities:

� Energy consulting and Information Centres: 50 agreements signed on provisionfor consulting, with overall costs of Kcs 21.6 million, support Kcs 13 million.

� Handbooks, studies and other documents for consulting activities on energysavings: 55 activities supported at a total cost of Kcs 11.97 million.

� Support for workshops, exhibitions on energy savings: 52 projects financed for atotal expenditures of Kcs 4.15 million.

� Printing of proceedings, handbooks, and computers programmes: 26agreements signed for a total support of Kcs 4.87 million.

In the 2001 in-depth review of the energy policies of the Czech Republic, the IEAstated: The Government of the Czech Republic should: � Strengthen the information, education and motivation campaign of the Czech

Energy Agency for energy savings by all end-users.� Involve all economic players (municipalities, utilities, industries, building

developers) in energy efficiency information, dissemination and projectdevelopment.

Measures underConsideration

Energy EfficiencyStandards

Both energy efficiency labelling and standards for household appliances in theCzech Republic are developed in the framework of the European Union SAVE IIproject, a task carried out by SEVEn. On the basis of knowledge of existinglegislation in co-operating EU countries (Austria, France, Greece) correspondinglaws, regulations and implementing documentation will be drawn up for the CzechRepublic. At the same time, the action plan for enforcing the legislation will beprepared and measures and procedures for consumers and suppliers proposed.

PUBLIC SECTOR

Energy Audits inthe Public sector

Based on Act No. 50/1976 as well as Act No. 22/1997, energy audits were notmandatory in all buildings of the public sector including the state, regions andcommunes with the exception of some legally prescribed cases. The new EnergyManagement Act includes mandatory audits for public and private facilities (withrespective consumption above 1500 GJ and 35 000 GJ) and the obligation toimplement low cost audit recommendations. However, funding for the audit as well asthe implementation of the recommended measures face the problem of limitedfinancial resources.

Model Energy Concepts

The Energy Management Act No. 406/2000 establishes the obligation for each of the14 regions to prepare a regional energy concept within five years in order to createconditions for efficient energy use.

The Ministry of the Environment supports the preparation of model energy conceptsfor municipalities and regions through its Guidelines for Energy Concepts. A total of80% of these concepts focus on the efficient use of energy and renewable energysource potential.

SEVEn, which is involved in the preparation of feasibility studies and business plans

10

for towns and municipalities on supplying and using energy and in the preparation ofsuch energy concepts, offers guidance to the Czech Energy Agency (CEA) on modelenergy concepts. These planning documents covering a 20-year period, which aremodified as necessary, include practical approaches for the economical use ofenergy and of renewable energy sources, with an evaluation of the impact on theenvironment.

Various energy concepts have been elaborated for several towns and regions, forinstance in 1999 for the Cities of Prague, Tábor, Bechyne, Nymburk.

According to the State Programme, in 2000, grants to design a model energyconcept for towns and municipalities amounted to 50% of the overall investmentexpenses with a maximum of about Kcs 500 000 per project. In that year, 24 projectswere selected for a total subsidy of Kcs 4.92 million.

Energy PerformanceContracting andESCo

In a 1998 contract with the Czech Association of Environmental Technology, SEVEnwas in charge of proposing a model procedure for applying the Energy PerformanceContracting (EPC) method to the public sector. The outcome of the work was tosupport the installation of energy efficient equipment in public sector buildingsadministered by the civil service, educational and health care institutions, defence,and security organs, cultural bodies and the like.

The basis for implementing an EPC in the public sector was laid down in compliancewith Act No. 199/1994. ESCos have been developed for upgrading heating and hotwater systems in hospitals and schools and others.

For example, the Energy Performance Services Czech Republic (EPS CR), anESCo which is a subsidiary of a privately-owned energy services company based inthe United States, implemented two performance contracting projects in two largehospitals, the Bulovka Teaching Hospital in Prague and the Jilemnice DistrictHospital in north-east Bohemia. Both hospitals needed a significant upgrade of theircentral heating systems but faced a lack of investment capabilities.

In the case of the Bulovka Teaching Hospital, EPS CR implemented in September1995 four energy conservation measures: switching the existing central heatingsystem to district heating, implementing a new energy management system,installing a new air handler recovery system and converting and upgrading to a newhigh energy efficiency natural gas boiler. Total costs of these measures amounted toabout $2.7 million, producing annual energy savings of about $700 000,corresponding to a four-year simple pay-back. In the 2001 in-depth review of the energy policies of the Czech Republic, the IEAstated: The Government of the Czech Republic should: � Encourage third-party financing.

IFC/GEF Efficient Lighting Initiative

The IFC/GEF Efficient Lighting Initiative (ELI) is a $1.25 million programme fundedby the Global Environment Facility (GEF)1 and designed by the International FinanceCorporation (IFC) and by local counterparts in each participating country. ELI's goalis to reduce greenhouse gas emissions by accelerating the penetration of energy-efficient lighting technologies in emerging markets. It will lower market barriers toefficient lighting technologies in the Czech Republic and also in six other developingor transitional countries. The ELI budget for the Czech Republic is $1.25 million.

1. The International Finance Corporation is the private-sector body of the World Bank Group and is the largestmultilateral source of loan and equity financing for private sector projects in developing countries. The GlobalEnvironment Facility is a multilateral entity, which provides grants and concessional funds to recipient countries forprojects to protect the global environment.

11

Implementation began in the spring of 2000, with SEVEn as the Czech projectmanager; the administration of the project is carried out by the Danish companyDanish Power Consult A/S. Other Czech organisations participate in itsimplementation. In the Czech Republic, ELI will catalyse the installation of energy-efficient lighting, primarily in the public sector, with special emphasis on streetlighting. It will also strengthen the capabilities of lighting businesses, particularly inthe area of project financing. ELI may also promote compact fluorescent lamps(CFLs) for the residential sector. The initiative will run for three years (2000-2003).The expected benefits are estimated in a direct impact on savings at a total of 390 ktof CO2 emissions in 2000-2003 and, in subsequent years, as indirect benefits at thelevel of 425 kt of CO2 emissions saved annually.

Manuals forMunicipalities

Through a contract with NOVEM, the Dutch Energy Agency, SEVEn prepared afinancial manual for cities and smaller municipalities entitled How to DevelopMunicipal Energy Projects. The manual contains information on the purpose andmethod for preparing a feasibility study and business plan; it includes an overview ofselected domestic and foreign sources of financing and a description of energyperformance contracting along with domestic ESCos that already offer suchservices.

Co-operation withMunicipalities

In 1998 SEVEn took part in the European Union's long-term Urban and RegionalEnergy Efficiency Programme as a consultant for major Czech cities carrying outdemonstration energy-saving projects under the programme in co-operation with EUcities. Demonstration projects were carried out in the areas of energy-efficient publiclighting, central heating reconstruction, building insulation, and waste management.

INDUSTRY

EnergyAuditing

Energy audits are mandatory in industrial companies which consume 35 000 GJ/year(or 835 toe). Audits proposed by CEA with limited cost contribution remain technicallyorientated (flow chart) rather than focusing on cost-effective measures; there aresome doubts that industrialists appreciate the usefulness of energy audits.

State SubsidyProgramme

The State Subsidy Programme for Energy Savings in Industry has been developedby the Czech Energy Agency since 1996 to support the implementation of measureswith lower energy intensity, the efficient use of energy losses from technologicalprocesses and the application of modern technologies and materials for energysaving measures. The proposed measures must use environmentally friendly energysavings ideas. A new technology project is accepted on the condition that it hasbeen successfully implemented as a pilot project and after undergoing a series ofverifications. The programme's evaluation should offer entrepreneurs reliableinformation to help them implement further measures.

Ten energy savings measures in the manufacturing industry were selected in 1997at a total investment of Kcs 74.8 million and a state subsidy of Kcs 13.5 million.Annual savings are 181.8 TJ representing 0.05% of the total manufacturingindustry’s consumption. In 1998 14 projects were supported for a total investment ofKcs 158.7 million and a state subsidy of Kcs 19.7 million. Annual savings are203.2 TJ. In 1999 24 projects were supported for Kcs 31.5 million, a total investmentof Kcs 420.6 million, energy savings 417.1 TJ/year. For the period 1997-1999, theaverage unit investment cost was 817 Kcs/GJ, 412 Kcs/GJ in 1997 increasing to1 010 Kcs/GJ in 1999.

PHARE EnergySaving Fund

To be eligible for loans from the PHARE Energy Saving Fund (see above), projectshave to generate savings by reducing energy consumption of any type (electrical,gas use, space heating, coal technology), but also by saving the costs of energy(cheaper fuel), operation and maintenance or for labour costs. At least 40% of theenergy savings must be achieved through reduced energy consumption. The projectsize must be at least Kcs 2 million and at the most Kcs 50 million. The duration ofloans and repayment terms are four years or longer (to a maximum of ten years).

12

The applicant companies are required to pay at least 40% of the total project cost.The PHARE Energy Saving Fund awarded 13 loans for energy efficiency projects inindustry during 1998 amounting to Kcs 200 million (two-thirds of the available funds). In the 2001 in-depth review of the energy policies of the Czech Republic, the IEAstated: The Government of the Czech Republic should: � Strengthen fiscal and financial incentives for energy efficiency projects.

Information News at SEVEn

Since 1993, SEVEn has published News at SEVEn, a quarterly newsletter devotedto energy efficiency with a press run of about 4 400. It is distributed free of charge tospecialised manufacturers, project, service and consulting firms, public institutions,local governments and other expert circles interested in the energy sector andenergy efficiency.

EEBW

Since 1992, SEVEn has organised an annual international conference and exhibitioncalled Energy Efficiency Business Week (EEBW) which is an opportunity forspecialists from the Czech Republic, Central and Eastern European countries andother countries to discuss current events and issues in the energy efficiency area.EEBW 2000 took place on 17-18 October 2000 in Prague and focused on a range oftopics, the most important being:

� The role of energy saving during the liberalisation of the energy market.� Energy saving in relation to the requirements for harmonisation of the economies

of associated countries with the European Union standards.

TRANSPORT In the context of the programme to stabilise and reduce CO2 emissions, the followingmeasures have been implemented and/or supported by the government in thetransport sector:

� Support for public transport provided by the Transport Policy of the CzechRepublic approved by government resolution in 1998 to enterprises which carryout municipal public transport and to Ceske Drahy (Czech Railways) as analternative to individual car transport.

� Continued development of integrated public transport systems in cities throughstate, municipality and district subsidies and tax breaks.

� Implementation of the Highway Development Programme, including thedevelopment of ring roads and city bypasses as well as access roads tohighways.

� Support for the development of combined transport, through a wide range ofmeasures such as favourable taxation, adequate infrastructure, special railways,etc.

� Speed limits of 90 and 130 km/h for cars and 80 km/h for lorries.� Taxation only on lorries.� Progressive charges on engine capacity. In the 2001 in-depth review of the energy policies of the Czech Republic, the IEAstated: The Government of the Czech Republic should: � Adapt the current energy efficiency strategy to market liberalisation and to

growing demand in the energy-consuming sectors, especially transport.

13

MONITORING ANDEVALUATION

Currently, the energy efficiency programme of the Czech Energy Agency isindependently evaluated each year by SEVEn. This has resulted in severalimprovements in the state support programme regarding both project results andadministration.

The Energy Management Act stipulates that the Ministry of Industry and Trade, inagreement with the Ministry of the Environment, has to prepare and assess the four-year state programmes of energy efficiency and renewable energy sources at leastonce every two years and that the government be informed of the results. Ifnecessary, the Ministry of Industry and Trade, in agreement with the Ministry of theEnvironment, prepares proposals for changes in the State Programme and submitsthem to the government. In the 2001 in-depth review of the energy policies of the Czech Republic, the IEAstated: The Government of the Czech Republic should: � Carefully monitor the development of energy efficiency programmes and their

cost-effectiveness.

Further Information

For further information, please contact:

Dr. Jirí BartonChief ExecutiveCzech Energy AgencyVinohradská 812 00 Praha 2Tel: +420 2 2421 7714, 2421 7774Fax +420 2 2421 7701email: [email protected]

DENMARK Updated April 2003

BACKGROUND Energy and Environment Plans

The first National Energy Plan of 1976, together with further development of policies during the 1980s, resulted in major restructuring of the energy system in Denmark. The policies implemented included, inter alia: � Massive change of heat supply from individual oil furnaces to district

heating and natural gas. � Elimination of oil used for district heating in favour of local resources

(straw, wood, waste) and natural gas. � Expansion of combined heat and power systems in order to increase total

system efficiency. � Comprehensive energy saving programmes in the industrial and

residential sectors. � Strengthening of standards for new buildings. In 1988, the Danish government presented its Plan of Action on Environment and Development as a follow-up to the recommendations set out in the report from the World Commission on Environment and Development, the Brundtland Report and in the United Nations’ Environmental Perspective to the Year 2000. This action plan set out the targets to be reached and the initiatives to be implemented in all sectors in order to obtain sustainable development. The Energy 2000 Plan (Energi 2000) followed in 1990 based on a political agreement of 20 March 1990. It introduced the goal of sustainable development in the energy sector and formulated the national objective of a 20% reduction in CO2 emissions by 2005 compared to 1988. This is still one of Denmark's main objectives in energy and environmental policy. Energy 2000 focused on savings in energy consumption, increased efficiency of the supply system, expansion of the use of renewables, especially wind, and on research and development. Action in these areas has been followed up by political agreements and legislation. The Energy 2000 — Follow-up from 1993 contained a review of trends and policies together with a number of other initiatives. The energy plan, Energy 21 (Energi 2001), approved by the Danish Parliament in April 1996, deals with international market conditions and long-term environmental aspects as the overall challenges to the energy sector. The major environmental challenge is to achieve convergence of emissions of industrialised countries at a level that would be globally sustainable. The plan sets out the framework for a number of initiatives focusing especially on reducing the requirements for resources and the impact on the environment from the energy sector. One of the targets of Energy 21 was the improvement of energy intensity (defined as final energy consumption in the end-use sector per unit of GNP) by 20% by 2005 in relation to 1994 figures. The June 1999 follow-up of Energy 21 projected that energy intensity would improve by 25% in 2005 and by 34% by 2012, more than fulfilling the established targets. Denmark is examining ways to reduce final consumption by an average of 0.5% per year. Sectoral targets were proposed in a September 2000 report of the Danish Energy Agency (DEA) entitled Promotion of Energy Savings. The savings target of 2.1 million tonnes of CO2 is 3.5% of the total Danish national objective to reduce CO2 emissions by 20% by 2005 from 1988 levels.

IEA ��

2

In March 2000, the government presented Klima 2012 (Climate 2012), Status and Perspectives for Denmark’s Climate Policy which offers a complete overview of Danish climate policy and paves the way for a process whereby the required groundwork is laid for Parliament to decide on Denmark’s ratification of the Kyoto Protocol. To fulfil its national and international obligations, the government will: � Update the 1996 energy action plan, Energy 21. � Submit an action plan for the transport sector. � Establish a programme for analysis, developing and testing of the Kyoto

mechanisms. � Determine future regulation of the industrial greenhouse gases. � Submit analysis and assessments of greenhouse gas reduction potentials

in the agricultural sector.

Energy Saving Act No.450

As the first step in strengthening energy-saving initiatives, necessary to reach long-term energy and environment policy targets, Act No. 450 of 31 May 2000 is a general act on the promotion of energy savings in energy consumption. The Act is the overall framework for the work of realising energy savings which are necessary to fulfil the Danish environmental commitments. The Act determines the overall framework for co-ordination and priority given to both centralised and decentralised savings initiatives for all sectors, actors and measures. It enables the appointment of local energy conservation committees to co-ordinate local efforts to save energy, and establishes new initiatives for energy conservation in the public sector.

Natural Gas Supply and Energy Savings Agreement

On 29 May 2001 a political Agreement was reached on natural gas and energy savings. In this Agreement it was stated that further energy initiatives were necessary to reach the environmental targets. The headlines in the Agreement are the following: � The establishment of energy savings targets in 2005 for individual sectors,

including the public sector, private trade and service, households and manufacturing.

� The introduction of behaviour-regulating product taxes that promote the sale of more energy-efficient products

� The translation of state energy-saving initiatives, including subsidy schemes into framework programmes for which tenders are invited in order to ensure the greatest possible efficiency in the activities.

� An expansion of the activities of the Electricity Saving Trust so that purchase agreements and other schemes to promote energy-efficient electric appliances are developed

� Energy saving efforts in the public sector to be strengthened by state institutions; in municipal areas, enhancement is to take place through agreements with the counties and primary municipalities.

� Energy saving activities within private trade and service within the framework of a product-aimed strategy.

� Activities of the electric network undertakings in relation to large-scale customers to be boosted so that at least 10% of their commercial customers are offered energy advisory services every year.

This political agreement also stipulates that other economic incentives for energy savings will be discussed with a view for adoption prior to the Energy Saving Review in September 2002.


Following the general election in late November 2001, a new large Ministry for Economic Affairs, Trade and Industry was created in January 2002 led by the Deputy Prime Minister; it is responsible for economic affairs, industry, trade, the internal market of the European Union, shipping, financial institutions, competition, housing consumers, tourism and energy. It manages ten

3

different, major government agencies, including the Danish Energy Agency. The former Ministry for Environment and Energy is now only responsible for environment issues. There is no Directorate General for Energy in the new Ministry for Economic Affairs, Trade and Industry. The view is that energy should be seen as an integral part of all the other responsibilities of the Department. Nevertheless, energy and international co-operation on energy are still high on the agenda for the Ministry.

CO2

Reduction Targets

The combined effects of Energy 2000 and the Transport Action Plan were expected to be a more than 20% reduction in emissions from energy use in 2005 compared to 1988. This target was subsequently approved by Parliament. Internationally, Denmark made the commitment to stabilise emissions at the 1990 level by 2000 within the framework of the United Nations Climate Convention, and as a contribution to the overall stabilisation by 2000 for the countries of the EU to achieve a 5% reduction in 2000 compared with 1990. Denmark signed the United Nations Framework Convention on Climate Change in Rio de Janeiro in June 1992, ratified it in December 1993 and submitted its first national communication entitled Climate Protection in Denmark — National Report of the Danish Government in accordance with Article 12 of the United Nations Framework Convention on Climate Change in September 1994. Denmark’s Second National Communication on Climate Change, submitted under the UN Framework Convention on Climate Change was issued in 1997 prior to the third meeting of the Conference of the Parties at Kyoto. Following the Kyoto agreement, Denmark has agreed under the Burden-Sharing Agreement1 of 17 June 1998 to reduce its emissions by 21% of the 1990 levels for the period 2008-2012. Specifically, the Danish commitment is compared to the adjusted 1990 emissions level of approximately 80 Mt CO2 equivalent. On 30 May 2001, Denmark's Parliament agreed, by a sizeable majority, for the government to ratify the 1997 Kyoto Protocol on global warming. Denmark's actual ratification of the Treaty will take place along with that of other European Union member states, anticipated in advance of the World Summit on Sustainable Development in Johannesburg in September 2002. Preliminary figures on future greenhouse gas emissions for 2000 showed that overall CO2 emissions in Denmark have been reduced by 11% since 1988, and that the country is on track to meeting its 2005 commitments for a 20% CO2 reduction with initiatives already launched.2 In Climate 2012 published in 2000, Denmark estimated that it will achieve a reduction of 16.6% of CO2 (to 63.6 million tonnes of CO2) by 2008-2012 with existing policies and measures. A further reduction of 3.2 million tonnes of CO2 would need to be achieved to meet the Danish target of 21% (adjusted) for the period. Based on updated and consolidated projections prepared in connection with the ratification legislation for the Kyoto Protocol, total Danish emissions of

1. The Burden-Sharing Agreement covers CO2, CH4, N2O, PFCs, HFCs and SF6. 2 This total is only for CO2 and is calculated somewhat differently than for the Kyoto Protocol target which includes six greenhouse gases. The Danish national target also includes emissions from international transport (aviation and marine bunkers are excluded from Kyoto numbers). It excludes emissions from cement, lime and yellow brick production and from flaring, and plastics in incinerated waste as well as removal by sinks: all these are included in the Kyoto calculations.

4

greenhouse gases are now projected to be reduced 18.6% below 1990 levels during 2008-12 (to 62.2 million tonnes of CO2). The projection is based on the adjusted 1990 baseline, and on policies and measures already implemented and adopted. Denmark’s expected gap has thus been reduced since the estimate in Climate 2012, and now stands at 1.8 million tonnes of CO2 (adjusted).

Baltic Energy Efficiency Group

The Baltic countries' energy ministers (BCSS) and the European Commission agreed on 1 December 1998 in Stavanger (Norway) on a joint working programme to enhance co-operation in the Baltic energy sector. This programme includes formation of a working group on energy efficiency (including CHP and DH) – the Baltic Energy Efficiency Group (BEEG). The BEEG assesses energy efficiency options and potentials with a focus on combined heat and power and district heating (including technologies, financing and legislation). This preparatory work included a seminar in September 1999. BEEG will be co-chaired by Denmark and Poland and consists of governmental representatives and experts from the eleven Baltic countries plus the European Union. The working group on energy efficiency continued its work in 2000 on the following issues: New financial instruments, co-ordination and follow-up on activities taken by other international institutions and organisations and development of combined heat and power production (CHP).

In the May 2001 report, the working group pointed out that the results of the Baltic Chain project, with the design of a new financing mechanism with the establishment of a clearinghouse to ensure quality and facilitate the link between projects and financing, is the essential keypoint. Furthermore it was pointed out that the potential for CHP is huge and that the development of a common regulatory framework and even market conditions for district heating in the region would support the preferred development offering environmental benefits and security of supplies. In addition, the group recommends development of reference standards for CHP technologies -- target values, check lists for improvement projects and for efficient district heating systems and target values for improvement projects.



Building Codes

The code for new buildings was tightened in several stages in 1977 and 1985. As decided in the previous energy action plan, Energy 2000, a new code has been introduced which will cut an additional 25% off net heating demand, reducing it to about 70 kWh per square metre per year. The code also sets limits on electricity consumption for ventilation and will enforce low temperature heating systems to increase the efficiency of various heat supply systems, such as district heating systems, condensing boilers, solar energy and heat pumps. The new code entered into force in 1996 (large buildings) and 1998 (small buildings). A further reduction to 45 kWh per square metre is scheduled to enter into force around 2005. Buildings respecting this limit through combined exploitation of passive solar techniques, insulation and coated glazing are

5

already being built.

Energy Labelling of Smaller Buildings

Every house-owner may have an audit of his building, describing the present energy conditions with recommendations for possible energy saving measures in the building shell and heating equipment. When dealing in real estate, an audit is required if the building has an area of 1 500 m2 or less. The result of the audit is an Energy Label describing the energy condition on a scale from A1 to C5 (A1 is best). Heating, electricity and water consumption are rated on the basis of a standard calculation – not actual consumption because it is linked to the particular seller’s household (number of persons and behaviour). Another part of the audit is an Energy Plan informing the buyer which measures could be worthwhile carrying out in the short or long run to save energy. This mandatory scheme was implemented in 1 January 1997 and replaces the heat inspection scheme that had been in operation since 1981. The scheme was evaluated in 2000 and the conclusions were that there is a large energy saving potential in existing buildings. Forty-five per cent of the owners of labelled houses actually invested in heat saving measures. Even though the scheme is mandatory, only around 50% of the traded houses were covered by an energy certification. The largest group of labelled buildings is single family homes. From 40 000 to 50 000 buildings are labelled every year. On the basis of other conclusions about the set-up of the scheme, changes were made in mid-2001 to empower the steering committee of the scheme to take over more responsibilities for the success of the scheme.

Energy Labelling of Larger Buildings (Eco-scheme)

The annual supervision of larger buildings (more than 1 500 square metres) is carried out by between 500 and 700 specially trained consultants. About 25 000 buildings are concerned. Every month all buildings, except industrial buildings, and those with very low energy consumption, with a surface of more than 1 500 square metres must register their consumption of heat, electricity and water. Once a year, a consultant makes an audit comprising an Energy Label and an Energy Plan. The Energy Label evaluates the consumption of heat, electricity and water on scales from A to M (A is best) in comparison with average figures for comparable buildings. The Energy Plan informs the building owner about relevant measures for energy saving in the short and long run. This new scheme runs parallel to the above-mentioned scheme concerning smaller buildings. It replaces the VKO scheme (statutory heat inspection of larger heat furnaces), in operation since 1981. This scheme was also evaluated in 2000 and the major conclusions were that the scheme works very well for those who participate in it, but around half of the buildings still do not fulfil the requirements. Lack of awareness of the existence of the schemes contributed to non-participation. The energy savings in the buildings following the scheme are larger than in those outside the scheme. Furthermore, the investments in energy savings are more focused in buildings participating in the scheme and those responsible for energy are more aware of the results of investments. The DEA has developed an action plan to improve the implementation of both schemes as well as further measures.

Inspection of Oil Burners

In the statutory annual inspection of oil burners, the owner has to show the chimney-sweep a contract with an authorised service provider or pay the

6

chimney-sweep for the inspection. The inspection includes measurement of temperature, CO and CO2 content of the smoke and an evaluation report for the owner. Based on fixed maximum values for these figures, the chimney-sweep can oblige the owner to have the oil burner adjusted within four weeks. The 700 000 small oil burning furnaces in Denmark are inspected by 2 500 trained consultants. Supervision has resulted in improved energy efficiency. For example, average chimney heat loss has been reduced from 19% to 12-13%.


In 1994, Parliament approved an act empowering the Minister of Energy to set efficiency standards for electrical appliances and other equipment. Efficiency standards for refrigerators/freezers were adopted in 1996 as EU-wide standards and became effective late 1999, bringing efficiency improvements of 15% compared to the 1992 market. The Directive does not include a second phase.

Energy Labelling

An extensive scheme for energy labelling of appliances was notified to the European Union by the Danish government in April 1990. The EU Directive for labelling of the first category of appliances (freezers and refrigerators) came into force in January 1995. EU Directives for washing machines and dryers were implemented in October 1996. Directives for other major household appliances and light sources will follow. A Danish system for informing consumers of the electricity consumption of various appliances, and for facilitating comparisons between different competing products (so-called "energy arrows"), has been devised by the utilities with support from the government, as a complement to EU-wide labelling Directives. These complete market lists of various consumer appliances.

Individual Metering

Individual metering of the use of electricity, district heating, gas and water in buildings has been mandatory in new buildings since 1996 and in existing buildings since 1997.

Informative Electricity Bills

This initiative aims at introducing informative electricity bills for households and for customers in the public and private service sectors. The initiative will include more frequent meter readings, regular billing of actual consumption and graphic presentation of the customers’ electricity consumption. The Danish Association of Power Companies has appointed a working group to prepare the practical implementation of informative electricity bills. The group reported in February 1994. The informative electricity bills are currently used by the utilities. As a part of the new regulations for the electricity market, the distribution companies have to introduce informative electricity bills. Minimum requirements for such bills are developed in co-operation with the sector.

Ban on Conversion to Electric Heating in Existing Buildings

The government has amended the Heat Supply Act to extend the ban on electric heating to the conversion to electric heating of existing buildings located within a district heating or natural gas supply network. The amendment to the Heat Supply Act came into force on 1 March 1994. By 2005, this amendment is expected to reduce the number of electrically heated homes by about 7 000.

"Project Window"

In 1998 the government introduced a specific programme to promote energy efficient windows in households and the public sector. A result of the programme was the introduction of an energy label system for windows. The programme has also supported the development of more energy-efficient

7

windows, and information campaigns carried out in 2001 in co-operation with branch organisations and companies. From 1998 to 2000 the Danish Energy Agency initiated projects amounting to DKK 25-30 million3 in co-operation with the manufacturer and branch organisations, etc. The market share for energy-efficient windows has increased to around 60% in recent years. The government anticipates that the annual energy saving will reduce CO2

emissions by about 150 000 tonnes by 2005.

District Heating and CHP

District heat is supplied by some 400 district heating companies, and today accounts for approximately 50% of Denmark’s heat demand, compared to 30% in 1980. Most of the companies produce and supply the heat, but some purchase heat from one of the “central” power plants. The average connection rate in district heating areas is 82% and is still increasing. The district heating network supplies heat not only to large consumers, apartment blocks and institutions but also to a large extent to modern single-family houses. Danish district heating companies are owned either by the municipalities, particularly in the major cities, or by local consumer co-operatives or foundations. In 1996 average distribution losses were 20%. In 1999, almost 80% of all district heat was produced from CHP plants, up from just under 40% in 1980. In 1999, almost 50% of electricity generation was from CHP, compared to just under 20% in 1980. Twelve of the 14 largest power stations in Denmark deliver all or part of their surplus heat to a district heating network. Nearly all large-scale power plants are located close to major cities. This and the fact that 80% of the population lives in urban areas allowed the combined development of district heating and CHP. The conditions for industrial CHP were less favourable as Danish industry is dominated by small and medium-sized companies with relatively low energy demand. The first steps in the development of CHP were taken in Copenhagen at the beginning of the 20th century. In 1904 the first CHP plant was commissioned, supplying heat and electricity to a hospital. By the mid-1930s the Copenhagen district heating network was well established, even though heating was to a large extent still provided by coal-fired boilers or small individual coal-fired burners. Today, ten major cities have city-wide district heating systems where almost all of the heat (95 to 98%) is produced in large coal-fired or gas-fired CHP plants and waste incineration plants, with a number of small oil-fired or gas-fired heat-only units for peak-load and emergency. Since the early 1980s, no new power plants have been commissioned unless provided with the ability to perform CHP and to supply heat to the district heating networks. This was motivated by environmental concerns and the wish to encourage energy efficiency. Construction of new electricity generating capacity must be justified by the need for new heat production capacity.

Small-Scale CHP

In addition to the large-scale CHP and district heating units, a large number of small-scale CHP plants exist. In Denmark, “small-scale” CHP designates CHP plants outside the centrally supplied areas, i.e. the larger agglomerations. The largest small-scale CHP plant has an installed electric capacity of 99 MW. However, most of the plants range between capacities of 0.5 to 10 MW and supply heat to small communities and institutional buildings. Often the plants consist of more than one CHP unit. Small-scale CHP plants not connected to a district heating network rarely exceed an electrical capacity of 1 MW. Small-scale CHP plants are laid out to cover at least 90% of the local heat demand. The electricity generated is sold to the public grid. Power utilities are obliged to purchase the electricity from these plants. The main fuels used in small-

3 On average in 1999 DKK 1 = US$ 0.145 and in 2000, DKK 1 = US$ 0.123.

8

scale CHP are natural gas and waste and, to a lesser extent, biogas and other biomass. Small-scale CHP received government support through a 1986 Parliamentary decision, adopted by the power utilities, to establish 450 MWe of small-scale CHP using indigenous fuels (natural gas, waste, biogas or biomass). In connection with the presentation of the Energy 2000 plan in 1990, a more ambitious programme for small-scale CHP was put forward. To accelerate the establishment of small-scale CHP, a state subsidy was introduced in 1992 for power production from waste incineration, natural gas and renewables used in small CHP plants. The subsidy originally amounted to 10 øre per kWh but has been reduced to 7 øre per kWh, except for plants smaller than 3 MW. The development of small-scale CHP peaked in 1994/95. About 80% of the installed capacity (< 25 MW) is based on natural gas boilers, 16.5% are gas turbines and 3.5% are biogas-fired boilers. Most of the installed gas boilers have an electric capacity in the range of 0.5 to 4 MWe whereas gas turbine units typically range in capacity from 4 to 25 MWe. There are more than 60 biogas-fuelled CHP plants, supplying heat to either the local district heating network or supplying a single farm. The electricity is fed into the national grid. The total installed electric capacity is now approximately 20 MW with only a few facilities larger than 1 MW. The feed-in tariffs for local CHP equal the purchasing utility's own long-term marginal cost (avoided cost). Danish electricity feed-in tariffs are based on a three-tier tariff system, with tariffs reflecting electricity demand patterns (low, medium and high tariff periods). The resulting heat price from small-scale CHP is very sensitive to variations in the gas price, but less sensitive to changes in interest rates and investment costs. As a result of the support measures, the capacity of local CHP was 3.4 times as high in 2000 as it was in 1993, whereas “central” power capacity remained stable.

Industrial CHP Industrial CHP is used in industries with high demand for process heat, especially the petrochemical, wood and paper industries. The food industry and greenhouses can also use low-pressure steam or hot water from CHP. In 1990, Denmark had about 20 industrial CHP plants, mainly coal or oil-based boiler or steam turbine units. However, the penetration of industrial CHP in Denmark remained low before 1992, largely owing to the low energy intensity of the Danish industrial sector compared to industry in neighbouring countries. In 1992, an industrial CHP programme was launched. Its objective was to realise the potential for industrial CHP, which was estimated at an additional 400 MW. Under the programme, investment subsidies were introduced for industrial energy efficiency measures, as was a bonus system for electricity production from gas and biomass in combined heat and power production. Following the introduction of the first Green Tax Package (see below), industrial companies could obtain state grants of up to 30% of investment costs in energy efficiency, including CHP. This provision is still in force. In special cases, small-medium size enterprises can obtain 40% coverage of the investment of industrial CHP plants from the government. However, a time limit of six years has now been set for the subsidy to industrial plants. As a consequence of the support measures, the number of industrial auto-producers rose to more than 100 by 1997. The total potential for industrial CHP was reassessed in 1995 to be 750 MW. In 2000, installed capacity was more than 300 MW and electricity production from industrial CHP was about 8% of total power generation. Industrial CHP is almost exclusively based on natural gas, but a few biomass-fuelled plants have been commissioned.

9

The government plans to develop CHP further in future. The Energy 21 programme of 1996 set a number of CHP-related targets for the long run (to 2030), which are still in force: � The bulk of future heat and electricity consumption is to be covered by

CHP. � Individual gas-based heating systems are to be converted to CHP-based

district heating. � Industrial CHP and mini-CHP are to be developed to a total capacity of

1 400 MW or approximately 10% of total public electricity generating capacity in 2000.

� Coal use in power plants is to be phased out. � Electricity from renewable energy sources, excluding large hydro and

electricity from waste, is to account for 20% of power generation by 2003 and 79% by 2030.

Conversion from electric to district or natural gas heating requires substantial investments in buildings for the installation of a central heating system. District heating currently accounts for close to 50% of energy demand for space heating compared with 30% in 1972. Seventy per cent of district heating production is now based on combined heat and power. Subsidies have been initiated to overcome this barrier to conversion. Houses constructed before 1950 that are situated in district heating areas are eligible for subsidies for installation of central heating and hot tap water. The purpose is to use excess heat at the central CHP plants efficiently. About 50% of qualifying houses had been converted by 1997. Subsidies may be applied for until the end of 2002. Total funds for subsidies amount to DKK 1 300 million and the plan is expected to save 100-150 thousand tonnes of CO2. The Danish Electricity Saving Trust (see below) has made an agreement with more than 200 district heating companies using CHP and biomass to convert electrically heated dwellings to collective district heating systems. Local information activities are eligible for an annual subsidy of DKK 50-60 million. During the period to 2007, 50 000 dwellings are expected to be converted (the potential is 90 000), resulting in reductions of 555 000 tonnes of CO2.

Danish Electricity Saving Trust

The Danish Electricity Saving Trust was established in 1997 (Act on the Danish Electricity Saving Trust, 27 December 1996) with the primary goal of supporting the substitution of electrical heating by district heating or heating by natural gas in households and in the public sector. The Trust is managed by an independent board that comprises representatives of consumer interest groups and utilities, as well as experts in energy savings and economics. The Trust extends conversion grants, currently available to electric heating consumers in areas without collective heat supply, to consumers of electric heating in areas with district heating and natural gas supply. A minor portion of the subsidy grants will be used for other purposes, especially regarding the development, market introduction and market dissemination of efficient appliances. The budget in 1997 for the scheme was DKK 50 million. From 1998 onwards the scheme has been financed by a fixed amount of DKK 0.006 per kWh sold, levied on the electricity consumption of households and the public sector. The sum available is expected to be DKK 90 million a year. In addition to the substitution of electrical heating, the Electricity Saving Trust has introduced several other activities. Buy A-products is a campaign for energy efficient lights (CFLs) and electrical household appliances. Buyer clubs for public institutions and housing associations have been a valuable means to facilitate the purchase of energy efficient appliances. In the autumn 2001 a new campaign for low stand-by equipment (TV, VCR) will take off. A

10

homepage for consumers to find the retailers with the lowest prices on A-labelled white goods is another popular initiative.

Subsidy Schemes

Since 1993 State subsidies have been granted for energy-saving measures in dwellings inhabited by pensioners with low incomes and relatively high bills for heating. Subsidies of up to 50% of investment costs can be obtained up to a maximum of US$ 3 600 per dwelling. Approximately 5 000 houses are granted subsidies each year at a total cost of approximately DKK 40-70 million per year. Subsidies for energy-efficient boilers in private houses fuelled by natural gas were given for the period 1999 to 2001. A subsidy of DKK 2 500 was given to increase the market share of boilers with an annual efficiency of more than 95%. The size of the subsidy is calculated to cover around half of the extra costs of the efficient boiler in comparison with a traditional boiler. The subsidy scheme ended in the beginning of 2001 as planned. The latest figures indicate that the market share of these boilers has increased from below 10% to around 50%.

Information/ Education and Motivation

Campaigns for Replacement of Appliances

This initiative means that the campaigns run by some power companies for replacement of electrical appliances (particularly refrigerators and freezers and low-energy lighting) will be expanded into longer or permanent schemes or campaigns covering consumers throughout the country. Danish power companies have carried out a successful country-wide replacement campaign for freezers. More country-wide campaigns may be carried out in the future for other types of appliances.

Buying Clubs and Buyer Policies

This initiative consists of organising buying clubs, each composed of users of a specific product -- for example, housing associations, large companies and retail chains. The buying clubs draw up strict requirements concerning the product’s energy efficiency, price, materials, etc. The manufacturer that best meets these requirements is rewarded with guaranteed sales of the product in question.

Training in Energy Labelling

A pilot project for supplementary training of store personnel to motivate them to use the EU’s energy labelling of kitchen hardware as an active selling tool was carried out in 1994. The experience from the project was used as the basis for a proper, country-wide supplementary training scheme when the first EU energy label was brought into effect in early 1995 and disseminated to all EU countries.

PUBLIC SECTOR


Energy Management in State Buildings

Since 1992, energy management and annual reporting of energy consumption have been mandatory in every building used by the State (central administration and state institutions, defence, and state-owned entities like the railways, etc.). Local energy managers must be appointed in every institution.

Financing The possibilities for financing investments in energy-saving measures in central government buildings were improved through a special grant scheme totalling US$ 1.4 million a year. Besides the energy tax, government

11

institutions had to pay a special tax of 5% of their energy expenses in 1996 and 10% in 1997 and 1998. After an evaluation of the grant scheme and the special tax, both were removed at the end of 1999. New agreements with public organisations are under negotiations, with priority given to green accounts, energy management and buying policies.

Energy- Conscious Buying in the Public Sector

The Danish Energy Agency co-operates with the Danish Environmental Protection Agency to ensure that due consideration is given to environmental and energy aspects when products, especially electrical goods, are bought by government authorities. Information on the energy consumption of the best products on the market is distributed to public sector purchasers.

Local Government Buildings

The government will improve the incentives to implement energy conservation in public buildings. This can be achieved by ensuring that a proportion of the money saved on the energy bill can be used for other purposes. Local commitment should be ensured at the county and municipal level. Energy-saving efforts will be promoted at the local level, including the introduction of “green accounts”. In addition, it is intended to promote the use of third-party financing of the implementation of energy-saving measures in the public sector. As a result of the political agreement of May 2001, there were negotiations in autumn 2001 with municipal organisations to reach an agreement on energy efficiency.

Local Energy Saving Committees

In September 2001, around 25 Local Energy Saving Committees were established or planned. They consist of representatives from electricity, natural gas and district heating distribution companies as well as representatives from municipalities and local environmental organisations. Their aims are to co-ordinate and discuss the planned initiatives in the energy distribution companies. They are the only forum for a local co-ordination between energy saving activities in the three supply sectors (electricity, natural gas and district heating). Municipalities and counties are obliged to initiate local Agenda 21 activities which have to be co-ordinated with other local measures of local agencies (environmental and energy agencies).

INDUSTRY


Green Tax Package 1995

The Danish energy tax on industry has been revised to improve energy efficiency in industry. The new legislation, which entered into force in January 1996, introduced different carbon tax rates in the industry. The tax rates are to be gradually increased from 1996 to 2000. All the revenue raised by the tax will be recycled to the industry. The Green Tax Package has four principal elements: � Three tax elements consisting of an energy tax, a CO2 tax and an SO2 tax. � A distinction between three different purposes for energy use when

assessing the tax: space heating, light industrial processes and heavy industrial processes.

� Provisions for a significantly reduced tax rate in the case of specific energy-intensive activities, conditional upon a business committing itself to reducing energy consumption through an agreement negotiated between

12

the company and the Danish Energy Agency. � Gradual phase-in of the taxes, with the revenue returned to enterprises

largely through cuts in taxation on employing labour and reduced employer’s social security contributions. The remainder will be returned through investment grants for energy saving measures over and above those that might be expected to be undertaken.

If the company does not fulfil the agreement, reimbursements already paid will have to be returned and the tax will be imposed in full. Differentiation of the taxes according to use has led to high taxes on space heating (rising to the household level), moderate taxes for general process energy and low taxes for energy used in specific purposes with high energy intensity. Thirty-five specific processes are defined as energy-intensive, covering more than one-third of industrial energy use. All energy use that is neither an energy-intensive process nor space heating, is defined as energy light processes. This residual category includes fixed lights, office machines, refrigeration and air conditioning. No firm will pay less than DKK 3 per tonne of CO2. There are three categories of reimbursement to industry: � Investment grants for energy saving measures in enterprises. The grants

are up to 30% of the initial outlay on projects with payback periods between two and nine years. The investment scheme is expected to lapse after 2000.

� Cuts in taxation on employing labour and lower employers’ contribution to the ATP (additional labour market pension fund).

� Funds for small and medium-sized enterprises, which benefit only to a limited extent from the reduced employers’ contribution.

The Green Tax Package was reviewed by the beginning of 1999. However, independent evaluations of the investment grants scheme and the agreements were carried out in 1998. The results show that the two initiatives together will lead to the CO2 reductions in 2005 that were expected in 1995 when the Green Tax Package was approved by Parliament.

Voluntary Agreements

As mentioned above in the framework of the Green Tax Package 1995, enterprises with specific energy-intensive activities, or with energy tax exceeding 3% of value added, can reduce their tax rate through a voluntary energy savings agreement. The enterprise must first present an energy audit prepared by an independent certified consultant and an action plan based on the audit, which demonstrates how the enterprise will implement a system of energy management, apply procurement policies favouring energy efficiency and educate staff in energy efficiency. The audit may be disputed and reviewed, or the enterprise may propose alternative measures to achieve equivalent CO2 results. The enterprise must commit to implementing the energy efficiency investments recommended by the audit with payback times of up to four years. On the basis of the action plan, the enterprise signs a three-year agreement with the government and is guaranteed partial reimbursement of carbon tax rates conditional on the fulfilment of the obligations in the action plan. By 2001, more than 300 enterprises accounting for about 60% of total energy consumption by industry (VAT-registered companies) had concluded an agreement with the Danish Energy Agency.

13

Subsidies in Industry

From 1996 to 2000, subsidies for investments in energy efficiency amounted to DKK 1.8 billion. About 80% of the subsidies went to the energy-intensive industries. From 2000 onward, an additional DKK 175 million/year has been allocated to the subsidy scheme, but the scheme is now open only to industry (excluding agriculture and the trade and services sector). It provides grants for three areas: investments in energy savings or efficient equipment, use of consultants and information about energy savings. In 2001 efforts in trade and services will focus on a strategy to develop, market, purchase and use more energy-efficient products. The emphasis will be on lighting, cooling equipment, ventilation, office equipment and buildings. Each year an action plan is formulated and different categories of products are given priority. For industry, the main focus in 2001 was on energy management, energy-efficient design, development of energy-efficient technology, standardised solutions and projects in selected industry sub-sectors. The tax, subsidy and voluntary agreements package was evaluated in 2000. The conclusion was that reductions of CO2 had met forecasts. In 1995 it was estimated that the package would reduce emissions by 3.9% versus an actual reduction of 3.8%. Sulphur reductions were better than expected(34 000 tonnes versus 32 000 tonnes anticipated) .The evaluation resulted in the following assessments: � The green taxation system for agriculture, trade and industry is an

appropriate instrument for attaining the environmental objective, is economically effective and takes international competitiveness into account.

- The administrative costs related to the voluntary agreement scheme are too high.

� The voluntary agreements were consequently adjusted in 1999 by replacing the mandatory audits with a requirement to implement an independently certified energy management system. The certifying body controls compliance with the agreement, thus reducing administrative costs.

In the 2002 in-depth review of the energy policies of Denmark, the IEA stated: The Government of Denmark should: � Continue to place time limits on subsidy schemes, particularly on those to

boost market penetration of new energy-efficient technologies.

Integrated Resource Planning

Integrated Resource Planning was imposed under the new Electricity Act in 1994 to achieve a balance between investments in electricity conservation and the development of electricity supply. ELSAM and ELKRAFT, the two regional associations of vertically integrated power companies, are obliged to present 15-year plans to the government specifying how they will achieve their commitments on energy efficiency and environment policies.

Amendment of the Heat Supply Act

On 29 March 2000, the Danish Minister for Environment and Energy launched a proposal to amend the Heat Supply Act (revised in June 1990). The overall purpose of the amendment is to promote activities that will support the national goal of reducing CO2 emissions by 20% in 2005. The objective of the plan is to reduce the energy sector’s negative impact on the environment and to promote renewable energy, and thereby support an environmentally sustainable development. According to the amended Heat Supply Act, the existing principle for heat pricing, stipulating that heat supplies must be priced according to actual costs on a non-profit basis, will be preserved. To increase the utilisation of

14

renewable energy resources and industrial surplus heat, new investors and heat producers will be allowed to sell heat on commercial conditions, always provided that the heat prices are below a defined price ceiling. The Heat Supply Act will introduce demands on the producers of heat to promote energy efficiency and to reduce the costs related to the production of heat. These demands will be implemented through benchmarking and plant-specific income caps with the aim of securing a more cost-effective production of heat.

Electric Utilities

The Danish power distribution companies, which are either consumer- or publicly-owned, have established extensive information and consultancy schemes recognised as a natural activity by the regulatory authorities. Most companies are involved in local information activities directed at consumers and educational institutions and offer a certain basic package of consultancy on electricity savings free of charge. Other initiatives include arrangements with stores and electricians to supply low-energy light bulbs to consumers funded via the electricity bill, schemes for distributing low-energy bulbs to all their customers free of charge, or for buying back old, inefficient appliances when new efficient ones are sold.

TRANSPORT


Transport Action Plan

In May 1990, the government adopted the Transport Action Plan for Environment and Development which aims at stabilising CO2 emissions by 2005 and a 25% reduction by 2030, compared to the 1988 level for this sector.

White Paper on Transport- Traffic 2005

The Transport Action Plan was followed up in December 1993 by the White Paper on Transport-Traffic 2005, which reviewed the implementation of the energy and environmental targets. It was emphasised that fulfilment of the target for CO2 emissions, while continuing to provide an efficient and flexible transport system to the public and commercial sector will be the greatest challenge to national transport policy in the years to come.

Action Plan 1996

In 1996 the government decided on an action plan entitled Regeringens handlingsplan for reduktion af transportsektorens CO2-udslip (Government Action Plan for Reduction of CO2 Emissions from the Transport Sector) containing ideas to reach the target of CO2 stabilisation. The action plan was mainly a description of possibilities, with a few specific initiatives. The main objectives in the plan were : 1. To promote higher efficiency for vehicles, as proposed by the European

Commission in connection with an agreement between the Commission and the vehicle producers (3-4% reduction of CO2 emissions).

2. Thirty per cent higher fuel price before 2005 in 1996 prices (8% reduction of CO2 emissions).

3. Other objectives regarding freight transport, public transport and bicycle transport (4% reduction in CO2 emissions).

The March 2000 Report

Based on a re-evaluation of targets, policies and measures (including a cost evaluation) and the fact that emissions from the sector continued to rise – they were about 14% higher in 1999 than in 1988 – Denmark proposed additional measures in a March 2000 report entitled Limitation of CO2 Emissions from the Transport Sector - Possibilities, Policies and Measures. Without new initiatives, it was estimated that CO2 emissions would be 27% higher in 2005

15

and 31% higher in 2010 than in 1988. Policies have not been successful in halting the upward trend in transport emissions, owing in part to higher than anticipated economic growth and commensurate increases in transport needs.

The April 2001 Action Plan

In April 2001, the Danish government published a new Action Plan for reducing CO2 in the transport sector, drawing on earlier recommendations. The targets were revised significantly downward. CO2 emissions are now to be reduced 7% in 2010 below business-as-usual trends (representing an actual increase in emissions of 22% over 1988 levels or 19% over 1990 levels). The 2030 target remained as established earlier – 25% below actual 1988 levels. The two main strategies in the Action Plan are increased energy and transport efficiency. The first strategy is being implemented through: � A feasibility study on promotion of environmentally-friendly transport

technology through adaptation of the tax system. � An information campaign about new cars’ energy efficiency to supplement

the energy labelling on new cars in place since April 2000. � Eco-driving and enforcement of speed limits. The second strategy is to be implemented through information programmes including promotion of public transport, bicycling and environmentally-friendly freight transport, and other pilot projects. The rise in energy consumption has been greatest for road traffic and aviation. The government estimates that the new measures in the Action Plan, when implemented, will allow the achievement of the 7% reduction from business as usual by 2010. Another new initiative also mentioned in the Action Plan is a proposal to develop a national road pricing scheme with the main objective of reducing motor traffic in major Danish cities. DKK 7 million will be allocated annually from 2001 to 2003 for the promotion of road pricing projects to prepare the way for the political decision on the pricing system. One element of these projects will be to investigate the effects of road pricing on carbon dioxide levels.

Information and Labelling

An information campaign on energy efficiency of new cars began in September 1997. Energy labelling of new cars has been established.

Taxation of Vehicles

In 1997 there were some changes in taxation for pick-ups, vans, private cars and electric vehicles. For pick-ups and vans the registration fees were changed to promote the use of smaller vehicles. Furthermore, an annual tax for private use of pick-ups and vans (medium-sized trucks up to 3 500 kg) was introduced. The purpose was to encourage people to change from less energy-efficient pick-ups and vans to more energy-efficient passenger cars (when the use is only for passenger transport). On 1 January 2000, the registration fee (purchase tax) for cars was changed in order to provide more incentive to purchase new, more energy-efficient vehicles. The registration tax for fuel-efficient gasoline cars consuming less than 4 litres/100 km has been reduced, as has the registration tax for diesel cars consuming less than 3.6 litres/100 km. The reduction in the registration tax varies from 1/6 to 4/6 of the existing fee. In connection with this decision, the range of diesel cars qualifying for the annual ‘green owner fee’ has also been expanded. On 1 January 2000, another four categories qualified for the green owner fee, and the lowest tax category is now for diesel cars which consume less than 3.1 litres/100 km.

16

In the 2002 in-depth review of the energy policies of Denmark, the IEA stated: The Government of Denmark should: � Make further adjustments to the car registration fee and pursue road

pricing and other cost-effective policy instruments in the transport sector.

Public Transport

To reduce emissions in the cities, some 230 bus companies are using natural gas or LPG. These buses run almost entirely in the greater Copenhagen area. They consume 1.1 km/litre on average. It has been decided to improve the quality of local mass transport in conjunction with the revision of lower fares. The subsidy allocated to public transport (excluding large infrastructure investments) was approximately DKK 4.4 billion in 1997. About the same amount was expected for 1998. Subsidies for public transport were increased in September 1997 in order to reduce prices by 10%. After preliminary studies, this seems to have been successful.


As part of the overall savings plan, the government will present an annual report on energy savings. The first report was presented in September 2000. In this connection, saving targets for 2005 were set for the different sectors, and it will be assessed whether new financial incentives or other new measures should be introduced in order to meet the overall target. In the 2002 in-depth review of the energy policies of Denmark, the IEA stated: The Government of Denmark should: � Continue to review the performance of existing energy-efficiency

programmes with a view to developing market-based and more cost-effective policies. Loan payback schemes could substitute for outright subsidies in some cases.

� Review the existing policy measures with a view to developing more cost-effective policies. Governments’ interventions should be analysed on a continuing basis for cost-effectiveness and should be prioritised accordingly. Market-oriented approaches should receive priority.

Further information

For further information, please contact: Peter Bach Senior Adviser Danish Energy Authority Amaliegade 44 DK – 1256 Copenhagen K Tel: +45 (33) 95 43 25 Bus Fax: +45 (33) 11 47 43 E-mail: [email protected]

1

FINLAND Updated October 2003

BACKGROUND

Energy Strategy

The Finnish Energy Strategy, which was completed in 1997, sets out the more fixed objectives to limit greenhouse gas emissions. In the Energy Strategy, the line of action for energy consumption defined in 1995 was made more stringent. Research and development aimed to improve the efficiency of energy use and the launching onto the market of new technologies were stressed. The Strategy underlined the voluntary scheme of energy conservation agreements, which were then in an initial stage of implementation. In fact, it seems that, after about three years of experience, this scheme is becoming the skeleton of systematic improvement of efficiency. In recent years, the strongest justification for efficient use of energy has been the need to reduce greenhouse gas emissions in order to prevent climate change. However, the traditional criteria, such as energy supply and competitive price of energy, still remain side by side with the climate policy.

New Energy Efficiency Action Plan

In September 2002, the Ministry of Trade and Industry appointed two working groups: one to revise the programme for promoting renewable energy sources, and the other to update the energy conservation programme dating from 2000. Both working groups submitted their reports on 16 December 2002. The principal task of the working groups, which completed their assignments within a tight timetable, was to propose practical measures for carrying out the statements concerning energy conservation and renewable energy sources which were given by the Finnish Parliament in connection with the debate on the National Climate Strategy and the debate on the new nuclear power plant unit. The working group on energy conservation has drawn up a proposal for a new Energy Efficiency Action Plan. The measures proposed have been slightly modified on the basis of comments received and included in the National Climate Programme. The Action Plan could reduce overall energy consumption by nearly 5% by 2010. This is roughly a quarter of Finland's target for reducing GHG and would correspond to a reduction of 1.5 million tonnes of oil. The reference situation is one where no new energy conservation measures were taken. However this business-as-usual scenario already includes a great number of actions started earlier, as well as the impact of these actions. In terms of the State economy, the total cost of implementing the Action Plan would amount to roughly Fmk 350 million1 per year, which is about Fmk 80 million higher than the present level. Priority activities to promote energy efficiency are: • Further development of building codes and other normative measures. • Development and wider use of voluntary agreements. • Further development and promotion of energy audit activities. • Targeted information activities. • Research, development, demonstration and dissemination of new

technologies. Efficient implementation of all these measures calls for their support through information services, training and motivation. Energy conservation activities of

1 On average in 2000 Fmk 1 = US$ 0.154 and in 2001 Fmk 1 = US$ 0.151

IEA EnergyEfficiencyUpdate

2

the EU and other international organisations should also be supported and used in implementing national measures. In the long term, energy taxation should be developed in a direction that will promote energy savings, taking into account the competitiveness of the export industry and the national economy as a whole. State financing to enhance energy conservation should be primarily focused on the development and commercialisation of new technology, aid connected with energy conservation agreements, energy renovations of buildings and information services supporting the conservation measures. Integration of the urban structure will require support and good management. The energy conservation working group will continue its work with respect to the legislative projects included in its assignment. A proposal will be prepared for a general act on energy conservation, and the service obligation to be placed on energy companies will be studied. These tasks should be completed by 31 May 2003.


Finland signed the United Nations Framework Convention on Climate Change (UNFCCC) during UNCED in Rio in June 1992 and ratified it on 31 May 1994. It produced its first National Communication entitled Finland’s National Report under the United Nations Framework Convention on Climate Change in January 1995. This National Communication emphasises the role of energy efficiency to achieve the target of stabilising CO2 emissions to 1990 levels before 2000. At the third Conference of the Parties (COP-3) of the UNFCCC held in Kyoto (Japan) in December 1997, Finland, among other members of the European Union, made the commitment to reduce its GHG emissions by 8% from the 1990 level. Finland signed the Kyoto Protocol on 29 May 1998; ratification is planned to take place in line with the other EU Member States. As part of the European Union, Finland intends to curb her greenhouse gas emissions during the first commitment period referred to in the Kyoto Protocol, i.e. 2008-2012, to the extent that annual emissions will not exceed those of 1990, when they were equivalent to around 76.5 million tons of carbon dioxide. The majority, roughly 70%, is carbon dioxide emissions arising from the combustion of fossil fuels and peat. This stabilisation target takes into account that Finland has already realised much of its energy efficiency potential. Combined heat and power (CHP), for example, accounts for as much as 32% of the country's electricity supply. Finland’s Second Report under the Framework Convention on Climate Change issued in 1997 surveys all the actions undertaken by Finland aimed at meeting the objectives of the Framework Convention. Strengthening energy efficiency in all the energy consumption sectors is considered a major tool to fulfil the environment commitments. Finland's Third National Communication under the United Nations Framework Convention on Climate Change was adopted by the government on 15 March 2001 and supported by Parliament in its statement on 19 June 2001. This Communication is largely based on the National Climate Strategy of Finland (see below) as well as on the background documents, research and sectoral reports of strategy formulation and on the work of an inter-ministerial committee for preparing the third national communication. In the 1999 in-depth review of the energy policies of Finland, the IEA stated: The Government should: • Continue its vigorous efforts to meet its international obligations in the

area of climate change.

3

National Climate Strategy

The National Climate Strategy, submitted to Parliament on 27 March 2001 in the form of a government report, contains the principles, targets and action measures that the government finds necessary to meet the national target. The Parliament supported the strategy in its statement of 19 June 2001. Several investigations and studies on emission trends extending as far as the year 2020 have been carried out for the purposes of the climate strategy. The courses of action recommended in the strategy are mainly aimed at meeting the obligation during the first commitment period. The following conclusions can be drawn from the findings: • Greenhouse gas emissions will increase to volumes exceeding the target

level, unless determined and effective action is taken to curb emissions. • Greenhouse gas emissions depend on a few major factors, such as the

growth and structure of the economy, and the structure of electricity supply.

• In order to meet the climate strategy targets, it is necessary to implement an energy conservation programme and a programme promoting renewable sources of energy. Together these two programmes could account for about a half of the targeted emission reduction.

• The growing use of coal must be reduced considerably by increasing the use of natural gas, by building nuclear power plants, or by a combination of these two measures.

• Implementation of this strategy will mean increased expenditure for consumers of energy and the entire national economy, and will result in a sizeable additional investment by the State.

• The alternative based on the increasing use of natural gas will lead to somewhat greater expenditure for the economy as a whole than the alternative favouring nuclear power as a source of electricity supply.

With reference to economic growth and other starting points, the calculations are based on the basic principles and conditions concerning the formulation of the climate strategy set out in the Government Programme. In terms of the above, the target adopted for Finland will be met in such a way that the necessary measures would neither weaken the economy nor promote unemployment, but would support a reduction of the national debt. Measures need to be taken in energy production and consumption, transport, the building sector, town and urban planning, in controlling the emissions from agriculture and forestry, and waste management. Meeting the targets calls for research and development, economic control measures, such as taxation and various financial support systems, statutes and regulations, voluntary agreements, and encouragement of consumers’ spontaneous actions. Promoting energy conservation, the use of bio-energy and other forms of renewable energy and research into energy technology are essential elements of the National Climate Strategy. Support to energy investments and survey projects is an important component of the Strategy. Energy subsidies are considered as a central means of reducing carbon emissions with the following objectives: to promote the introduction of innovative energy technology; to increase the use of renewable energy sources and to reduce any environmental effects caused by the production and use of energy. The new Government Decree on energy subsidies came into effect on 1 August 2002. Energy subsidies amounted to € 29 million in 2002, or nearly

4

50% more than in 2001. The energy subsidy situation for 2003 also looks encouraging: the government proposes a commitment of about € 29 million. When approving the government's decision-in-principle concerning a fifth new nuclear plant unit, the Parliament, on 24 May 2002, passed four statements: these apply to more efficient means of conserving energy, restricting the use of coal, promotion of renewable energy use and a report to be given to Parliament on the implementation of these measures. The Ministry of Trade and Industry has already taken action prompted by these statements. Energy efficiency measures based on the Energy Efficiency Action Plan will be intensified in keeping with Parliament's statement and the government's statement on electricity conservation issued on 17 January 2002. To update the energy efficiency programme, the Ministry appointed a working group which should complete its work by the end of 2002.

Motiva In 1993, MTI established Motiva, the Information Centre for Energy Efficiency to implement the government’s energy conservation programme. MTI, representing the State of Finland, purchased the stock of Motiva from Finntech Finnish Technology Ltd OY, a technology transfer company. Following the sale of the stock, Motiva became an independent limited liability company owned by the State; its ongoing projects will continue without interruption. The starting point of Motiva's operations is as an impartial and reliable service centre with solid expertise. Motiva compiles, processes and distributes information, develops methods and encourages the use of advanced technology in households and in companies. Motiva's activities support the goals specified in the government's Energy Strategy, where efficient use of energy and renewable sources play a central role. Motiva actively co-operates with energy consumers, companies providing services and products related to energy, communities, energy suppliers and authorities involved in the field of energy and the environment. Motiva’s area of activities includes: • Influencing attitudes towards rational energy use and saving. • Developing and marketing energy audits and other procedures to promote

energy efficiency. • Promoting the implementation of energy-efficient technologies. In January 1998, promotion of the use of renewable energies was added to Motiva’s mission.



Building Code

The National Building Code of Finland, which applies to all new building projects (both residential and non-residential) and which was revised in 1985 by the Ministry for the Environment, is supervised by the local building authorities. The current standards are prescriptive thermal insulation requirements for walls, roofs and windows, thermal conductivity values for building materials, and requirements related to indoor air quality, ventilation rates, equipment and design. The Ministry of the Environment is revising the Building Code to improve the

5

energy efficiency of new buildings. These new regulations should come into force in 2003. The aim is a 30% reduction in energy consumption in new buildings compared to buildings constructed on the basis of today’s regulations.

Energy Labelling and Standards

Energy labelling and energy efficiency standards for domestic appliances have been implemented in accordance with the principles within the European Union. Energy Labelling Energy labelling of refrigerators and freezers began in accordance with EU labelling directives in 1995. Energy labelling of washing machines and tumble dryers started in 1996 and washer-dryers in 1998. In 2000 the energy labelling of dishwashers and household lamps came into force. The introduction of energy labelling has been supported by extensive information and training carried out by Motiva and directed at consumers and retail staff. As a result of labelling, consumers’ energy awareness has risen and the availability of energy efficient appliances on the market has increased. Energy Efficiency Standards Minimum efficiency requirements for hot-water boilers (according to the EU Directive) were implemented in 1998 and for refrigerators and freezers (EU Directive) in 2000 and for ballasts for fluorescent lighting in 2002. Finland also supports the adoption of minimum efficiency requirements for other appliances.


MTI and the Finnish Association of Building Owners and Construction Clients signed in May 1999 an Energy Conservation Agreement relating to the real estate and construction business. This agreement provides the commercial sector, for example shops, banks, insurance companies and media, with the opportunity to join the energy conservation agreement and the activities subject to it. By the end of 2001, the coverage of the agreement was 73%. The target is to have 10% less specific heat consumption in buildings in 2005 and 15% less in 2010 compared to 1998. There is also a target to stop the increase in electricity consumption and reverse the trend before 2005.

Metering and Billing

Demonstration projects are under way on metering and billing of heat energy on the basis of actual consumption, looking at cost-effectiveness and actual savings. In 1995 there was a study on experiences of users and occupants. The work in this field was based on the 1995 Government Decision on Energy Conservation. The first phase, from 1992 to 1995, dealt with studies amounting to about ECU 100 000. The second phase, starting in 1996, includes demonstrations. The budget for demonstrations in 1995-1996 amounted to about ECU 1 million. Some results of the demonstration projects are positive, others less so. The guidelines for further actions are in the Energy Efficiency Action Plan. New buildings will be required to have apartment-specific measurement of service water and electricity as well as billing based on actual consumption. As for heat, the measurement requirement will be introduced along with the development of measurement technology and transfer technology of measurement data.

Renovation Grant Scheme

The state supports the renovation of housing by, for instance, the repair grant scheme that is prepared each year by the Ministry of the Environment. The basic grant is 10% of the total repair cost. For certain energy conservation measures, the amount is 20%. The Ministry of the Environment follows up on the grant's use. These grants fund actions such as the adjustment of heating systems, cleaning and adjustment of ventilation systems and construction of heat recovery systems for exhaust air.

6

District Heating

District heating (DH) was introduced in Finland’s major cities in the 1950s and 1960s and in small towns after the 1970s oil crisis. DH covers 48% of total space heating demand and in 2001 as much as 75% of DH was produced by combined heat and power (CHP). Most DH utilities are owned by municipalities. DH systems cover almost all regions of Finland where the sale of district heat is profitable. In Helsinki, as well as in other cities, DH has been developed with no direct financial support. The state does not interfere directly in the production and distribution of power and heat and there is no price regulation. General practice for the construction of a DH system is that the sale of district heat must be profitable even without CHP. On the other hand, the sales price of district heat must be competitive with other forms of heating. In the 1999 in-depth review of the energy policies of Finland, the IEA stated: The Government should: • Consider involving EMA (Electricity Market Authority2) in the OFC’s (Office

of Free Competition) monitoring of district heating prices, especially cross-subsidies between heat and electricity supply.

Technical Assistance

Tekes, the National Technology Agency, supports and organises R&D projects in the construction and building sector. One of the technology programmes going on in this sector which includes energy efficiency targets is INFRA – Construction and Services Technology Programme for the years 2001-2005. The national public research institute, the Technical Research Centre of Finland, VTT, carries out R&D and offers expertise on technical building services, structures and building systems.


The LINKKI 2 research programme on energy conservation decisions and behaviour, started by the Finnish Ministry of Trade and Industry in 1997, ended in 2001. An independent evaluation of the programme has been made. The programme consisted of 26 projects, which for their part have promoted the implementation of the Energy Conservation Programme approved in 1995 and the Energy Strategy.


Technology Procurement

Motiva Oy organises and co-ordinates technology procurement competitions. In 2001, the MotiVoittaja competition was finalised with the commercialisation of eight small house packs representing the highest level of energy efficiency. MotiVoittaja houses produce a saving of 40-50% in energy and water bills. Energy efficient devices are obtained for the Finnish market also by means of international acquisition competitions. The winner of the IEA Copier of the Future competition was brought onto the market in 2001. The EU´s Green Light programme to enhance the energy efficiency of lighting piloted and modelled a basic lighting audit model in five companies and organisations. Through Motiva, Finland has also actively participated in the European Union Technology Procurement SAVE Study.

2 The Electricity Market Authority (EMA) established by the Electricity Market Act (386/1995) in force since 1 June 1995, is the regulatory institution of the electricity supply industry responsible, inter alia, for supervising grid access and pricing

7


Energy Audits

At the end of 2001 there were a total of nine audit models for industrial and service properties. Audits are conducted by experts who identify potential ways of achieving savings in the areas of heating, water consumption, electricity and air conditioning. Motiva Oy is responsible for the development, marketing and quality assurance of audit activity and for training the auditors. The Ministry of Trade and Industry (MTI) provides subsidies for audits, which are normally 40% of the auditing cost. In the period 1992-2001 more than 4 900 audits had been supported by the MTI at a total cost of € 13.7 million. Audit activity speeded up at the end of the 1990s when the first energy conservation agreements began to be implemented. In 2001, 95% of audits were carried out at companies and organisations falling within the scope of energy conservation agreements. A substantial share of energy consumption in industry has been audited. In SME industry saving potential observed in audits are on average 8% in electricity and 25% in heating. According to the questionnaire circulated in year 2000 approximately two-thirds of the saving potential will be realised. Motiva develops and maintains the Motiwatti programme, which harmonises and eases the calculation of energy savings in audit projects. To monitor the auditing work, a computer-based follow-up system, MOTICOP, was developed in August 1994. Motiva also produces marketing and support materials and ordering guidelines for auditing companies and their customers. The quality of audits is safeguarded by checking the reports on all objects and by providing the auditors with feedback. Customer feedback is also gathered from the purchasers of audits.


Industrial energy efficiency policy relies mainly on voluntary agreements initiated in 1992 and significantly extended in 1997. In November 1997, MTI signed six new framework agreements on energy conservation with the organisations of industry and employers, energy producers and energy distributors. The parties concluding the agreements with MTI were the Confederation of Finnish Industry and Employers, the Association of Finnish Local and Regional Authorities, the Finnish Energy Industries Federation, the Finnish District Heating Association, the Finnish Electricity Association and the Finnish Petroleum Federation. The State Real Property Authority signed a co-operation programme which is equivalent as regards its objectives to an agreement and to which most of the other governmental real estate entities have acceded. The agreements will remain in effect until 2005. In signing the framework agreements, the industrial organisations are committed to promoting energy conservation and inducing their members to accede. A company joining an agreement is committed to appointing someone to take charge of energy conservation affairs, auditing and analysis of energy consumption, preparing its own energy conservation plan, taking measures according to the plan, and reporting annually to the sector organisation concerned. Some 115 companies had joined the voluntary industrial agreements at the end of 2001, representing about 85% of total energy use by Finnish industry. All the major energy users have joined. In the power plant sector, 22 companies have signed an energy conservation agreement, representing 90% of Finland's electricity production. The agreement in the district heating sector has been signed by 40 companies, accounting for 70% of the district heat

8

energy sold in Finland. An agreement on electricity transfer and distribution has been concluded with 42 companies, covering 76% of electricity supply to final consumers. The agreements signed by MTI cover 55% of municipalities, 73% of commercial buildings and 10% of truck transport. On 28 March 2001, the Ministry of Trade and Industry, the Ministry of Transport and Communications, the Ministry of the Environment, and the Finnish Bus and Coach Association signed the energy conservation agreement on bus transport. It currently covers 35% of the sector's energy consumption In addition, two co-operation programmes – which correspond to energy conservation agreements – are under way: one applies to the State’s own real estate and the other, renewed in June 2002 together with the Finnish Oil and Gas Federation and Ministry of Environment and the Association of Entrepreneurs for Installation Services, applies to buildings heated by oil. The conservation agreements have given a major boost to energy audits. One of the targets of the Voluntary Agreements is to have 80% of the energy use in industry and commercial and public buildings audited by the year 2005. With regard to agreements made by industry, the energy sector, and municipalities and joint municipal boards, their annual reporting data from 2000 reveal that the total impact of the conservation measures implemented so far in the companies and corporations encompassed by the agreements is 2.2 TWh/year. Of this total, 2 TWh/year, or over 90%, comes up in the annual reports of industry. An interim evaluation of conservation agreements in industry and in the energy sector commissioned by MTI, has been completed. The goal in the evaluation of individual agreements was to provide an overall picture of the benefits of the agreement procedure and to give recommendations for development of the scheme. Concluding that the agreement system works well, the evaluation team proposed that the agreements be kept unchanged until the end of the present agreement period in 2005. Concerning industry's conservation agreements, the conservation measures implemented, decided and considered by enterprises in 1998-2000 totalled 4.2 TWh per year for heat and fuels and 1.3 TWh per year for electricity. The evaluators pointed out that the magnitude of these figures is important, even when compared to the national energy balance. The evaluators also presented a number of recommendations for developing operations during the current period. The main recommendations are: introduction of renewable energy sources in the system and development of reporting so that the reporting process would be speedier and the reports would also serve the needs of enterprises better. Extra attention should be paid to the means that maintain enterprises' motivation for the conservation agreement scheme. The evaluators recommend that enterprises should include energy conservation targets in their environment and quality systems. The evaluators also propose that, at this stage of the system, setting of agreement-specific energy conservation targets should be considered. The results of the evaluation will be discussed in the respective management groups which will decide how operations should be channelled for the rest of the agreement terms. Alongside the implementation of the agreements already concluded, the Ministry of Environment, together with the Ministry of Trade and Industry, is preparing an extension of the agreements practice to the residential building sector.

9

In the 1999 in-depth review of the energy policies of Finland, the IEA stated: The Government should: • In its voluntary agreements, set concrete targets for the different sectors,

based on thorough audits and estimates of likely trends, and further develop monitoring of the results.

Grants MTI provides grants for energy audits and investments to improve the

efficiency of energy production and use and to increase the use of bio-energy or other renewable sources. Grants of up to 30% of the capital expenditure are provided for qualifying investment projects and up to 50% for audits. Total subsidies were Fmk 135 million in 1999 and Fmk 130 million in 2000.


Finland leads the world in the combined production of heat and power (CHP). Co-generation is widely applied for the heating of communities and for heat and power from the utilisation of waste fuels from industrial processes. The amount of energy Finland saves annually through CHP corresponds to 6% of all primary energy used in the country. In 2000, approximately 31% of electricity consumed was produced in combined heat and power stations. This production is divided quite evenly between industrial auto-producers and plants owned by local distribution companies. These power plants may be between 0 and 400 MW in unit size, but most of them are between 30 and 40 MW in unit size. Pulp and paper mills and other heavy industry generate two-thirds of their own electricity needs. Many of them use peat, waste wood or natural gas. There is no preferential treatment in dispatching for CHP. Although small biomass-fired CHP plants can get a subsidy from MTI for up to 30% of the investment, the subsidy is usually 10 to 20%. The electricity tax is refunded for peat-fired CHP plants of less than 40 MW and for any power plant using wood or wood-based fuels.

Energy Service Companies (ESCOs)

Motiva started developing standard ESCO contract documents in 1997 and launched the first pilot project in the autumn of 1998. The model contract documents were released in 2000. The idea of the developed Motiva ESCO Concept is to show one transparent way of applying energy performance contracting in the Finnish market. ESCOs can benefit the model when drafting their own concepts. In 2001, as part of Tekes’ Climtech programme, the Jumesco project was launched with the objective of implanting ESCO activity in the municipal sector. The activity of energy service companies from the standpoint of climate change is to be examined in another Climtech project started in 2002. Motiva is involved in the IEA´s international ESCO project lasting until the end of 2002, which will investigate the state of activity in eight countries all over the world. The results of the project will be utilised by applying them to Finnish conditions.


As an international pilot project within the IEA DSM Agreement Annex III, Motiva organised the IEA Hi-Motors Competition. The goals of the project are to: • Establish electric motors with losses of some 25-50% less than average

motors, at a price and performance level which guarantees a significant long-lasting market share.

• Establish highly efficient electric motors in the market (three-phase, four

10

poles, 1 500 r/min., continuous use, most common motor type on the market).

• Produce electric motors with an energy efficiency higher than in any previous motor and get them to the marketplace.

With a buyer group of more than 30 Finnish industrial companies, the project has led to commercially available motors by ABB with extremely high energy efficiency – not seen in practice before.

Technology Development

Tekes is the main financing organisation for R&D in Finland. It provides funding and expert services for R&D projects and promotes national and international networking. Energy efficiency is one of the criteria that are taken into account horizontally in different technology sectors when granting aid to R&D projects. Tekes also finances some technology programmes where energy saving is one of the key targets. The Process Integration Technology Programme (2000-2004) is an example of this with a total budget of around € 17 million. In 2001 Tekes spent about € 20 million for the R&D projects the main target of which was energy conservation.

PUBLIC SECTOR Energy Audits

A third of public buildings are audited. According to the reported audits, the average saving potential in audited buildings of the public sector is 16% for heating, 7% for electricity and 8% for water consumption.


Energy conservation agreements introduced in 1992 are an important element of Finnish energy policy. Voluntary agreements have been developed with the public sector (and with industry) for energy intensity reductions. A public sector agreement was signed by MTI with the Association of Finnish Local and Regional Authorities (representing all municipalities) and another with the City of Helsinki in 1993. The municipal sector agreements were renewed in 1997. Municipalities, in co-operation with the Association of Finnish Local and Regional Authorities, draft individual energy conservation agreements for signature by MTI. Each municipality concluding such an agreement is committed to carry out measures similar to those taken by companies. Coverage of the agreements is 55% and 62 municipalities and joint municipal boards have joined the system. The target is to have 10% less specific heat consumption in municipal buildings in 2005 compared to 1990. The agreement was in force until the end of 2002.

Recommendations for Energy Efficiency of Public Procurements

HYMONET, a tool for the environmental control of procurements, was brought into use in spring 2001. The extranet database guides users to select energy-efficient products in accordance with MTI´s recommendations on public procurements.

TRANSPORT


Environmental Guidelines for Transport Sector

The Ministry of Transport and Communication has had an environmental management programme of transport policy since 1994. A new programme was adopted in July 1999 when "Environmental Guidelines for the Transport Sector" were published (Ministry of Transport and Communication 1999). The new programme is a standardised environmental management programme

11

based on ISO standard 14 001. The programme defines the environmental objectives, responsibilities of various actors and concrete measures to reach the objectives. Moreover, the programme contains a monitoring and follow-up mechanism. This new programme provides a practical tool for the environmental management of transport policy. The Ministry of Transport and Communications has also published a long-term strategic programme called "Towards a sustainable and intelligent transport sector". The strategy aims at reaching a transport system in which the demand for road transport (passenger car traffic and road freight traffic) should peak by the year 2020 and gradually start to decrease thereafter. With the aim of promoting the attractiveness and market share of sustainable modes of transport and in accordance with the National Climate Strategy and the Environmental Management Programme, the Ministry of Transport and Communications has adopted the following programmes: 1) National Cycling Policy Programme with the aim of doubling cycling from

the 1998-99 level by 2020. An annual cycling week is held at the beginning of May.

2) National Walking Policy Programme with the aim of incorporating walking into transport policy and planning.

3) Public Transport Strategy with the aim of increasing the attractiveness and competitiveness of public transport, e.g. with the help of door-to-door travel chains and the introduction of travel centres.

Motiva Motiva has also worked actively in the transport sector since 1994. It

develops, launches and implements practical work according to the National Climate Strategy. The goal is to activate companies, organisations and consumers to improve energy efficiency and increase the use of renewable sources of energy. Motiva operates in joint projects with companies and organisations in the market.

Joint Efforts to increase Transport Energy Efficiency

The Ministry of Transport and Communications, Motiva and other relevant organisations and parties are working together in the following areas to increase energy efficiency of transport and reduce transport related greenhouse gas emissions.

LIPASTO

LIPASTO is a calculation system for traffic exhaust emissions and energy consumption in Finland. The system was developed by the Technical Research Centre of Finland (VTT). The website www.lipasto.vtt.fi introduce the system with its submodels and the results. The submodels are: LIISA – road traffic, RAILI – railway traffic, MEERI – waterborne traffic and ILMI – air traffic. In addition, the work machine emission model TYKO (in Finnish only) and unit emission pages will be presented. Unit emission means here vehicle emissions per transported mass or person and distance unit (g/tonne-kilometre, g/person-kilometre). All the material on these sites is public and available in English. The material can be cited referring the source.

Monitoring of CO2 emission reduction from new registered passenger cars

In accordance with EC legislation (Decision 1753/2000/EC) the Finnish Vehicle Administration has established a register to monitor the development of energy efficiency and CO2 emission reduction of the new registered passenger cars. Tampere University of Technology conducted a study in 2001 on behalf of the Vehicle Administration to receive comparable historical data from the years 1993-2000 for the register.

New Study Completed

In the study “Reducing carbon dioxide emissions of transport in Finland” carried out by Tampere University of Technology, several measures to reduce carbon dioxide emissions have been analysed. In addition to the effect on carbon dioxide emissions the applicability and feasibility of the measures have

12

also been assessed. The assessed measures have been mainly allocated to the modes and source areas where the emissions are greatest. The studied measures include different means of transport pricing, legislative measures, development of vehicle technology, promoting public transport, decreasing traffic congestion, development of transport system, and changes of attitudes and life styles. Among the most efficient measures to reduce carbon dioxide emissions would be increasing the fuel price, decreasing the annual tax of diesel passenger cars, promoting an economical driving style, and adding biofuel components to traditional petrol and diesel fuels. Promoting railway transport and increasing the highest allowed truck total weight to 70 or 80 tons would also notably decrease carbon dioxide emissions. The most efficient measure of public transport means studied was the development of light rail systems in urban areas.

Fuel Economy Labelling

Fuel economy labelling of new passenger cars sold in Finland came into force at the beginning of 2001, in accordance with the EC Directive. The motor vehicle database designed by Motiva for its homepage includes all passenger car and cross-country vehicle models sold in Finland. Car sellers can print out type-specific symbols directly from the electronic motor vehicle database. The guide for choosing a car with fuel consumption and emission data published by the Vehicle Administration and Motiva’s electronic database helps consumers to compare consumption and carbon dioxide emission data for passenger cars. Fuel-efficient cars have been focused on by arranging a yearly competition to designate the most ecological car of the year in co-operation with VTT, the Technical Research Centre of Finland, and the most widely read motoring magazine in Finland. The impact of cold starts on consumption has been studied in the "Cold" project. As a result, recommendations on proper preheating of cars and information on different technical solutions for preheating have been circulated.

Promoting Use of Public Transportation

The annual funding for public transport is around € 0.4 billion. This funding is shared between the government (around two-thirds) and municipalities (one-third). It is not expected that the annual governmental funding for public transport will increase but it will be directed differently aiming at increasing its efficiency, reducing the taxation rates set for the employment-bound public transport tickets lower than their nominal value and funding the development of passenger information services and establishing travel centres. Motiva’s strategy is to work in joint projects with different actors and administrative bodies. Examples include demand-based transportation services, ticket systems, car-pooling and educational packages for different grades in schools. The international Car Free Day was held this year in Finland for the third time. The “In town without my car” concept has attracted several towns and municipalities to promote light traffic and public transport. This year 18 localities took part in this event. Several companies, organisations and associations organise their own happenings, events and campaigns. Encouraging people to use optional ways of transport and the advantages of leaving one’s own car at home (decrease in emissions, health related reasons, atmosphere and environment of city centres) are emphasised.

13

The impacts of the car free day are studied in Helsinki and Tampere: the quantity of traffic, quantity of people using public transportation and parking areas on that day compared to average working day. Air quality and noise are also measured. Motiva is the national co-ordinator of International Car Free Day. Finland is considering arranging the Mobility Week in 2003.

Voluntary Energy Conservation Agreements

The voluntary agreement scheme was launched in Finland in November 1997. At the end of 2001, an energy conservation agreement was in force in five sectors and two co-operation programmes were underway. In the transport sector, there are two agreements ongoing, one for trucks and vans and the other for buses. The aims of this agreement procedure are to reduce specific consumption of energy as well as to develop and introduce action models which allow energy efficiency to become an integral part of the companies’ operations. The target in the transport sector is to achieve an average of 5-10 % savings in energy consumption by 2005. The most significant savings potential is in fuel consumption, which can best be decreased through economical driving habits. Motiva is responsible for the administration and monitoring of the agreements. The coverage of the agreement in the truck and van sector is some15% of the vehicle stock in the agreement scheme, i.e. 400 companies and 2 380 vehicles. The implementation of an energy conservation agreement in the bus and coach sector was introduced in the spring of 2001. The sector obtained 34 % coverage with 2300 vehicles and 54 companies by the end of the first agreement year.

Economic Driving

Drive Pure Profit - Save Energy and the Environment The aim of this project was to develop an educational package for energy efficient driving for all driving schools in Finland. Theoretical and practical instructions in energy efficient driving methods were introduced in all driving schools. An evaluation was completed among the 850 driving teachers involved in the project and 90% thought that the material worked well. The fuel savings for cars owned by driving schools vary in the range of 6 to 12%. EcoDriving Since 1997 EcoDriving has been increasingly integrated into the general driving instruction that is given in Finland. Energy and environmental matters pertaining to EcoDriving are included in stages I and II of the training provided by driving schools. For drivers already carrying a driving licence an educational package for more efficient driving with less emissions has been developed. It is especially aimed at companies and organisations that have environmental programmes or are working to certify their operations according to the ISO 14001 standard. In Finland, more than 200 000 driving school students and over 3 500 drivers who already have a driving licence have been trained in EcoDriving. EcoDriving reduces the average driver’s fuel consumption by 1.3 litres per 100 km (12-16 %). The EcoDriving method can be tailored to several target

14

groups. For example taxi-drivers and policemen have a tailor-made EcoDriving training modules

KEY-Programme This professional traffic action programme is included in the environmental management models and in energy conservation agreements of the truck and delivery van sector and the bus and coach sector. It is important to build up educational packages in the energy and environmental management systems of these companies, mostly based on the structure of the ISO 9002 and ISO 14001 standards. The results of this programme for heavy vehicle drivers have been excellent. At present, there are nearly 7 000 KEY-trained drivers in Finland, whose fuel consumption has decreased after the training by 3–4 litres per 100 km. The saving percentages vary from 8 to 12% and this has been achieved with an increase in average speed with less traffic accidents and lower service costs of the buses and trucks. The EcoDriving and KEY driving habit training methods have been exported to Sweden and Norway.

Travel virtually!

In the Flight-exhibition in the Finnish Science Centre Heureka a new multimedia travelling game was launched in September 2002. In the game you travel virtually from Lisbon to Helsinki (via Manchester) by passenger car, train, bus and airplane. The programme gives you information on the different forms of travel: the fastest, the most economical, the least polluting and the least fuel consuming. You can also compare the emissions and fuel consumption as well as travel time and costs of different means of transportation. Next year this game wil be demonstrated at the exhibition in Lisbon. During the Finnish Energy Awareness Week, Motiva launched a national model of this game in which you travel virtually across Finland. This Internet game is also suitable for schools. The Finnish game is available at www.motiva.fi/matkallasuomessa also in Swedish and in English.

Information dissemination

Motiva publishes a wide range of leaflets, brochures, guidebooks and other material concerning sustainable transport in co-operation with many organisations and companies. The latest publication published this year is called “Nyt menoksi” (Let’s go) and gives information and good tips for making sustainable choices for you daily trips.


Automobile Tax

In reforming the automobile tax, fuel consumption will be considered one of the criteria on which the rate of tax would be based. Such studies on taxation are in the programme of work of the Ministry of Finance.

CO2 Tax Finland was the first country to introduce a CO2 tax in 1990, initially with a few exemptions for specific fuels or sectors. The tax was based on the carbon content of the fuels. After a number of increases in the CO2 tax rate in the early 1990s, the first major change occurred in 1994, when an additional component based on the energy content of the fuels was introduced, as well as special taxes on nuclear power and hydropower. Imported electricity was taxed at the average rate applied to domestically produced electricity. The second important revision of energy taxation took place in 1997, prompted by the opening of the Nordic electricity market. To avoid harming the competitiveness of domestic industries, the carbon/energy tax based on

15

fuel inputs in the electricity sector was scrapped and an electricity consumption tax was introduced, with a lower rate for industry and greenhouse cultivation (slightly above half the rate on households and service sectors). Source fuels for heating and transport continued to be taxed, but only on their carbon content, with a reduced rate for natural gas and peat. Since then, tax rates have been raised on two occasions and further exemptions added mainly for electricity production by renewable energy sources. In addition, since 1998, some taxes paid by energy-intensive industries are refunded.


Preliminary impact assessments derived from the baseline scenario used for the preparation of the climate strategy have been made on the full-scale and successful implementation of the energy conservation programme proposed by the working group appointed in September 2002. The updated energy conservation programme could have an impact on primary energy conservation that is about 50% higher than the impact of the previous programme. Calculated on the basis of the average electricity generation structure and fuel consumption, the reduction of greenhouse gas emissions could total about 4 million tonnes. In order to streamline and accelerate the implementation of the energy conservation programme, and to assess its impact, the working group in charge of updating this programme proposes the appointment of a follow-up group that would consist of representatives of the principal executive bodies. It would be good, however, if the measures were reviewed already in connection with the national implementation of a potential EU-wide emissions trading system. In the opinion of the working groups appointed to update the renewable energy and the energy conservation programmes, the expertise of associations and other players in these sectors should be utilised widely when implementing both the programme to promote renewable energy sources and the energy conservation programme. Extensive assessments of the implementation of the programmes should be carried out in 2006 at the latest.

Further information

For further information, please contact: Pentti Puhakka Energy Department Ministry of Trade and Industry P.O. Box 32 FIN – 00023 GOVERNMENT Tel: +358 (9) 160 648 13 Fax: +358 (9) 160 639 97 E-mail: [email protected]

1

FRANCE Updated February 2003

BACKGROUND The fundamental objectives of French energy policy have not changedsignificantly since the early 1970s. They continue to be to improve energysecurity by reducing dependence on imported fossil fuels, maintaining reliablelow-cost energy supplies to ensure the competitiveness of the Frencheconomy and protecting the environment. The basic strategy to achieve thesegoals includes, inter alia, end-use efficiency and co-operation with othercountries through the IEA, the European Union and other internationalorganisations.

Energyand theEnvironment

France signed the Framework Convention on Climate Change (FCCC) atUNCED in June 1992 and ratified it in March 1994. It submitted its firstnational programme entitled Programme National de Prévention duchangement de Climat (National Programme for the Mitigation of ClimateChange) in February 1995.

During the 1980s, France achieved substantial reductions in energy-relatedCO2 emissions — a decrease of 23% between 1980 and 1990. At that time,therefore, France adopted a target to limit by 2000 energy-related CO2

emissions to below 2 tonnes of carbon — or 7.33 tonnes of CO2 per capita peryear, which is roughly 10% above the 1990 level of per capita emissions.

At the Fourth Conference of the Parties (COP-IV) to the FCCC held in Kyotoin December 1997, the European Union as a whole agreed to reduce theemissions of a basket of six gases by 8% from 1990 levels by the period2008-2012. In June 1998, the European Union Council of EnvironmentMinisters reached a Burden-Sharing Agreement1 on emission reductioncommitments, to re-allocate internally the 8% reduction agreed at Kyoto. Thereduction commitments are expressed as a percentage of 1990 levels for the2008-2012 period.

Under the Burden-Sharing Agreement, France is committed to have its annualaverage greenhouse gas emissions at 1990 levels for 2008-2012.

France submitted its second report entitled République Française: SecondNational Communication of France Under the Climate Convention, inNovember 1997. It provides a detailed description of policies and measuresmitigating greenhouse gas emissions.

A UNFCCC expert review team evaluated the Third National Communicationof France Under the Climate Convention on Greenhouse Gas Emissions. Theofficial report to the UNFCCC was published in November 2001.

Following the change of government in June 2002, the Ministry ofEnvironment became the Ministry of Ecology and Sustainable Development(MED) and a State Secretariat devoted to sustainable development wascreated under the responsibility of the MED. This demonstrates thewillingness of the government to give high priority to the theme of sustainabledevelopment.

InstitutionalFramework

SouvironReport

In January 1994, the government launched a national debate on ways toimprove the security, environment-friendliness and efficiency of energy supply,particularly electricity and gas. In December 1994, a synthesis report by therapporteur Jean-Pierre Souviron on the main conclusions of the debate,

1. The Burden-Sharing Agreement covers CO2, CH4, N2O, PFCs, HFCs and SF6.


2

including policy recommendations, was published. One of the mainconclusions and recommendations was that France’s internationalcommitments to limit CO2 emissions and local environmental problems requiremore efforts in improving energy efficiency. One priority should beenforcement of existing efficiency standards in the transport and buildingsectors.

Energy2010-2020Report

This report was published in 1998. It outlined the major directions for Frenchenergy policy: organising the liberalisation of the electricity and gas markets,modifying underlying trends in the transportation urban planning sectors inorder to control consumption, preparing to replace electric power generatingplants while maintaining nuclear options open, and making energy tax policiesfairer and more environmentally friendly.

ADEME French energy efficiency policy is defined by the DGEMP (Direction généralede l'énergie et des matières premières – Directorate-General for Energy andRaw Materials) and carried out by numerous organisations. An important bodyfor the implementation of energy efficiency policies and programmes,including information dissemination, technical assistance and R&D, is theAgence de l’Environnement et de la Maîtrise de l’Energie, ADEME (Agency forthe Environment and Energy Efficiency). ADEME was set up in September1991, bringing together the former energy conservation agency, AgenceFrançaise pour la Maîtrise de l’Energie, AFME, with two environmentalagencies – the waste agency, Agence Nationale pour la Récupération etl’Elimination des Déchets, and the air quality agency, Agence pour la Qualitéde l’Air.

ADEME has a staff of 700 in three locations (Paris, Angers and Valbonne) and26 delegations in the French regions, in three overseas territories that operatein a very decentralised manner, and in Brussels. http://www.ademe.fr (withinformation in English).

In the context of the national climate response plan, the government decidedin February 1998 to set aside Fr 575 million2 in 1999 (compared with Fr 75million in 1998) for activities in areas of efficient use of energy and thedevelopment of renewables (plus the R&D budget). On the basis of thisincreased budget, ADEME defined a new programme to mobilise economicactors towards energy efficiency investments.

ADEME’s budget more than doubled between 1992, when it was slightlyabove Fr 1 billion, and 1999, when it reached almost Fr 2.5 billion. Most ofADEME’s resources were spent on waste, including the clean-up ofcontaminated soils, which accounted for almost 40% of the budget in 1999.The portion of the budget reserved for energy efficiency and renewables was22%, and a further 14% was spent on transport and clean air.

In a special effort to re-launch French energy efficiency policy after the Kyotoconference, the government in 1998 decided to allocate Fr 500 million a yearto help implement its climate change policy. This amount forms part ofADEME's Fr 2.5 billion budget for 1999 but represents a stable and higherenergy-related portion than before.

A new planning contract was signed in June 2001 between ADEME and thethree Ministries in charge of Industry, Research and the Environment.Priorities for the period 2000-2006 are in three areas: waste management,energy efficiency, transportation policy and air quality. For 2001, ADEME'stotal budget was € 400 million, 15% of which was devoted to research.

2. On average in 2000 Fr 1 = US$ 0.140 and in 2001.Fr 1 = US$ 0.137

3

Given the co-operation with each administrative region in the framework of"ADEME-region" contracts, a total budget of € 230 million was available in2001 for energy management in all sectors of the economy. Despite this largebudget, extensive and systematic subsidies by ADEME for energyconservation remain impossible. ADEME therefore implements partnershipswith banks, large building stock managers, professional organisations andmunicipalities.

In the 2000 in-depth review of the energy policies of France, the IEA stated:

The Government of France should:

• Continue to review its energy efficiency and renewables policy withrespect to all its main objectives.

Law on Airand RationalUse of Energy

Law No. 96-1236 of 30 December 1996 on Air and Rational Use of Energywas adopted to replace most of the existing legislation relating to efficientenergy use and is implemented through Decrees.

CIMEReport

A major evaluation of French energy efficiency policy (1973-1993) conductedby an interministerial committee (CIME) was published in February 1998.Seventeen investments and programmes were evaluated by officials andconsultants. The conclusions of the report will be used to define new policyon energy efficiency to be implemented by ADEME. The major findings of theassessment are:

• The public effort was too specific to the economic situation (following theevolution of energy prices).

• A large number of measures labelled energy efficiency are devoted toother public policies (building activities).

• In the transport sector, public intervention was poor and inefficient (onlyon vehicle efficiency).

• Regulatory measures were well-designed (new buildings, audits inindustry) but lacking supervision and in some cases (boilers) not strictenough.

• Subsidies for diagnostics in industry and for demonstration were effective.

NationalProgramme toCombat ClimateChange

On 19 January 2000 the Prime Minister announced the adoption of theProgramme national de lutte contre le changement climatique (NationalProgramme to Combat Climate Change) elaborated by the MissionInterministérielle sur l'Effet de Serre, MIES (Inter-ministerial Mission onClimate Change).

According to this document, the stabilisation target, after climate correctionand for six gases, means that France has to bring its emissions back to 143.5million tonnes of carbon equivalent by about 2010. The report quotes areference scenario that projects greenhouse gas emissions to rise to 175million tonnes of carbon equivalent in 2010. Taking into account a number ofresponse measures decided later but not incorporated into the projections,emissions in 2010 are estimated at 159.58 million tonnes of carbonequivalent, 16.08 million tonnes above 1990 levels. To reach the stabilisationtarget, France will have to reduce emissions at the end of the first budgetperiod by 10%. CO2 emissions alone are estimated to rise from 103.4 milliontonnes in 1990 to 122.8 million tonnes in 2010. The reference scenario isbased on the assumption of 2.2% annual GDP growth rate up to 2010. If a2.8% growth rate is assumed, emissions rise to 171 million tonnes instead ofsome 160 million tonnes.

4

The Programme presents a set of 96 measures designed to comply with theFrench commitments to 2010. It identified three categories of measures to fillthe gap:

• Regulatory measures, standards, incentives: these traditional measureswould avoid 7 Mtc of GHG emissions.

• Fiscal measures such as carbon/energy taxes which will result in a6.7 Mtc emissions reduction (including the reinforced impact of traditionalmeasures).

• New infrastructure development over the long-term from which the impactin 2010 is assessed around 2.2 Mtc.

Through these measures the Programme identifies a potential of emissionsreduction of 3.4 Mtc in industry (13 measures), 4 Mtc in transport (22measures), 2.7 Mtc in buildings (26 measures), and 2.6 Mtc in the energysector (12 measures).

Some of these measures should be implemented at the European levelthrough joint co-ordinated measures. The Programme's aim is to fulfil theKyoto target with domestic policies and measures (with an average economicgrowth of 2.3% per year) but leave open the possibility to use flexiblemechanisms if necessary (stronger economic growth, for example).

The report required by the Chairman of the MIES from the Ministry of Planningon "evaluation of the GHG measures of the National Programme to CombatClimate Change" has been published. The report concludes that if in certaincases the evaluation of a measure is valuable, it is also necessary to evaluatea "package of measures" dedicated to a specific target. It also recommendsthat a set of models for assessing long-term GHG emission forecasts shouldbe launched for five years and supported by the French administration. Forthis purpose, the MIES carried out a European call for tender for a decision bythe end of 2002.

NationalProgramme toImprove EnergyEfficiency

On 6 December 2000, the Programme National d'Amélioration de l'EfficacitéEnergétique, PNAEE (National Programme to Improve Energy Efficiency) hasbeen launched: its targets are to lessen the impacts of oil crisis, strengthenenergy self-sufficiency and complement the National Programme to CombatClimate change. The PNAEE includes the creation of a Local InformationCentres network towards consumers and a national public informationcampaign (see below) in 2001. In addition the PNAEE includes varioustechnical measures to promote energy savings and the development ofrenewable energy sources.



• Implement the measures set out in the National Programme to CombatClimate Change swiftly, and according to the anticipated results.

• Provide greater continuity and stability to energy efficiency andrenewables policies.

5


Measures alreadyexisting and/orbeing improved

ThermalRegulationsin NewResidentialBuildings

As early as 1974, France took the initiative, in close co-operation with theconstruction industry, to introduce mandatory heat insulation requirements fornew constructions. The regulations were strengthened regularly. Theiradoption permitted a reduction of one half of average specific consumption forhousing built after 1975.

New strengthened thermal regulations have been applied since 1 January1989. They were formulated in 1985 with a view to minimising the discountedoverall cost of energy (with additional investment bringing about a reduction inenergy consumption and hence in running costs).

In order to incorporate into the regulations advances made in the developmentof low-emission glazing, technical solutions offered to professionals have beenchanged. Strengthening of thermal regulations aimed at making them morestringent to a level equal to the energy saved by the substitution of low-emission glazing to standard double glazing, initially scheduled for 1 January1997, was postponed until 1 January 1999. A savings of 5 to 10% in heatingneeds in new housing units is to be expected from these measures.Compliance with the thermal regulations amounts to 85% in collectivebuildings but to only 30% in industrial buildings due to insufficient controls.

Energy regulations for new buildings were updated in 2001. In the residentialsector, energy consumption in new buildings should be reduced by 15% withrespect to the 1989 regulations. In the commercial and tertiary sector, aperformance improvement of 40% is expected (the previous regulation wasmuch less severe).

The new regulation "RT 2000" incorporates a general objective for the energyperformance of the buildings and not merely constraints on particular aspectssuch as thermal insulation, thermal bridges, infiltration, etc. Space heating,ventilation, air-conditioning and domestic hot water are concerned (as islighting in commercial and administrative buildings). The optimal combinationcan be chosen by building designers from among all possible solutions,thermal insulation, use of solar energy, high-performance space heating andcooling systems, etc., taking into account the practical constraints of theproject and economic aspects.

A complete building energy evaluation tool, incorporating all aspects citedabove, has been developed by the Centre Scientifique et Technique duBâtiment,- CSTB (Scientific and Technical Centre for Building) and is beingdistributed as free software among practitioners. For simple buildings such assingle-family houses or typical administrative buildings, a simplified version ofthe thermal regulation is available as Technical Reference Solutions for whichno complete evaluation is required.

This new RT2000 regulation has been applied since June 2001. Based on thesame methodology and evaluation tools, it is planned to update it in 2005.

ThermalRegulationsin NewCommercialBuildings

Former thermal regulations in force in the new commercial sector (buildingsother than housing) were less stringent than those applying to new housingunits since 1 January 1989. These regulations, as mentioned above, havebeen revised according to RT2000 with the aim of gaining 40% energyefficiency.

6

To incite professionals to design more energy-efficient buildings than thecurrent regulations require, sectoral guides have been produced by ADEMEand the Association of Air-Conditioning, Ventilation and Cold Engineers. Eightguides (hotel, office, health, educational, retail, leisure, industry andagricultural sectors) were published between 1992 and 1997.

On the assumption that new building projects continue at the present rate, again in unit consumption of 25% with respect to the current regulations willproduce an energy saving of 90 000 toe a year for the buildings put intoservice each year as from 1998.

ExistingBuildings

There are 28.9 million houses in the residential sector, including 23.9 millionprincipal residences occupied on a permanent basis, and 753 million squaremetres of heated commercial premises. Most of this property, about 66% forresidential buildings and around 65% in the commercial sector, was builtbefore 1975, date at which the first thermal building regulations came intoforce.

Policy aimed at this category of housing has been in place since 1975, basedon three types of action:

• Decision-making assistance aimed at encouraging owners to carry outenergy saving improvements, in particular through a thermal diagnostictool.

• Regulation and standardisation of components with, in particular, theregulation of boiler performance as from 1975.

• Investment assistance, subject to various terms and conditions such asdirect subsidies or tax incentives.

It is estimated that investments in energy savings in housing built before 1975carried out pursuant to these measures have permitted energy savings inheating of around 10% of total heating consumption.

In 1997 and 1998, ADEME rarely financed thermal diagnosis. Thisintervention was reinforced in 1999 as ADEME is now financing energydiagnosis (at a rate of 50% of the cost) and also lighter studies (“prediagnosis” and “orientation advice” for a commune’s patrimony).

Twenty five concerted operations for a large-scale retrofitting of buildings arein preparation. They will be implemented at the local level and will concernenergy savings on space heating, hot water, cooling and demand-sidemanagement. The selection of municipalities and sites will be based on aprecise evaluation of the potential for energy savings and reduction ofgreenhouse gas emissions in the area. All residential, commercial andinstitutional buildings are concerned. Subsidies will be provided by ADEME,the municipalities, ANAH (French Agency for Improvement of ExistingDwellings) and by associated public bodies for pre-audits, audits andfeasibility studies, energy conservation investments, information and training.Each operation will last four to five years. The 25 operations are to beimplemented by ADEME from now on.

A large-scale funding system gathering private and public money to financeretrofitting operations will be implemented.

In the 2002 budget, building energy retrofits benefit from a tax reduction of15% of expenses to a maximum of € 8 000 per family.

7

EnergyCostsCertificate

The Law on Air and Rational Energy Use dated 30 December 1996 required astandardised estimate regarding annual energy costs of housing units orcommercial units for sale or lease. A decree should specify the rules oncomputing the estimate. The decree for new buildings was issued in April2000. A decree for existing buildings will be also be issued.

EnergyLabelling

On the basis of adoption of the European Union directives, mandatorylabelling for refrigerators, freezers and combinations was introduced inSeptember 1995, in November 1996 for clothes dryers and on 10 January1999 for washing machines. In the second half of 1999, energy efficiencylabelling was made mandatory for dishwashers.

ADEME and EdF (national electricity utility), in partnership with equipmentmanufacturers, have financed promotion campaigns for the general public.Promotion has also been organised on the place of sales, with distributionnetworks.

LocalInformationCentres

In the framework of the National Programme to Improve Energy efficiency, thefocus has been on the implementation of Local Information Centres ("PointsInfo-Energie") throughout the country to inform local people and smallcompanies about energy efficiency. ADEME set up these local centres and bySeptember 2001, 41 were in operation. The target was to have 84 centres bythe end of 2001 and 150 by the end of 2002. The network is organisedthrough a 30% funding in partnership between ADEME and local or regionalauthorities.

InformationCampaign

A national public information campaign, sponsored by ADEME and theMinistries of Environment and Industry, ran from June to November 2001, at acost of Fr 40 million. This campaign was aimed at consumers with theobjective of harmonising individual interests with the collective goal, inparticular with relation to climate change policies. The campaign wassupported by a mass media plan on television and radio, and field operationswith a partnership of professionals.

Financial/FiscalIncentives

Various financial incentives to improve existing housing have been introducedfocusing on projects that are the most efficient with respect to combating thegreenhouse effect. The amount of this public financing for energy savings canbe assessed at Fr 2.5 billion in 1992. The incentives are as follows:

• Tax reductions: income tax reductions were available from 1 January1990 until 31 December 1995 for heat insulation improvements, heatingregulation, the replacement of boilers or in some instances the installationof a wood stove in main residences built before 1 January 1982. Thismeasure was renewed in 1996.The tax reduction is valid for any type of work (not only energymanagement improvements) if it is carried out by professionals. TheCEKAL label for double glazing and the ACERMI label for insulation arestill in force but are no longer a condition to obtain this tax reduction.

• Grants for housing improvements: this government subsidy is to help low-income homeowners improve their main residence if it is over 20 yearsold.

• Grants from ANAH, the National Housing Improvement Agency: this grantaims at helping improve privately owned rented housing units built morethan 15 years ago.

• Grants for rental and social housing improvements (PALULOS): this grantassists organisations to improve the rental housing units they own ormanage for social welfare purposes, rented to house low-income people,and which are more than 15 years old.

8


In 1997, the building sector was responsible for 17.5% of GHG emissions: theProgramme designs 26 measures for limiting emissions by 2.66 Mt CO2 by2008/2012.

EnergyAuditing

Energy auditing will become mandatory when renting or selling a building.

BuildingManagement

Building owners will be encouraged to undertake energy efficiency work intheir estates and allowed to increase rents, which will be counterbalanced bya decrease of renting charges.

Heating charges will be adapted in collective buildings to encourage energyefficiency work.

Those responsible for commercial centres and the rented building park will beencouraged to implement energy efficiency work, thus motivating the otherbuilding sectors to do likewise.

Regulationand TechnicalControl

Starting in 2000, and over five years, the thermal regulation of buildings will beprogressively strengthened step-by-step to allow professionals to comply withhigher energy efficiency standards and to avoid too high increases in theprices of materials. Implementation of the reinforced thermal regulation will becarefully monitored through strengthened controls and, if necessary, penaltiesfor non-compliance.

Informationand Training

Energy labelling and information to the public will be developed to encourageconsumers to buy energy-efficient goods.

Information on the environmental quality of materials used in construction willbe delivered to the building sector.

Information and training for all categories of professional involved in building(architects, specialists in heating and insulation) will be improved.

Financial/FiscalMeasures

For buildings in the tertiary sector which cannot benefit from specific support,a new incentive scheme will be created under precisely defined conditions.Financial incentives will be made available for condensed boilers in collectivebuildings.

The TGAP (General Taxation on Polluting Activities) will be applicable tobusinesses in the tertiary sector.

The VAT rate on the sale of heat from new and renewable energy sourcesand on some highly energy efficient products will be lowered.

PUBLIC SECTOR

GovernmentBuildings

Each year government buildings consume 2.25 million toe and spend Fr 3billion on energy.

In a circular dated 24 January 1991, the Prime Minister requested eachMinistry to implement an energy-saving programme in buildings under itsauthority. These actions are co-ordinated at the national level by a group ofsenior civil servants responsible for energy within each Ministry.

The priority, as of 1995, has been for investments for which the payback isless than six years so that government buildings may serve as a reference inthe energy field; this applies to new buildings as well as renovations and theoperations of existing buildings. This programme is a priority action forADEME, which spent Fr 3.2 billion on it in 1996.

9

Energy consumption in existing government buildings could thus be reducedby around 12%, i.e. a reduction of 200 000 tonnes of carbon emissions peryear by 2000.

Third-party financing has been authorised for energy consumption measuresin other public building.

At the local level, various programmes of thermal insulation improvement willbe launched through partnership between municipalities and the appropriatepublic bodies.

A wide range of energy efficient measures will be implemented in publicbuildings, such as services for energy management, energy audits, budgetaryallocations to promote energy efficient work.

Guide forLocalAuthorities

The Climate Change Task Force published a Guide for local authorities tohelp local public decision makers identify the impact of their investments inGHG emission prevention; during 1999. Regional authorities prepared multi-year contracts (2000-2006) with the State; these "contrats de plan" signed bythe State and elected regional authorities are implemented in all sectors ofregional responsibilities (land and urban planning, transport, communityservices).The government's objective is to promote the prevention of GHGemissions through investments in these contracts.

INDUSTRY


EnergyAuditing

Mandatory energy audits, carried out by experts appointed by the Ministry ofIndustry were required every three years from 1977 to 1997 for industrialfacilities consuming more than 300 toe per year (20 000 sites in France). Thedegree of compliance in 1994 was only 40%, partly due to inadequateresources. Energy savings identified are about 3% of energy consumptionwith an average return of investment of four to five years. The regulation waschanged in September 1998 and these mandatory audits were suppressed.ADEME, which was subsidising energy audits and specific studies for theother establishments (SMEs essentially), will continue for all types ofenterprises, eventually in partnership with regions.

The regulation now concentrates on the obligation for audits on the energyefficiency of energetic equipment including large boilers, for which efficiencystandards were updated in 1998.

EfficiencyStandards forLarge Boilers

Efficiency standards for large boilers were updated in 1995.

10

Financial/FiscalIncentives

Subsidies forAudits andFeasibilityStudies

Since 1983, financial support of up to 50% of the cost is provided tocompanies that carry out an energy audit or a feasibility study. The averagesupport amounted to Fr 15 000 for an audit and Fr 40-100 000 for a feasibilitystudy. Almost all investments with a rate of return of less than three yearshave been implemented, the rate of “free-riders” being 10%. A public budgetinvestment of Fr 600 generates 1 toe of energy saving per year for ten years.ADEME has reinforced its intervention in this area by subsidising both “light”studies (“pre diagnosis”) or more specific ones (“diagnosis” and feasibilitystudies).

AcceleratedDepreciation

Since 1977, investment in various types of systems intended to save energyor produce electricity in cogeneration units has been eligible for accelerateddepreciation (depreciation over 12 months since 1991). This is equivalent to asubsidy of 2 to 5%, depending on the useful life of the installation. It is notpossible to specify the impact of this very modest aid, which is of very littleinterest to industries.

SOFERGIE Funds for energy efficiency investments in industry are available fromSOFERGIE, created in 1980 (a group of companies that finances energy-saving investments) to facilitate lease financing for energy management withthe hope that this funding would give structure to a body of “third-partyinvestors” who would identify, analyse, carry out and finance investment in“turn-key” energy conservation projects remunerated out of the resultingsavings. The role of SOFERGIE funding has ultimately been very small and,according to the CIME assessment, maintaining this funding system does notappear justified.

FIDEME FOGAME, the fund to guarantee energy management has been used less andless in past years and consideration has been given to transforming this fund.The FIDEME (Fonds d'Intervention pour l'Environnement et la Maîtrise del'Energie - Investment Fund for Environment and Energy Management) aimedat small and medium companies was launched by ADEME. The subscriptionto this fund guaranteed by ADEME with the banking sector started on 21October 2002 and ended 31 December 2002. Total funding was € 45.7 million.

VoluntaryAgreements

Since 1995, the government has undertaken discussions with energy-intensive industries covering energy efficiency improvements and emissionreductions. At this stage, voluntary agreements have been signed with sixpartners (branches or industries): aluminium (the Pechiney Group), cementindustry, fat lime and magnesia lime manufacturers, the French steelfederation, glass packaging industry, and the “3 Suisses”-France (a large mailorder company).

Negotiations are under way with the French Smelters Union. In otherbranches such as chemicals, paper and agro-food industries, discussionshave taken place but no agreement is in sight.

DSM Under an agreement signed by EdF and ADEME in February 1993, 19regional and three national demand-side management (DSM) pilotprogrammes have so far been launched. These cover the promotion ofenergy-efficient appliances and compact fluorescent light bulbs (CFLs),energy efficiency audits in industry, public lighting and efficient industrialmotors. One example of success is a decrease of over 20% in peak-load inGuadeloupe achieved through an efficient lighting campaign.

11

Cogeneration Since the early 1990s, there has been a renewed interest in cogeneration inFrance. Installed power reached 4 GW as of 1 January 1998, including2.4 GW for steam turbines.

This situation was facilitated by a regulatory provision that obliges EdF topurchase electricity produced by co-generation facilities up to 8 MW in size.Beyond this limit, ministerial authorisation is required; the Ministry of Industryagreed to approve this type of project up to a cumulated power of 1 GW in2000. The purchase rate is determined by reference to the offset costs forEdF assuming financially balanced production facilities (i.e. marginal long-term cost).

A study by ADEME estimates the economic potential of co-generation in theFrench industrial and commercial sectors (excluding district heating) to bebetween 5 and 10 GW, depending on whether one relies on a returninvestment payback of 5 or 12 years. This capacity would be added toexisting facilities.

DistrictHeating

In addition to measures adopted to encourage the use of wood, solar thermalenergy and geothermal energy, the development of district heating based onrenewable energy will be supported by fiscal incentives; feasibility studies willassess the opportunity of adopting a public policy to promote district heating.

Informationand TechnicalAssistance

Communication, information and training programmes on energy efficiencyand environmental management are initiated by ADEME and carried out byprofessional and technical organisations such as chambers of commerce andindustry, technical centres, ATEE (an association of 2 000 engineers in chargeof energy management in enterprises) and AFITE (an association ofenvironmental engineers and technicians).


In 1996, industry was responsible for 23% of the GHG emissions: theProgramme designs 13 new energy efficiency measures for limiting emissionsby 3.42 Mt CO2 by 2008/2012.

EnergyLabelling

It is planned to develop and strengthen the current energy labelling policy.


Information for businesses will be improved and strengthened, particularly forthe replacement of combustion devices and electric motors.

Professionals in firms will be better trained to deal with climate changeproblems.

FinancialIncentives

Implementation of the financial measures already in place in 1998, forexample subsidies for feasibility studies, subsidies delivered by ADEMEguarantee of investments by FOGIME, etc., will be strengthened.

A new fund for promoting energy efficiency will be created by ADEME(FIDEM: investment fund for energy efficiency): the fund will buy shares fromcompanies in rapid development, thus providing capital. It will be managed byADEME with ABN AMRO (a bank) and the Caisse des Dépôts etConsignation, a French public bank. The loan rate will be much lower than thecapital risk market value.

12

TRANSPORT


PassengerTransport andLight GoodsVehicles

TechnicalInspection

Safety inspections have been mandatory since 31 December 1985 upon thesale of a vehicle over five years old and under 3.5 tonnes. A regular safetyinspection has been required for all these vehicles, whether sold or not, as of1 January 1992. The inspection is carried out in approved centres and covers52 items defined in a decree dated 18 June 1991; these include inspection ofcarbon monoxide emissions (gasoline) and exhaust fumes (diesel).

Since 1 January 1995, a safety inspection is required every two years forvehicles over four years old. A decree of 5 July 1994 requires mandatoryrepairs of vehicles that have failed pollutant emission tests during the safetyinspection, as follows:

• As of 1 October 1994 for gasoline vehicles without catalytic converters.• As of 1 January 1996 for diesel vehicles.• As of 1 January 1997 for gasoline vehicles with catalytic converters.

Safety inspections seem to have had a positive impact on the tuning ofgasoline vehicles since the failure rate observed was higher than 50% duringfree inspection drives sponsored by ADEME in the early 1990s and is nowonly 25% with current mandatory inspections.

An average drop of 10% in consumption and of 50% in pollutant emissions forgasoline vehicles that were not in conformity in 1990 can be anticipated.

Bonusfor CarReplacement

Bonus payments (“Prime Balladur”) corresponding to a cash sum of Fr 5 000were offered from February 1994 to 30 June 1995 for the retirement of oldvehicles (ten years and over). From 1 October 1995 to 30 September 1996,an “automobile quality bonus” was provided. replacing vehicles that were overeight years old.

Compared with natural renewal, it is estimated that these bonusesencouraged replacement of close to 1 million additional old vehicles.

Economicand CleanVehicles

France fully supports the Conclusions of the European Council of 25 June1996, announcing the objective of an average level of CO2 emissions for newcars sold in the European Union of 120 g CO2 per kilometre to be reached by2005 or, at the latest, in 2010.

Pursuant to the conclusion of the Council, within the scope of voluntaryagreements with the automobile industry, the French automobilemanufacturers Renault and PSA Peugeot Citroën have voluntarily undertakento lower CO2 emissions of new vehicles sold within the European Union toless than 150 g CO2/km in 2005.

Furthermore, the new PREDIT programme (Programme de Recherche et deDéveloppement pour l’Innovation et la Technologie dans les TransportsTerrestres) will maintain its research effort on the consumption of newvehicles over the 1996-2000 period. Around Fr 2 billion will be spent onprogrammes for energy-saving vehicles. Improvement in the fuel-engine-

13

depolluting cycle, research on materials and lighter vehicles, focus on non-conventional engines, design of low consumption demonstration projects arethe main actions being considered on this issue.

UrbanTravelPlan

The Law on Air and Rational Energy Use of 30 December 1996, made itmandatory for all cities with populations of over 100 000 to draft urban travelplans. These urban travel plans, drafted and implemented by the authoritiesorganising urban travel in the relevant cities, focus in particular on automobiletraffic reduction, the development of less expensive and less pollutingtransportation modes, the development and exploitation of street networks,organisation of parking, transportation and freight delivery, etc.

Electricand otherAlternativeVehicles

The Law on Air and Rational Energy Use of 30 December 1996 introduced anumber of measures aimed at fostering the development of electric vehiclesand other alternative vehicles powered by liquefied petroleum gas or naturalgas. The main measures are the exemption or reduction in the tax oncompany vehicles for electric vehicles or other alternative vehicles as well asthe requirement that the various public managers of vehicular fleets procure aminimum of 20% of such vehicles when renewing fleets.

These measures complete existing measures aimed at encouraging thepurchase of electric vehicles (Fr 5 000 bonus from the government in effectuntil 31 December 1998, limited to 10 000 vehicles) or the use of otheralternative vehicles (drop in the excise tax on LPG fuel).

The objective is that electric vehicles be purchased by the general publicwhich, in spite of efforts made by the two major French manufacturers in co-ordination with the public authorities and other partners, is still at an earlystage. The French electric vehicle fleet remains marginal at around 3 000vehicles.

In the 2002 budget, the purchase of a clean vehicle (LPG, NGV, electric andhybrid) will benefit from a tax reduction of € 1 525 per vehicle, +50% if an oldvehicle is retired.

High-SpeedTrains

Following the entry into service of the first TGV (high-speed train) line in 1981,France decided to build a high-speed rail network adopting as early as 1991 amaster plan of national high-speed rail links. This plan provides for around4 700 km of new high-speed lines, of which 1 260 km were alreadyoperational in 1995. In June 2001, the Mediterranean TGV becameoperational, running from Paris to Marseilles and the first phase of the EasternTGV will begin from Paris to the Moselle Valley.

Moreover, mainly through PREDIT, the government is encouraging researchand development on high-speed trains, in particular the new generation TGVprogramme. This effort will be pursued within the scope of the new PREDIT:around Fr 500 million will be spent on the high-speed train system.

Traffic estimates by the SNCF (French National Rail Company) concluded thatthe opening of the Mediterranean and Eastern TGVs would divert from airtravel 1.8 and 0.7 billion passenger/km per year respectively. Diversion fromroad travel would reach 0.7 and 0.3 billion passengers/km per year.

It is estimated that this would lead in 2000 to fossil fuels replacementequivalent to 130 000 toe per year for aircraft and 30 000 toe for road travelwith electric energy. The estimated gain in terms of CO2 emissions willtherefore be around 130 000 tonnes of carbon per year.

14

Freight Transport(excluding LightTrucks)

IntermodalFreightTransportation

In France, a country with much transit traffic, including freight, road-railcombined transportation still represents a small proportion of traffic. Theobjective for 2000 in the field of combined transportation was to double thevolume compared with 1990 (+7 billion tonnes/km). In particular, efforts madefor expanding infrastructures are aimed at ensuring that the development ofcombined transportation is not hindered by a lack of capacity.

The law of 13 February 1997 that established the public corporation Réseauferré de France (the French railroad network), responsible for developing andenhancing the rail infrastructure, is a crucial stage in implementing theEuropean Union Directive 91/440/EEC providing for access to railinfrastructures of the Member States to international combined transportation.

Substantial funding for research and development was devoted to inter-modaltransportation within the scope of PREDIT over the 1990-1994 period; withthe new PREDIT programme for 1996-2000, about Fr 400 million would bedevoted to inter-modal freight transportation.

Upgrading of major freight lines to gauge B+ is being pursued. Since 1985,financing of the gauge upgrade has reached Fr 250 million; an additionalFr 700 million was provided in 2000. Goods transport by rail will be developedwith Fr 740 million a year from the Ministry of Transport for investments ininfrastructure and material. ADEME will be involved in managing the transportof goods through voluntary agreements with transport companies (Fr 90million a year).

New transfer platforms were built in 2000 on four of the ten major focal pointsof combined transportation in France (Bordeaux, Lille, Lyon and Marseilles).Government and regional contributions to these investments equal Fr 100million per year.

Regarding the development of the waterway network, projects under way(Niffer-Mulhouse, dredging the Saône, Bray-Nogent) will permit keeping sometraffic that would otherwise have shifted to the road.

Pursuant to European Union regulation 1107/70/EEC as amended, thegovernment, ADEME and EdF introduced in 1990 subsidies to encouragesmall and medium-sized trucking companies to purchase combinableequipment. From 1990 to the end of 1996, the total amount of this financialassistance amounted to Fr 17 million, for a total investment of Fr 102 million.



• In particular, implement the measures addressing demand and emissionsgrowth in the transport sector without delay, as these measures willbecome fully effective only in the long-term.

15


In 1997, transportation was responsible for 22% of GHG emissions: theProgramme designs 29 measures to save 4 million tonnes CO2 by 2008/2012.

Measuresfor Vehicles

ACEACommitment

In 1996, the European Community planned to introduce a strategy to reduceemissions of CO2 from new passenger cars, setting a target of 120g/km to beattained by 2005 (2010 at the latest). In addition to this proposal for aDecision, the strategy also includes an agreement to be concluded withmanufacturers. In July 1998, the European Union withdrew its strategy whichwas replaced by a voluntary agreement from car manufacturers.

Indeed, in the framework of the ACEA (Association des constructeurseuropéens d'automobiles) all its car manufacturing companies have made thecommitment, in an environmental agreement, to achieve a reduction target ofCO2 emissions from new passenger cars: the target is to manufacture modelsemitting 140 g CO2/km by 2008, measured according to Directive 93/116/EC,on the average of the EU new car sales represented by ACEA.

This target will mainly be achieved by technological developments affectingdifferent car characteristics and market changes linked to thesedevelopments. ACEA will aim at a high share -- up to 90% -- of new cars soldbeing equipped with CO2 efficient direct injection gasoline and dieseltechnologies. Compliance with this target translates for the automobileindustry into an average CO2 reduction of 25% for newly registered cars,compared to 1995.

To assess compliance with these commitments, there is a joint ACEA/European Commission monitoring of all relevant factors with regard to thesecommitments.

The Programme national de lutte contre le changement climatique stressesthe importance of complying with this European voluntary agreement toachieve a substantial reduction of the average fuel consumption of the carfleet and to limit CO2 emissions.

In addition, the efficiency of the auxiliary devices, such as air-conditioning, willbe improved and it is considered that their consumption should be taken intoaccount in the calculation of the evaluation of the standard fuel consumptionof vehicles.

ManagementMeasures


Information and training of all categories of road users should take intoaccount energy efficiency and environmental concerns.

LandPlanning

Efforts will be developed in line with the above-mentioned Law to avoidunnecessary traffic. At the European level, co-operation will be set up tomanage the space so that the less polluting means of transport can beorganised.

UrbanCollectiveTransport

Urban collective transport will be developed (Fr 500 million/year from theMinistry of Transport). ADEME will allocate Fr 60 million/year for transportdemand-side management (support of feasibility studies of local authorities).

FreightTransport

Regulations on heavy trucks will focus on speed limits and technical control onthe road; a study on the benefits of a speed limit for light trucks will also becarried out.

16

IntermodalFreightTransportation

Improving the intermodality between air transport and public transport will bemade through, for instance, better co-ordination between national andinternational flights, agreements between air and rail companies, etc.

Development of the combined rail-road and maritime-rail transportinfrastructures will be promoted.

AirTransport

Various measures will be considered to limit emissions in air transport whenplanes are awaiting for taking-off.

TGAPEnergie

The Taxe générale sur les activités polluantes (TGAP) (general taxation onpolluting activities) was planned to be implemented in 2001 on industrial andtertiary enterprises. The government has fixed a level of Fr 150-200/tonneC02 at the beginning to rise to Fr 500/tonne CO2 progressively by 2010. Aspecial regime for alleviating or exempting highly energy-intensive industrieshas been studied to avoid distortion of economic competitiveness of theFrench industry on the international market.

This project adopted in 2000 was criticised by industry and cancelled by theConseil Constitutionnel (The French Supreme Court). The Prime Minister hasdecided not to reintroduce this project for an energy ecotax.

MONITORING/ASSESSMENT

As mentioned above, the French government is very concerned about someof the weaknesses of its energy efficiency policies and measures andlaunched in-depth assessments of its various programmes to overcome thebarriers – economic, technical regulatory – which impede or slow down suchenergy efficiency efforts. The Souviron report and CIME report provided thegovernment with detailed information on this matter.



• Continually monitor the effects of various economic incentives. Adjust andtighten policies in a flexible and market-compatible way if necessary inlight of the stabilisation target.

Furtherinformation


Mr. François MoisanADEME27, rue Louis Vicat75737 Paris Cedex 15tel. +33 (1) 47 65 20 95fax +33 (1) 40 95 74 53email: [email protected]

GERMANY Updated July 2003

BACKGROUND

Germany is a federal country comprised of 16 Länder (federal states). Responsibility for most energy policy issues (e.g. energy legislation) is at the federal level. At the federal level, the main responsibility for energy policy lies with the Federal Ministry of Economics and Technology (BMWi). This ministry is also in charge of energy efficiency policy and support to renewables. Environment policy issues related to energy are co-ordinated within the Federal Ministry for the Environment, Nature Conservation and Nuclear Safety (BMU). Issues related to transportation, such as policies to increase energy savings, are under the responsibility of the Federal Ministry for Transport, Buildings and Housing (BMVBW). The Länder governments are responsible for the implementation of the federal law. They are in charge of granting licences in their jurisdiction. Beyond those matters that are under federal jurisdiction (e.g. energy regulation), Länder, may take their own measures in the field of energy policy. Länder governments and municipalities finance a wide range of measures to improve energy efficiency, in particular through loans and grants to industries and commerce. These measures have to be notified to the European Commission. There are no legal or constitutional restrictions on the measures related to energy efficiency that local governments are empowered to take, but, as a general rule, a project is not allowed to receive funds from different public authorities at the same time. Länder have no obligation to report to the federal government on their activities. However, the federal government seeks to be informed. The reunification of Germany took place on 3 October 1990. Since 1991, the federal government has taken measures to integrate the five new Länder into the German regulatory and economic framework; major efforts have been made at both the federal and local levels to integrate and increase energy efficiency measures and policies.

Energy Report In October 2001, the Federal Ministry of Economics and Technology published a new Energy Report entitled "Sustainable Energy Policy to Meet the Needs of the Future". The report outlines the new orientation of the government's energy policy for the 1998 to 2002 period. It describes the decisions already taken by the federal government to assure the sustainable supply and use of energy. It further explains how long-term trends for energy supply and use might develop, depending on the climate policy targets that are set. The basis for the Report are two scenarios, each relying on the reference year 2020 and both assume a phasing out of nuclear energy use.

Eco Tax on Energy Products

One of the main aims of the federal government is to reduce unemployment by reducing social costs. To reduce these costs, and at the same time improve the environment, the government set up an ecological tax, the so-called Eco Tax. The tax is being introduced in two stages: 1 April 1999 to January 2000 and 2000 to 2003. Tax increases for the manufacturing industry and agriculture amount to 20% of normal rates. The law also provides for further rebates for energy-intensive industries. Railways must pay 50% of the electricity tax.

IEA EnergyEfficiencyUpdate

2

Table 1: Eco Tax, 1999 and 2003

Energy Tax Increase 1999 2003

Electricity standard rate 2 Pf/kWh 4 Pf/kWh night storage heaters* 1 Pf/kWh 2 Pf/kWh manufacturing 0.4 Pf/kWh 0.8 Pf/kWh Gasoline/Diesel 6 Pf/litre 30 Pf/litre Heating Oil standard rate 4 Pf/litre 4 Pf/litre manufacturing 0.8 Pf/litre 0.8 Pf/litre Natural Gas standard rate 0.32 Pf/kWh 0.32 Pf/kWh

manufacturing 0.064 Pf/kWh 0.64 Pf/kWh

*The reduced rate applies only to night storage heaters installed before 1 April 1999.

The second stage, adopted by the Bundestag on 27 November 1999, includes the following additional measures for the period 2000 to 2003: • An annual increase in fuel tax rates by 6 Pf/litre1 . • The electricity tax will be raised gradually by an annual 0.5 Pf/kWh (see

Table 1). • The introduction of a uniform tax rate for heavy fuel oil of DM 35 • The law provides special incentives for highly efficient cogeneration and

gas-steam-power installations; a special programme to promote renewable energies is financed by revenues from the Eco Tax.

The government expects that additional tax revenues from the Eco Tax in the 2000 to 2003 period will amount to more than DM 35 billion. These funds will be used to lower social security contributions of companies and their employees by 2%. In the 2002 in-depth review of the energy policies of Germany, the IEA stated: The Federal Government should: • Develop and apply market-based instruments to give incentives to reduce

emissions in cost-effective ways. Review the energy taxes and the “eco tax” system to better reflect the externalities of each source of energy.

German energy policy is increasingly influenced by environmental concerns. Since the beginning of the 1990s, the federal government’s environmental policy has given increased emphasis to global warming issues. In this context, energy efficiency policies have been given more and more importance because increases in energy efficiency contribute to CO2 emissions mitigation.

Environmental Policies

It is the responsibility of the federal government to adopt national targets and measures to achieve environmental goals. The Länder can establish their own climate protection programmes with a wider range of local measures and all of them have chosen to do so. Local authorities have increasingly included climate change mitigation among their environmental policy goals. More than 400 cities, towns and rural districts have joined the Climate Alliance2 (Allianza

1 On average in 1998: DM 1 = $ 0.57 = € 0.51. 2 The Climate Alliance was founded in 1990 as a partnership between European local authorities and indigenous rainforest peoples with the goal of protecting the atmosphere. Almost 1 000 European cities, municipalities and district authorities have joined the Climate Alliance. By joining, the members have committed themselves to certain goals, activity areas and measures. One of these is to halve CO2 emissions from the 1987 level by 2010.

3

del Clima) and thus undertaken a voluntary commitment to cut carbon emissions in the energy and transport sectors. Citizens have also taken an active role in energy and environment related policies through the many strong environmental NGOs. Germany deposited the instrument of ratification of the United Nations Framework Convention on Climate Change (UN FCCC) at the United Nations in December 1993 and submitted its first national report entitled Environmental Policy: Climate Protection in the Federal Republic of Germany pursuant to the United Nations Framework Convention on Climate Change, in September 1994. With resolutions dated 13 June 1990, 7 November 1990 and 11 December 1991, the federal cabinet approved a comprehensive CO2 emissions reduction programme, 25% to 30% less by 2005 compared to 1987. In September 1994, the federal government confirmed this reduction objective. At the COP-1 Conference in Berlin in 1995, the Federal Chancellor mentioned as an objective a 25% cut in CO2 emissions between 1990 and 2005. After the Kyoto commitment of December 1997, the European Union Council of Ministers agreed on 17 June 1998 to the Burden-Sharing Agreement3 towards achieving the 8% European Union commitment to reduce emissions. In this context, Germany is committed to reducing its emissions by 21% of the 1990 level for the period 2008-2012. According to an estimate made by the federal government, Germany’s GHG emission reductions by 2001 represent 75% of total reductions achieved within the EU since the “Burden Sharing” agreement in 1998. Germany submitted its second report entitled Climate Protection in Germany – Second Report of the Government of the Federal Republic of Germany pursuant to the United Nations Framework Convention on Climate Change in 1997. The report outlines greenhouse-gas emission trends in Germany and presents projections for the future. It describes some 130 individual measures that federal authorities have taken through a complex federal climate protection programme, and provides an overview of similar measures taken by the Länder, communities, industry and of other relevant groups. The Federal Council passed a bill on the ratification of the Kyoto Protocol on 22 March 2002 and the Parliament gave its approval on 26 April 2002.

Climate Protection Programme

On 18 October 2000, the German government adopted a new Climate Protection Programme which contains a package of measures to close the existing gap (50 to 70 million tonnes of CO2) and reach the 25% goal. This programme is based on the fifth report of the Inter-Ministerial Working Group on CO2 reduction, which is broken down into five sub-groups for the fields of energy supply, transport, buildings, new technologies, and agriculture/forestry. The further development and updating of climate protection measures will be the subject of a sixth report by the Working Group; its completion is planned for 2003. The report seeks to double the share of renewable energies by 2010, to expand co-generation considerably and to increase energy productivity significantly. By 1999, CO2 emissions had been reduced by 15.3% and those of the six GHG named in the Kyoto Protocol by roughly 18.5% relative to their 1990 levels.


4

Strategy for Sustainable Development

On 17 April 2002 the federal Cabinet adopted a comprehensive document on a Strategy for Sustainable Development. It contains estimates and scenarios on an energy policy sustainable in the future. According to this strategy the improvement of energy efficiency plays a key role within the framework of a modernisation strategy for sustainable development. Based on an analysis of some key energy efficiency indicators of the entire economy, some suggestions for pilot projects for the further improvement of efficiency are included. These projects refer to renewable forms of energy, especially including the efficient use of energy in fuel cells, the demonstration of redevelopment of old buildings using low-energy building methods in all Länder, and energy efficiency contracting in federal government property.

National Energy Agency (Dena)

To implement the measures contained in the Climate Protection Programme, the Federal Minister of Economics and Technology established in September 2000 the German Energy Agency (Deutsche Energie Agentur -- Dena). Dena is not a subordinate agency of a ministry, but was set up as a GmbH, a private company. The stakeholders are presently the KfW (Kreditanstalt für Wiederaufbau), the reconstruction bank (50%) and the Federal Republic of Germany (50%) represented by the Federal Ministry of Economics and Technology (BMWi), the Federal Ministry of Transport, Building and Housing (BMVBW) and the Federal Ministry for the Environment, Nature Conservation, and Nuclear Safety (BMU). Dena is a company which networks the various players within the energy sector and was set up to implement energy-efficiency policy and promote renewable energy sources, climate protection and sustainable development. The most typical activities of Dena are running pilot projects using new technologies together with the industry, and information campaigns. Inter alia, Dena organises the campaigns together with the 12 Land agencies for energy efficiency, but there are no formal organisational links between them. It also operates the Energy Hotline, a toll-free telephone service for advice to both companies and private individuals on the rational use of energy in buildings, co-generation and renewable energy sources. In 2002, the number of staff at Dena was about 40, and it aims to increase the number of employees to 45 by 2003. Dena’s budget for 2002 is € 19 million. In the 2002 in-depth review of the energy policies of Germany, the IEA stated: The Federal Government should: • Ensure that energy intensity and energy efficiency continue to improve. • Ensure adequate funding for cost-effective Dena programmes, and

support its co-operation with the private sector (industrial and financial sectors) and the Länder.



Buildings and Structures

Thermal Insulation

On 1 February 2002, the new Energy Conservation Ordinance came into force which aims at reducing the amount of energy consumed in heating, climate control, and hot-water provision in new buildings by roughly 25 to 30%. It unifies the previously separate thermal insulation and the heating installation

5

ordinances. The Energy Conservation Ordinance means that, for the first time, an overall optimisation of measures for thermal insulation on the one hand, and heat unit efficiency on the other hand, is possible and specifically supported by statutes. Another new provision of the Ordinance is that new buildings must have an energy-profile certificate showing information on its energy demand. The Energy Conservation Ordinance also encourages energy efficiency improvements in existing buildings. The Ordinance requires that all boilers installed before October 1978 must be replaced. There were some 2 million such boilers in 2001. The ordinance sets stricter energy requirements when modernisation or retrofitting measures are undertaken than did the 1995 Thermal Insulation Ordinance. In some specific cases the ordinance requires retroactive improvement of insulation of floors, ceilings and piping. Both the existing rules on energy conservation and the government assistance have resulted in substantial improvements in Germany’s building stock. Between 1978 and 1993, the specific heat energy consumption in residential buildings in the west of Germany dropped by about 30% to an average of 200 kWh/m2. For new residential buildings, the following ceilings have derived from the measures: 1st Thermal Insulation Ordinance 1977-1984 below 200 kWh/m2/year 2nd Thermal Insulation Ordinance 1984-1995 150 kWh/m2/year 3rd Thermal Insulation Ordinance from 1995 100 kWh/m2/year Energy Conservation Ordinance from 2002 70 kWh/m2/year Following German reunification, it was necessary to tackle considerable deficiencies in heat energy conservation in the new Länder. Since 1991, all new buildings in the new Länder have had to meet the latest standards applied in Western Germany: at present average energy consumption in existing buildings — all types of buildings — amounts to 265 kWh per square metre per year for space heat.

New Administrative Buildings

The federal government set new standards for the energy-efficient construction of administrative buildings. The new buildings, constructed for the relocation of parts of the federal government to Berlin in 1999, use 20% to 50% less energy than is required by the recent Thermal Insulation Ordinance. The figures are 44% for the Federal Chancellery, 34% for the Federal Ministry of Economics and 29% for the Office of the Federal President.

Energy Labelling and Standards

Since 1 January 1998, energy consumption labelling has been mandatory in Germany. EU Directives have thus been transposed into national law (Energy Consumption Labelling Ordinance, Energieverbrauchskennzeichnungs-verordnung). Cooling and freezing equipment, washing machines, dryers, combined washers/dryers, dishwashers and household lamps have to be provided with uniform labels showing information on energy consumption and other product characteristics before they get into the shops. A separate Ordinance (Ordinance on Maximum Energy Consumption, Energie-verbrauchshöchstwerteverordnung) to transpose the EU Directive on maximum values of energy consumption by cooling and freezing equipment came into effect on 13 June 1998. The national legal basis for labelling and minimum energy performance ordinances, the Energy Consumption Labelling Act, had to be amended in particular to open legislation for the labelling of appliances other than 'white goods'. The act became effective in February 2002. On this basis, the federal government started to work out new ordinances on energy efficiency

6

requirements for ballasts for fluorescent lighting and on the disclosure of motor vehicles' energy consumption levels, to include European Directives into German law. Prior to signing a purchase contract, buyers of motor vehicles will in future have to be given information on the vehicle's fuel consumption and CO2 emissions at the place of sale. The rules, which will be uniform throughout Europe, also require annual publication of a comprehensive set of guidelines containing information on consumption and CO2 emissions of all new cars on the market in Germany. The information may be obtained free of charge by consumers at all new-car dealers and at a central office in Germany. Furthermore, voluntary labelling programmes are being carried out or prepared, including the labelling of the Group of Efficient Appliances (GEA) for electrical appliances and the Energy Star designation for office devices. The new energy agency Dena is preparing special activities to organise and promote the Energy Star as a voluntary label for office equipment on the basis of the EU programme. In 2001 the Federal Ministry of Economics and Technology commissioned a study entitled Evaluierung zur Umsetzung der Energie-verbrauchskennzeichnungsverordnung (Evaluation of the Implementation of the Ordinance on Compulsory Watt Labeling) that looked at the size of the market shares of energy-efficient "white goods" -- refrigerators and freezers, washing machines, clothes dryers, and dishwashers -- and the extent to which manufacturers and retailers obey the requirement to place EU energy labels on the appliances so that they can be easily seen by consumers. The results of the study showed that: • Since the introduction of the compulsory Watt labelling at the beginning of

1998 in Germany, there has been a significant increase in the manufacture and sale of large, more energy-efficient household appliances (efficiency classes A and B).

• Germany has now taken a leading position in the sale of energy-efficient large electrical household appliances of classes A and B.

• CO2 emissions have been reduced by roughly 453 000 tonnes owing to the share of more efficient appliances on the market. If the trend persists, the experts forecast a possible CO2 reduction of just under 3.8 million tonnes for the period 2000 to 2010.

In the 2002 in-depth review of the energy policies of Germany, the IEA stated: The Federal Government should: • Enhance measures to address energy efficiency in buildings, in particular

existing ones.

Advisory Services

On 1 July 1998, a support programme to provide advice on energy conservation in residential buildings was reintroduced; it had ceased at the end of 1997 for financial reasons. This programme involves “on-site advice” in residential buildings for which permission to build was given before 1984 (1989 in eastern Germany). Under this programme, owners of dwellings receive a grant if they are given on-site advice by professional experts on potential energy conservation measures. Between the beginning of the programme in 1991 and its end in 1997, a total of 16 000 on-site advice sessions were promoted. Small and medium-sized companies can also receive assistance under this programme if the amount of turnover does not exceed an upper limit. Depending on the number of dwellings, grants up to € 332are provided to the

7

owners of residential buildings as well as SMEs (within the programme no distinction is made between private owners and SMEs with respect to the amount of the grant). Despite the scarcity of public funding, Parliament decided on an increase of funds provided in 1999 for energy consulting services for consumers, small and medium-sized enterprises and builders. The scope of information and advisory services supplied will thus be further expanded, especially in collaboration with consumer consulting organisations, consultant engineers and regional energy agencies. The assistance programme, originally scheduled to expire after the summer of 2000, has now been extended to the end of 2002. With this consulting, owners receive detailed technical expertise on the building. It contains an indication of whether the physical characteristics of the building would make improvement of thermal insulation a viable option, whether conversion or renewal of the heating system is recommended, and whether the use of renewable energies might be worthwhile. The required financial outlays and economies achieved by the proposed investments would also be calculated. The report can also be used to take advantage of the variable "Measures Package 4" of the KfW's CO2 building modernisation programme. With this package approach, the applicant is free to select the modernisation to be made, as long as a recognised energy consultant confirms that a minimum of 40 kg of CO2 is saved every year per square metre of living space. AgV, a consumer association working group, provides an energy advisory service in 300 major cities — financed by the Federal Ministry of Economics and Technology — on all questions related to economic and efficient energy use, including the use of renewable energies. For 1998, it had the use of two buses that systematically visited small and medium-sized communities throughout the country. Dena conducts a series of information dissemination sessions on the new Energy Conservation Ordinance for architects and engineers.

Heat Consumption Metering

Since January 1996, rooms in occupied buildings in the new Länder have to be equipped with heat consumption metering instruments as in the old Länder where this measure has been in force since 1981. Independent experts indicate the energy efficiency effect of this regulation to be 15%.

Environmental Certification Mark

Since 1977 the Environmental Certification Mark (Blauer Engel) has been used to draw consumers' attention to products supporting efficient, thrifty energy use, as well as the use of renewable energies. It is similar to the European Ecolabel now being introduced.

Information The federal government has taken steps to enhance the transparency of programmes promoting energy conservation. In co-operation with the state of North-Rhine-Westphalia and the Association of Consumer Unions, preparations have been made for the pilot project entitled “modernising consultancy” designed to enhance the efficiency of recommendations by using up-to-date media. A demonstration version of a CD-ROM providing advice on such questions as: “How can walls be efficiently insulated in existing buildings?” is now available. In October 1997, the Federal Ministry of Economics and Technology set up an Internet data base on promotion facilities which, for the first time, gives a complete and up-to-date overview of all its promotion programmes, including those of the federal states and the European Union. Various information brochures on energy efficiency for the residential sector have been published. These include a series of brochures on “thrifty and

8

efficient energy use” by the Federal Ministry of Economics and Technology, the Guide to Saving Energy in your Home by the Federal Ministry for Transport, Building and Housing, etc.

Dena’s Energy Efficiency Campaign

At a press conference on 29 October 2002 the German energy agency Dena (Deutsche Energie-Agentur) launched a nationwide energy efficiency campaign ("Initiative EnergieEffizienz"), aiming at raising energy efficiency in private households. This public awareness campaign has been organised as a public/private partnership project. Three main associations of the electricity supply companies (VDEW, VRE, VKU) provide € 8 million. Additionally € 2.8 million are being provided by the Federal Ministry of Economics and Labour and € 2.2 million by the Federal Environment Foundation (Bundesstiftung Umwelt), thus granting a budget of € 13 million to the whole project. The financial contribution of the electricity supply companies is part of their voluntary commitment to CO2 reduction as agreed with the Federal Government. Initial planning began in January 2002 and the entire campaign is designed for four years ending in December 2004. The campaign focuses on three items: Reducing standby losses of brown goods and office equipment. Supporting efficient lighting with high comfort. Raising energy efficiency of household appliances.

Part of the strategy of the campaign is to include retail trade and craftsmen as well as co-operating with existing consumer advice centres. Six regional project managers organise the project to cover all federal states organising strong regional support. Regional energy agencies play a special role in this concept. The initiatives at a local level include information for the local media, opinion polls, exhibitions and other public events. From October to December 2002 more than 300 reports on the campaign were published by the media, including 164 articles in newspapers and magazines with an edition of 26 million. In particular, standby electricity consumption of appliances has been a topic often covered by the reports. Until May 2003 about 3 000 retail stores including small shops as well as big chain stores joined the campaign and were equipped with special point of sale materials by the Dena. The strategic guiding of the campaign is managed by a project steering group consisting of representatives of the partners financing it. An opinion poll organised by the Energy Efficiency Campaign in January 2003 provided more information on the challenges in the field of lighting in private households. According to the results of the poll, the share of German households not using energy saving lamps still amounts to 51%. Only 6% of households use mainly energy saving lamps. More information is available in German on the initiative's website www.initiative-energieeffizienz.de.


Climate Protection Programme for Existing Buildings

The Climate Protection Programme for Existing Buildings was launched in January 2001 to provide financial support to the activity. It is a modernisation programme for buildings aimed at improving energy efficiency and reducing CO2 emissions. Over the next few years, packages of measures involving the modernisation of heating installations, thermal insulation and the replacement of windows in more than 33 000 dwellings are to be supported by low-interest loans from KfW. The condition is to reduce CO2 emissions by at least 40 kg

9

per square metre of floor space in buildings which were built before 1979. The programme consists of four special packages. The first three packages support the modernisation of heating installations, the change of the heating system to more energy-efficient sources, the thermal insulation of the building shell, the replacement of windows and some other measures in standardised combinations, for which a reduction of CO2 emissions by at least 40 kg per square metre per year is assumed. The fourth package is flexible: additional measures can be financed if an expert carries out an analysis of the building’s energy performance ensuring that the measures result in at least a 40 kg CO2 reduction. The programme budget is € 1.02 billion over the next five years. It is to be expected that the KfW will thus be able to mobilise a loan volume of some € 5.1 billion. From January 2001 to May 2002, more than 18 500 applications for cheap credits were brought forward. More than € 826 million of loans were provided to energy conservation activities in nearly 50 000 residences. The expected volume of loans will amount to € 8 billion by 2007.

Loans for Modernisation of Buildings in the Old Länder

The programme on CO2 cuts adopted for the old federal states for a period of five years beginning 1996 under which low-interest loans (1-2% below market rates) are obtainable from Kreditanstalt für Wiederaufbau (KfW), the reconstruction bank, has reached a total of DM 7.8 billion for 380 000 housing units. Of this, 38% was for thermal insulation, 44% for the construction of new low energy and passive housing units, and 16% for the installation of condensation and low temperature boilers. In 1999, the volume of approved loans stood at more than DM 4.5 billion.

Loans for Modernisation of Buildings in the New Länder

The housing modernisation programme of the KfW reconstruction bank provides loans at a rate 1-2% lower than market rates for a ten-year period for modernising and renovating housing in the new Länder. Up to the end of 1999, low-interest loans totalling DM 78.4 billion had been earmarked for the modernisation of 3.6 million dwellings. Some 22% of the funds were committed to energy conservation. In a second phase of the programme, from February 2000 to June 2002 about 11 400 loans comprising a volume of € 1 886 million were committed for financing the modernisation of 120 000 dwellings.

Tax Breaks for the New Länder

The September 1993 amendment of the Assisted Areas Act provided for tax breaks until end 1998 in the new Länder for the renovation of existing buildings. This renovation work generally included improvements in energy efficiency. Up to 50% of expenses for the modernisation of buildings that generate revenue -- such as commercially-used buildings and rented residential buildings -- could be written-off. Up to 10% a year of modernisation expenses, to a maximum of DM 40 000, were tax-deductible as extraordinary expenses for buildings used for (own) residential purposes. Tax deductions were possible for both measures within ten years. From 1999, the tax breaks have been replaced by investment allowances in the new Länder: for modernisation and repair measures of buildings constructed before 1991 an investment allowance of 15% is granted.

Architects and Engineers

On 1 January 1996, the fifth amendment to the Ordinance on the Fees for Architects and Engineers (HOAI) came into force. This updated version of the Ordinance provides for fee-based incentives for architects and engineers to encourage efficient use of energy and the use of renewable energy sources in dwellings.

Assistance Programme for Renewables

On 1 September 1999, an assistance programme for renewable energy came into effect. € 445 million have been allotted for 1999 to 2002 for the market incentive programme in support of the use of renewable energies -- above all in the heat market -- by private investors. Since the programme started operating, 157 604 applications have been approved in the assistance volume

10

of some € 292 million (as of 1 September 2001). A total of 142 759 solar panel installations, for example, were installed. By 2002, roughly 200 000 additional approvals are expected. During the first year the programme also supported energy conservation in existing buildings. In combination with thermal solar units, grants or loans amounting up to 20% of investment costs were available for the insulation of roofs and external walls, window refitting, heat recovery units, and heating modernisation. In the first eight months of its implementation, nearly 10 000 applications for energy conservation were submitted, of which 4 035 applications for thermal insulation measures, 604 for heat recovery units and 6 642 for heating system modernisation. In order to concentrate the programme's financial means on the extended use of renewable energies, the possibility to use it for energy conservation measures was cancelled.

INDUSTRY The federal government relies more on market based measures such as voluntary agreements in industry than on regulatory interventions. It considers that additional regulations are not necessary because industries implement the most cost-effective measures related to energy savings in order to be competitive. The voluntary agreements signed by industry are aimed at CO2 emissions and improvement of energy efficiency.



In 1995, 14 industrial sectors, four associations included in the Federation of German industries, entered into voluntary agreements (VAs) to increase energy savings and reduce CO2 emissions. These sectors accounted for two-thirds of industrial energy consumption. VAs with each sector depend on its energy saving potential. Industries, including enterprises in the new Länder, signed individual commitments. As a result of these VAs, German industry was committed to an “up to 20% reduction between 1987 and 2005 of specific CO2 emissions or specific energy consumption”. In some cases, the VA is supplemented by absolute target reductions. In March 1996, in its Declaration on Global Warming Prevention, German industry made a commitment to an updated version of voluntary agreements. In the updated version, it committed to reducing specific CO2 emissions “by 20% between 1990 and 2005” (i.e. the wording was changed from “up to 20%”). The agreement covered more than 70% of industrial energy consumption and 99% of public electricity production. Potential reductions in CO2 emissions in the manufacturing sector and in the electricity industry were estimated at about 120 Mt. Between 1990 and 1998, observed CO2 emission reductions amounted to 46.6 Mt in industry and 31 Mt in public electricity generation. On 9 November 2000, German industry and the federal government concluded a further updated voluntary commitment for climate protection. By 2005, CO2 emissions are to be lowered by 28% and by 2012 the greenhouse gases named in the Kyoto Protocol are to be lowered by 35% (each relative to 1990 levels). By another supplement to this agreement, CO2 emissions are to be lowered by a further 45 million tonnes in 2010. A special focus is the greater use of cogeneration, which will allow 23 million tonnes of CO2 emissions to be avoided in 2010. To support this measure, the German government introduced new legislation for sustaining, modernising, and expanding cogeneration. The programme on VAs is supplemented by low interest loans given to enterprises wanting to make investments in energy savings. Kreditanstalt für Wiederaufbau (KfW) and Deutsche Ausgleichsbank (DtA) run pollution control

11

programmes to provide funding to these enterprises. In particular, this organisation provides low-interest loans to medium-sized private businesses for cogeneration projects. The voluntary agreements include evaluation and monitoring by a research institution. The results of the voluntary commitments are continuously analysed and evaluated by the independent economic institute RWI at the request of the federal government and the private sector. Three monitoring reports dating from November 1997, March 1999, and December 2000 are now available. These reports were also the foundation for the further development of the accords in connection with the post-agreements. According to the latest monitoring report of the Rheinisch-Westfälisches Institut für Wirtschaftsforschung (RWI), published in December 2000, a CO2 reduction of 78 million tonnes had been attained by 1998 relative to 1990 levels. German industry is thus making a decisive contribution to CO2 reduction. The agreement will help attain more than one-third of the German CO2 reduction target of a total of 25% by 2005.

DSM Public utilities in Germany are deeply involved in least-cost planning and demand-side management (DSM). German utilities lead the development of load management, and DSM activities are an integral part of business policies. DSM projects consist of advising consumers on energy savings. The Federal Ministry of Economics sees no need to be involved in such an activity. Annual expenditures for information and consulting in this area amount to about DM 800 million.

Combustion Facilities

The Small-Scale Combustion Plant Ordinance sets maximum heat losses and pollution levels for combustion facilities with heat output of less than 1 MW (where solid fuels are used), less than 5 MW (liquid fuels) and less than 10 MW (gaseous fuels). The Ordinance of November 1996 amending the Small-Scale Combustion Plant Ordinance further reduced heat loss requirements in new and gas-fired heating systems. Heat losses in existing plants must be progressively reduced to these levels after a transitional period. The length of this transitional period depends on the operational status as well as on the nominal heat capacity of the combustion plant. It amounts to three to eight years from the date at which the amendment entered into force (i.e. 1 November 1996).

Combined Heat and Power/ District Heating (CHP/DH)

Heat for district heating and industry is produced both in combined heat and power (CHP) plants and in heat-only boilers. The government estimates that 12.5% of domestic electricity generation takes place in CHP plants. The German Association of District Heating and CHP Producers (AGFW) estimates that the installed electric capacity in CHP plants was 10 700 MW and electricity generated by CHP was 28 TWh in 1999.

District heating is widely used in East European countries, including the former East Germany. According to Euroheat and Power4, the share of DH in the total heat market in the New Länder was 28% in 1998, whereas the share in the Old Länder was about 8% and the national average was 12%. The heat sales were 84 000 GWh in 1998. The 250 district heating schemes in Germany in 1998 were supplied by 621 CHP plants and 1 751 heat-only boilers. About 75% of heat supplied to the district heating systems is produced by CHP plants and the rest in heat-only-boilers. The total length of the district heating pipeline system is 18 500 km. Natural gas has to some extent

4 Euroheat and Power is a non-governmental international association for district heating, cooling and combined heat and power (CHP).

12

replaced coal in CHP and heat plants, which still accounted for 50% of heat production in 1998, followed by natural gas (42%), waste (5%), oil (2%) and other fuels (1%). Heat price is not regulated. Prices are negotiated between the supplier, usually the local stadtwerke, and the consumer. Because electricity prices have decreased as a consequence of liberalisation, and gas prices have increased to correspond to the oil price in the last few years, many municipal CHP plants had originally lost competitiveness in the late 1990s. The Berlin Energy Agency estimated that about 2 GW of CHP capacity was closed after 1998. This created a political concern. Therefore, in May 2000, the parliament adopted a law to guarantee temporary protection for the existing co-generation units operated by public utilities. This law provided a guaranteed minimum remuneration for their electricity amounting to € 4.6 per 100 kWh. This minimum remuneration was to be lowered by € 0.26 per 100 kWh per year. The feed-in tariff applied to the public CHP plants, regardless of whether generated in the CHP (back-pressure) mode or in the condensing mode. In principle it was possible to transfer the cost of the scheme to consumers via the electricity price. The introduction of this law slowed down the closure of the plants. The difficulties mentioned above faced by CHP over the last few years, triggered a broad debate to seek for adequate policy instruments to make CHP sustainable. For example, CHP supporters suggested the introduction of tradable certificates, which are similar to green certificates, issued for co-generated power; the five largest electricity companies suggested new voluntary agreements with fixed CO2 reduction targets. The government decided to include into the new Climate Protection Programme the new voluntary agreements with the industry and the introduction of a new CHP law, which would again support co-generation by attractive feed-in tariffs. In August 2001, the government presented a new CHP Law, replacing the previous one, and its provisions on remuneration in 1 April 2002, mainly to give incentives for the on-going operation and modernisation of existing co-generation units. The law aims to lower CO2 emissions in 2005 by about 10 Mt and in 2010 by 20-23 Mt compared to the 1998 levels. The law will be effective until the end of 2010. The 2002 law allows CHP operators, feeding electricity into the public transmission network, to receive bonus payments on top of the revenue at market price. The estimated total cost of these bonus payments is € 4.45 billion between 2002 and 2010. The law requires that an interim assessment be carried out in 2004 to evaluate whether the climate targets are met and the expenditure is within the budget. The legislation sets requirements for the power-to-heat ratio to qualify to receive the bonus. The bonus then varies according to the plant type: • Existing CHP plants receive initially (i.e. 2002-2003) a bonus of € 0.0153

per kWh. • After modernisation existing CHP plants receive initially (i.e. 2002-2004) a

bonus of € 0.0174 per kWh. • Existing and new small plants (up to 2 MWe) receive initially € 0.0256 per

kWh. • Fuel cell plants and new small plants (up to 50 kWe) receive € 0.0511 per

kWh. The above rates will be progressively reduced from 2004 onwards except for fuel cells and new small plants (up to 50 kWe). Payments will end in 2010 for the small plants, and for plants built before 1990 and modernised in 2002 or later. For non-modernised plants above 2 MW, payments end in 2006 if the plant went into operation before 1990; for other plants, the payments end in

13

2009. The cost of the bonuses granted within the feed-in tariffs can, in principle, be transferred to the electricity consumers through the electricity prices. The cost is transferred in proportion to consumption but for large consumers, meaning those consuming more than 100 MWh/year or those whose electricity bill is more than 4% of annual turnover, the resulting price increase has been limited for amounts exceeding 100 MWh/year. In addition to the feed-in system, CHP is promoted by tax exemptions. Units with a maximum 2 MW of electricity generation capacity are exempt from the electricity tax for the autoproducers own use (article 9 of Electricity Tax Law) and units with minimum 70% fuel efficiency exemptions from the mineral oil tax (article 25 of the Mineral Oil Tax Law). In the 2002 in-depth review of the energy policies of Germany, the IEA stated: The Federal Government should: • Evaluate the bonuses granted within the feed-in tariffs for electricity

generated in CHP plants with the aim of reducing unreasonable costs. • Evaluate the cost-effectiveness of expanding district heating systems thus

creating effective use of more heat from the CHP plants and smaller CHP versus expanded district heating networks.


In addition to voluntary agreements, another non-regulatory measure is energy conservation contracting (third-party financing) which has increased considerably in recent years. In 1999, about 480 companies had invested € 6.6 billion for a total of 39 000 projects. The federal government has supported the activity by granting exemptions from the “eco-tax” for co-generation facilities established by the contracting companies and giving assistance for the installation of renewable energy applications in buildings under the Market Incentives Programme. The companies providing energy conservation contracting can receive financing from special programmes established by the Kreditanstalt für Wiederaufbau (KfW), the reconstruction bank, and the Deutsche Ausgleichsbank (DtA).

Financial Measures

The government promotes investments in energy conservation through financial incentives as follows: • Low-interest loans to small and medium-sized enterprises for investment

in energy efficiency amounting in 1990-1998 to credit volume of DM 8.8 billion.

• Interest free loans and grants from the federal and Länder governments for the development of district heating systems in the old Länder.

PUBLIC SECTOR Third-Party Financing for Public Buildings

In order to further promote energy conservation in their own properties, the federal government and Länder have initiated third-party financing projects. Based on the first results of these projects, as well as of several projects successfully conducted in Baden-Wurttemberg, the federal government has recently published a guide to third-party financing for its own properties. The building administrators have been instructed to use this guide for implementing new projects. The federal government thus aims at supporting the dissemination of this relatively new financing model in order to make it better known. The Land of Berlin has set in motion a project Berlin heat supply model to modernise many inefficient heating facilities in the eastern part of the city. Private sector operator models have managed to reduce considerably current expenditure on fuels in schools without the state having to meet investment

14

costs. Based on this experience, Berlin has started a comprehensive project entitled Energy Conservation Partnership Berlin. With three partners (so far), energy management contracts have been concluded for a total of 120 buildings. The first interim results are very promising. It is planned to invite bids for further groups of buildings. Several Länder, including Bavaria, Brandenburg, North-Rhine-Westphalia, Hesse, Rhineland-Palatinate and Thuringia are looking into similar projects.

Government commitment

The German government is determined to face the challenge of climate protection. Its goal is to reduce CO2 emissions within its sphere of operations by 30% by the year 2010 and by 25% by 2005 (relative to 1990 levels). The individual government departments will draft and implement their own reduction programmes.


In the face of the rise in CO2 emissions in the transport sector, unlike the trend in other sectors, the federal government considers it particularly important to achieve substantial progress in this area. In its Climate Protection Programme of 18 October 2000, it announced various measures to achieve this goal.

Voluntary Agreement

The automobile industry committed itself to a 25% reduction in fuel consumption by new cars built and sold in Germany between 1990 and 2005. This means that the desirable average consumption level is 5.97 litres per 100 km. The achievement of this agreement is conditional on measures undertaken by the federal government such as improving traffic flows, tax breaks, introduction of an emission-based motor tax system and government support of alternative fuels and vehicles. This commitment from the car industry will be increased to 33%. In addition, Germany supports voluntary agreements on a European level to reduce fuel consumption and emissions of cars and trucks; for example, the ACEA agreement on CO2 reduction, in which the German car producers take part. In 2001, the federal government drew up additional measures to reduce greenhouse gas emissions and energy consumption in the transport sector: As part of the Future Investment Programme, investment in the rail

infrastructure in the amount of € 3.1 billion and in road construction in the amount of € 1.4 billion in the years 2001 to 2003.

Introduction of a mileage-based highway toll for heavy trucks as of 2003. Reduced motor-vehicle tax (support for "three-litre cars" and continuation

of assistance for "five-litre cars") to assist low-fuel-consumption cars. Agreement with automotive industry on possibilities to reduce

consumption (e.g. greater use of low-friction oil and consumption gauges). Broadly designed information campaigns to inculcate good driving habits,

with the participation of the automotive industry and car and environmental associations. A broadly designed traffic safety campaign, begun in February 2001, also includes information on fuel-conserving driving habits.

Introduction of emissions-related landing fees at German airports, in co-ordination with neighbouring countries. In addition, the federal government will work toward the introduction of an EU-wide emissions-related aviation fee.

Introduction of integrated transport and housing-settlement planning attuned to climate factors.

Employment of telematics and fleet management systems. Observation and support for the traffic-sector energy strategy of German

15

automotive and energy companies with the goal of a broadly based introduction of alternative fuels.

Financial assistance from the federal government in the amount of more than € 8 billion a year for investment to improve traffic and transport in local communities (community transport financing act, regionalisation act) with an eye to the greater use of short-range public transport.

Vehicle Taxation

In March 1997, the German Parliament adopted an amendment to the Motor Vehicle Tax Act that took effect in July 1997. It allows for temporary exemptions of the annual motor-vehicle tax for low pollutant emissions cars (cars that meet the limit values laid down in the European Commission’s proposal for the follow up Directive 94/12 EC) and higher taxes for some high emissions cars. The tax rate was also reduced for cars that have a very low level of specific consumption. Particularly energy-efficient and low pollutant cars benefit from tax rebates: so called “5-litre cars” (120 g CO2/km) enjoy a non-recurring tax rebate of DM 500 upon the date of first registration. The tax rebate for so-called “3-litre cars” (90 g/CO2/km) is DM 1 000, irrespective of the date of first registration. This amended Act is subject to renewal five years after its implementation. In the 2002 in-depth review of the energy policies of Germany, the IEA stated: The Federal Government should: • Speed up the development of the national energy efficiency strategy in the

transport sector and take into account the cost-effectiveness of measures.

Eco-Taxation in Transport Sector

The federal government raised mineral oil taxes in April 1999 and in the following years, as part of the concept of eco-taxation (see details under "Eco tax of energy products").

Vehicle Inspection

Mandatory controls on emissions for all kinds of vehicles have been in place since December 1993. The aim of the inspection is primarily to reduce harmful emissions, not to improve energy efficiency

Railways The 1992 Federal Transport Infrastructure Plan called for more investments in railways than in road transport. Between 1991 and 2012, it is planned to devote DM 244 billion to the railways (DM 118 billion of which is for new construction and development). It is also planned to devote DM 210 billion to long-distance motorways (DM 109 billion for new construction and development) and DM 30 billion for waterways (DM 16 billion for new construction and development). Before the Plan, more funds were devoted to motorways than to railways. The Climate Protection Programme of 18 October 2000 announced additional budget funds for investment in rail infrastructure in the total amount of DM 6 billion over the next three years in the framework of the programme "Investing-in-the-Future".

Local Public Transport

Pursuant to Germany's Constitution, increasing the attractiveness of local public transportation is mainly the responsibility of the Länder. Determination of funding for the Act on Financing Community Transport (GVFG), as well as determination of federal programmes for local transportation, is subject to approval by the Länder. Since 1967, the federal government has provided substantial financial assistance for investments in local public transportation, going beyond € 88 billion.

Trans-shipment Terminals

Germany is a key transit country in Europe. The tonnage of freight increased by over 25% in the period 1990/1995. The Federal Ministry of Transport expects – as for passenger transport – an increase in freight haulage by 2010

16

of another 30%; over 60% of this increase will account for road haulage. For this reason, the federal government has decided to expand the interfaces between road haulage and railway transportation. This includes new construction and/or expansion of 52 trans-shipment terminals. The federal investment grants are to amount to DM 4.1 billion till 2010.

Town and Country Planning

In the interest of a long-term improvement in energy conservation in the transport sector, the Town And Country Planning Act was amended effective 1 January 1998. The modified legislation includes improved conditions governing the creation of traffic-minimising settlement structures.

Information to Drivers

In 1997, the Federal Ministry for the Environment, Nature Conservation and Nuclear Safety published a brochure entitled “My Agenda 21 – The Energy-Saving Booklet as your contribution to climate protection” which incorporates a chapter on mobility. The aim is to make drivers more aware of fuel-saving driving habits, to encourage them to use public transport and, in general, to foster greater environmental awareness on the part of automobile users. The Climate Protection Programme will launch broadly structured information campaigns on good driving habits, with the participation of the automotive industry and the associations from the automotive and environmental industries.


Major efforts are under way to improve energy efficiency at the federal, Land and municipal levels with the main objective of reducing CO2 emissions, a priority of overall energy policy in Germany. Thus the federal government places great emphasis on improving its monitoring and assessment efforts on energy efficiency measures in order to concentrate on the most cost-effective ones. However, the federal government has only limited information on the various energy efficiency measures developed by administration at Land and municipal levels. In the 2002 in-depth review of the energy policies of Germany, the IEA stated: The Federal Government should: • Evaluate the cost-effectiveness of the measures used to achieve the

integrated fulfilment of all the energy and environment policy objectives and publish the results.

Further information

For further information, please contact: Wolfgang Stinglwagner Deputy Head of Division, Energy Conservation Federal Ministry of Economics and Labour Villemombler Strasse 76 D – 53123 Bonn Tel: +49 1888 615 2859 or +49 (228) 615 2859 Fax: +49 1888 615 3182 or +49 (228) 615 3182 Email: [email protected]

1

GREECE Updated July 2002

BACKGROUND Greece signed the UN Framework Convention in June 1992 and ratified it inApril 1994 (Law 2205 on the Ratification of the United Nations FrameworkConvention on Climate Change, Gazette A/60/15.4.94).

The first National Communication to the United Nations FrameworkConvention on Climate Change (UNFCCC) entitled Climate Change. TheGreek Action Plan for the Abatement of CO2 and other Greenhouse GasEmissions was issued in February 1995.

The Greek government has accepted as a realistic objective for its nationalprogramme the restriction of the total increase in CO2 emissions during the1990-2000 period to 15% +3% (or 12.4 million tonnes). The margin of 3% isto allow for unpredictable domestic or international developments and relevantEU policy actions. The EU community policy on climate change agreed by theEuropean Council of Ministers in March 1997 allows a 30% increase in Greekgreenhouse gas emissions (CO2, CH4 and N2O) over the period 1990-2010.

After the Kyoto commitment of December 1997, the European Union Councilof Ministers agreed on 17 June 1998 on the Burden-Sharing Agreement1towards achieving the 8% European Union commitment to reduce emissions.In this context, Greece is allowed to increase its emissions by 25% over the1990 levels for the 2008-2012 period.

The second National Communication to the United Nations FrameworkConvention on Climate Change: Review of the Greek National Action Plan forthe Abatement of CO2 and other Greenhouse Gases Emissions was issued inJune 1997 under the responsibility of the Ministry for the Environment,Physical Planning and Public Works. It provides a full account of the progressin implementing national policies and measures included or resulting from theNational Action Plan.

Main Legaland FiscalInstruments

DevelopmentLaw 2601/98

The Development Law 2601/98 replaced the previous Development Law1892/90. It provides inter alia the subsidisation of industrial and tertiary sectoractivities relative to energy saving, exploitation of agricultural, industrial andmunicipal wastes and effluents, and the creation of mechanisms for energysaving. The law also provides subsidies to industries or companies for theproduction of electricity through the exploitation of indigenous renewableenergy sources. Investment subsidies range from 15 to 40%, depending onthe geographical location of the investment. An alternative scheme of loans atreduced interest rates and tax credits is also provided. Up to 2001, 38projects have been approved. Approximately 25 projects concern wind power(more than 60 MW), ten projects concern small hydro (more than 3.4 MW) andthe rest concern energy conservation from heat recovery or substitution offossil fuels by natural gas. As for energy efficiency the Development Law2601/98 has proved to be inefficient; very few investments have been madein energy efficiency because the subsidies are less generous than under the1990 Law and investors find the subsidies through the operationalprogrammes preferable.

The results of the 1990 Development Law were assessed by the Directorateof Renewable Energy and Energy Saving in the Ministry of Development. Thesubsidy scheme reduced primary energy consumption by 26.3 ktoe/year and


2

substitution of electricity and oil by gas and biomass by 37.4 ktoe/yearbetween 1993 and 1998.

Law 2208/97 Law 2208/97 for the Sustainable Development of Towns is a major legislativedevelopment to ensure better the sustainable development of proper planningof the urban and rural areas, emphasising the recycling and upgrading of thebuilt space instead of its expansion. The law grants subsidies to the localauthorities to enable them to proceed with the rehabilitation of urbanagglomeration aiming at the improvement of the built environment, theaesthetic upgrading of buildings, protection of the environment andconservation of energy and natural resources.

Law 2364/95(Article 7.17)

This law gives financial incentives to promote the use of natural gas andrenewable energy resources through a 75% tax reduction of the expenses forthe purchase and installation of domestic appliances or systems using naturalgas or renewable energy resources for the whole tertiary sector.

Law 1559/85and Law 2244/94

The possibility of exploiting renewable energy sources and promotingcombined heat and power generation was established for the first time by Law1559/85. However, as the results obtained after implementation of this lawwere unsatisfactory, it has been replaced by Law 2244/94. (For detailedinformation, see the paragraph on Combined Heat and Power].)

OperationalProgramme forEnergy (OPE)

An Operational Programme for Energy (OPE) of the Ministry for Development,in which funds for investments in renewable energy sources and rationalenergy use are made available, was launched in January 1994 and continueduntil the end of 2001. The programme has a total budget of ECU 1 116million, out of which 33.8% derives from the EU Community SupportFramework, 39.6% from the Public Power Corporation (PPC), 21% fromprivate contributions and 5.6% from state contributions. The amounts ofsubsidies were up to 45% for energy efficiency investments (35% forcogeneration) and 55% for renewable energy use. In addition, the EuropeanInvestment Bank can provide a loan of up to 50% of the project cost.

The budget has been used for projects in the following five categories:

� Increase in electricity production capacity (three PPC projects with a totalbudget of € 561 million).

� Private investment projects in energy conservation and renewable energysources (332 investments with a total budget of € 477 million).

� Support to the development of renewable energy sources includingstudies on wind potential and demonstration projects (23 investments witha total budget of € 20 million).

� Supporting the exploitation of domestic energy sources including ligniteand geothermal energy (48 investments with a total budget of € 24million).

� Development of the National Information System (see Energy Statistics)and other projects to support energy policy (ten investments with a totalbudget of € 2.9 million).

The OPE has been managed by a separate management authority within theMinistry of Development. The evaluation of OPE project proposals was to becarried out by independent evaluators following transparent criteria taking intoaccount a variety of factors including technology, energy saving, economic,environmental and social considerations. The projects accepted have beensubject to continuous monitoring and energy audits, and a full evaluation ofthe programme will be completed in 2002. Most, but not all, of the energyobjectives set for the programme, in terms of installed capacity of large-scaleelectricity generation, cogeneration and generation from renewables, wereachieved. Private investments were smaller than originally estimated and

3

many investments in energy conservation and renewables were developedwith public support.

OperationalProgramme forCompetitiveness (OPC)

The OPC was launched in 2000 and it will continue until the end of 2006. Itapplies not only to the energy sector but also to a variety of other economicactivities. The three sub-programmes with energy objectives are the following: � Support and Encouragement of Entrepreneurship: increased use of

renewables and CHP. Energy conservation, fuel substitution,environmental protection.

� Promotion of Excellence in Enterprises: Improvement in the quality andmanagement of CHP, renewables and energy conservation technologiesused. Increased competitiveness of Greek energy technology.

� Security of Energy Supply and Promotion of Liberalised Energy Markets:Energy Infrastructure to support security of electricity supply in the islandsand security of gas supply.

� Reinforcement of energy infrastructure to promote more electricitygeneration from renewables. Improved operation of the liberalisedelectricity market; support for the establishment and operation of theRegulatory Authority for Energy (RAE) and the Hellenic ElectricityTransmission System Operator S.A (HTSO). Preparation for gas marketliberalisation.

� Energy and Sustainable Development: Transmission and use of energy inan environmentally-friendly manner. Rational use of natural resources.

The first calls for energy project proposals were launched in 2001 with a totalbudget of € 0.51 billion of which € 0.17 billion were EU Community SupportFramework grants. The programme received 310 proposals from the privatesector for renewables, cogeneration and energy efficiency. In the 2001 in-depth review of the energy policies of Greece, the IEA stated: The Government of Greece should: � Formulate a comprehensive and clearly structured policy framework with

measurable objectives and targets that can be monitored and verified.Choose measures based on their cost-effectiveness. Give priority tomarket oriented instruments. Ensure that government supportprogrammes do not discourage market-oriented approaches.

� Ensure that the objectives of the Operational Programme forCompetitiveness are met. The programme should be assessed withmeasurable criteria.

The HellenicClimate ChangeProgramme

In 1996, the Ministry of the Environment (YPEXODE) developed the “HellenicAction Plan for the Abatement of CO2 and other Greenhouse Gas Emissions”in 1995. The government’s objective, set out in the Plan, was to restrict anincrease in GHG emissions, namely CO2, N2O and CH4, from all sources in2000 to no more than 15% ±3% (or 15.7 Mt +/- 3.1 Mt) from 1990 levels. Themargin of 3% was adopted to allow for unpredictable domestic or internationaldevelopments and relevant EU policy actions. As the emissions of the threeGHGs were 23.3% above 1990 levels in 2000, the target was not achieved.

In the industrial, residential and commercial sectors, emphasis was onincreasing energy end-use efficiency and fuel substitution by natural gas. Inthe transport sector, emphasis was on improving the transport infrastructureand measures related to fuel use and vehicle technology.

4

NationalProgrammefor ReducingGreenhouseGas Emissions

The Hellenic Action Plan expired in 2000 and Greece is planning to introducea new “National Programme for Reducing Greenhouse Gas Emissions 2000-2010”. The plan was compiled by the National Observatory of Athens underthe supervision of the Ministry for the Environment, Physical Planning andPublic Works, and partly the Ministry of Development. The first version wascompleted in early 2002 but needs be approved by the two Ministers. Thegovernment plans to establish a Special Action Unit to monitor and assessprogress in implementation. In the 2001 in-depth review of the energy policies of Greece, the IEA stated: The Government of Greece should: � Complete and implement promptly the "National Programme for Reducing

Greenhouse Gas Emissions" and monitor the effectiveness of policies andmeasures.

� Reduce greenhouse gas emissions by putting more focus on demand sidemeasures.

NationalInstitutions

Formulating energy policies is within the competence of the Ministry ofDevelopment but the Ministry for Environment is responsible for policies forenergy use in buildings and the Ministry for Transport in transport. Theelements of energy efficiency policy can be found in the policy statement,“Guidelines of Energy Policy”, issued by the Ministry of Development in July1998. However, there exist no clearly structured policy, comprehensiveprogramme or targets for energy efficiency. The above elements includeimproved efficiency of electricity production, transmission and distribution;energy saving in all sectors with an emphasis on buildings and the transportsector; promotion of CHP; consumer awareness; and new financinginstruments such as third-party financing. The government considers a recentstudy, “Planning of national actions for the next decade in the energy sector incompliance with the Kyoto Protocol national commitments”, conducted by theAthens National Observatory in April 2000, to help in specifying energyefficiency policy and strategy. The study includes specific recommendationson energy conservation measures in all sectors, with estimates of their costsand classifies them according to their cost-effectiveness.

In the 2001 in-depth review of the energy policies of Greece, the IEA stated: The Government of Greece should: � Ensure good co-operation with all the ministries involved in energy

efficiency.



Action Plan“Energy 2001”

The Action Plan “Energy 2001” is the main action taken to comply with theEuropean Directive on reducing carbon dioxide emissions through buildingenergy efficiency programmes (SAVE Directive 93/76/EC). It was preparedunder the supervision of the Ministry of the Environment by a joint scientificcommittee under the co-ordination of the Centre for Renewable Energysources (CRES). Financial incentives for energy saving measures in buildingsare being planned.

5

The Action Plan also stresses the use of renewable energy sources as a basicprerequisite for sustainable development.

MinisterialDecision21475/4707/98

A programme on sustainable buildings has been launched through a CommonMinisterial Decision on the limitation of carbon dioxide emissions at thebuilding sector. (21475/4707/98 dated 19 August 1998) (Ministry for theEnvironment, Physical Planning and Public Works/Ministry for Development/Ministry of National Economy/Ministry of the Interior). A regulation for therational energy use and energy conservation in buildings (KOXEE) is beingprepared, which will replace the existing Regulation 2 on the thermalinsulation of buildings. Consequently, minimum energy standards for newbuildings will be established, as well as other measures, such as energyaudits, classification of buildings according to their energy consumption etc.

EnergyEfficiencyStandards

Minimum energy efficiency standards were set by the EU for non-industrialboilers (Directive 92/42/EC) and refrigerators and freezers (Directive96/57/EC). Greek legislation has been harmonised in accordance with bothEU standards through the Presidential Decrees 335/1993 and 178/1998.

EnergyLabelling

The general obligations for energy labelling are set by Directive 92/75/EC(harmonisation by the Presidential Decree 180/1994), while particularprovisions are set for refrigerators/freezers (Directive 94/2/EC —harmonisation by the Ministerial Decision 25810/1994), washing machines(Directive 95/12/EC — harmonisation by Ministerial Decision 3972/96), dryers(Directive 95/13/EC — harmonisation by Ministerial Decision 3972/96); forcombined washer-dryers (Directive 96/60/EC) — harmonisation by MinisterialDecision 9142/97 and for dishwashers (Directive 97/17/EC) — harmonisationby Ministerial Decision 10200/98).

EnergyAuditing

The Centre for Renewable Energy Sources (CRES), founded in 1988,manages a programme of energy auditing. The programme provides moneyand technical assistance for energy auditing in buildings as well as in smalland medium-sized enterprises and industry. As of November 1997, a total of50 energy audits had been performed in the building sector (15 in hotels, 10 inhospitals and 25 in public buildings).

The programme of energy auditing for energy managers in public buildingswas brought into force by the Ministry of the Interior, Public Administration andDecentralisation.

Lighting A programme for the replacement of incandescent lamps with more energyefficient lamps mainly in the islands (which are not connected to the mainlandelectricity grid, and face significant problems because of high rates of increaseof electricity consumption) is in progress. The programme is co-ordinated bythe national electric utility (PPC) and provides fiscal incentives to customersfor lamp replacements (i.e. gradual payment of the relevant investment costthrough electricity bills). Approximately 120 000 bulbs were replaced in 2000-2001 and the resulting energy conservation from the application of this projectis estimated to be 12 GWh.

Third PartyFinancing

Third party financing has, up to now, been little used in the private sector andis actually forbidden in the public sector. Only a couple of projects have beenestablished in private hospitals, despite the more favourable financing termsoffered by OPE. A draft law, which will shortly be presented to Parliament, willcreate the necessary legal frame, which will encourage the use of third-partyfinancing in the private sector.

Informationto Consumers

The government has established 18 energy centres at regional, local andurban levels as provided for by Law 2244/94 on the promotion of energyconservation and renewable energy sources. The European Union, through

6

the SAVE programme, contributes most of the funding for these centres. Themain goal of the centres is to provide support to all energy consumers. Theyuse all available methods to disseminate energy efficiency technology,procedures, etc. The centres also collect and disseminate energy-relatedinformation. Three new centres were opened in 1998 in the framework of theSAVE II programme. Law 2244/94 foresees the enactment of a PresidentialDecree that will establish CRES as co-ordinator for all regional centres.

The Public Power Corporation (PPC) promotes the conservation and efficientuse of electricity by all classes of consumers through information campaignsand other measures.

In the 2001 in-depth review of the energy policies of Greece, the IEA stated:

The Government of Greece should:

� Give consumers detailed information on their energy use to help themsave energy , for instance, in connection with energy billing.

INDUSTRY


EnergyAudits

CRES conducts surveys on energy consumption using energy audits inindustry and in the public and commercial sectors and makesrecommendations on energy efficiency. By November 2001, a total of 119energy audits had been performed on industrial processes.

MandatoryEnergyInspections

The government planned to introduce mandatory energy inspections andcontrols for industries and businesses with heavy energy consumption, but nolegislation has been issued to implement them.

CombinedHeat andPower (CHP)

CHP has mainly been promoted through investment support. Themechanisms for this support are the Greek Development Laws (1982/90 and2601/98) and the Operational Programme for Energy 1994-1999 (OPE) andthe Operational Programme for Competitiveness 2000-2006 (OPC), whichreceive financing from the EU Community Support Framework. The investormay choose the subsidy mechanism he prefers. The fuel efficiencyrequirements for eligibility for a subsidy are 60% for the industrial sector and65% for the services sectors. OPE provided subsidies of a maximum 35% ofthe investment cost leading to an 185 MWe increase in CHP capacity. Theinvestment subsidy under OPC will also be 35% and the estimated increase inCHP capacity is 375 MWe and 690 MWth.

Under the Development Law of 1998, the investor can benefit from a 40%investment subsidy. Most investors have preferred the lower subsidy from theOperational Programmes because it is available at the beginning of theinvestment project whereas the subsidies under the Development Law arepaid only upon completion of the project.

Law 2773/99 replaced the provisions of Law 2244/94 on the buy-back tariffsfor electricity produced by CHP. In the interconnected system, the generatorreceives compensation for energy, which is 90% of the energy part in themedium-voltage end-use tariff and for capacity that is 50% of the capacity partin the same tariff. Prices in the non-interconnected system are determined aspercentages of the current PPC low-voltage residential tariffs, ranging from60% for CHP using fossil fuels to 90% for CHP using renewable energies.

7

There were some barriers to wider use of CHP other than weak economiccompetitiveness. For environmental reasons, the prevailing legislation doesnot allow the installation of CHP or any other industrial plants in the Region ofAttika (surrounding Athens). There have been plans to revise the legislation toallow CHP installations using natural gas.

District Heating (DH)

The Public Power Corporation (PPC) has initiated the implementation of acogeneration programme in its lignite-fired plants by setting up a districtheating network in northern Greece. Specifically: � Medium pressure steam from the lignite-fired power station of Agios

Demetrios in northern Greece is already used for the district heating ofpart of the nearest town of Kozani. The thermal capacity of the installationis 67 MWth. With the construction of a new power unit in Agios Demetrios,the network will be expanded by another 70 MWth to cover the entire town.

� Medium pressure steam from the lignite-fired power station of Ptolemais isused for the district heating of approximately 45% of the nearest town ofPtolemais. The thermal capacity of the installation is 50 MWth.

There are plans to develop a DH network in the town of Florina (70 MWth) andanother to supply heat to the town of Amyntaio (40 MWth). In addition, the DHunit for the town of Megalopolis (Peloponnese), with a capacity of 20 MWthhas been approved for cofinancing by the OPE.

Financial Support

One of the programmes of the Operational Programme for Energy (OPE) wasfor energy conservation aiming at increasing energy efficiency in the industrialand services sectors with subsidies of up to 45% for energy conservationinvestments. The projects approved for the programme were implementedbetween 1997 and 2001and had a total budget of € 127 million of privateinvestments for activities in energy end-use efficiency and the projects. The Operational Programme for Competitiveness 2000-2006 (OPC) continuesthe subsidies for energy conservation investments. Both the programmes givesubsidies not only to promote efficient energy in end-use but also tocogeneration and fuel substitution. The total budget used for these threeactivities under OPE was € 168 million and the estimated primary energysavings achieved are 280 ktoe/year.


Industrial Projects

Within the framework of the Development Law 1892/80, six projectsconcerning energy conservation and he use of exhaust gas heat in sectorssuch as cement and glass industry, pottery and dryers have been submittedfor approval. For half of these, the financing procedure at the Ministry ofNational Economy has been completed, for the rest it is still going on.


The financing of all possible interventions in the industrial sector poses aserious problem. In this context, the mechanism of third-party financing (TPF)— through which the economic risk of investments in the field of renewableenergies, rational energy use and energy conservation is undertaken by athird party (mainly the Energy Services Company/ESCO) instead of the end-user — is under consideration. An appropriate legal framework is beingformulated by the Ministry for Development (formerly the Ministry for Industry,Energy and Technology), while a favourable evaluation is foreseen forproposals comprising TPF schemes which are submitted for approval withinthe OPE framework. Furthermore, it is planned to extend the TPF mechanismon the environmental and energy projects supported by Laws 1892/90 and2234/94. No ESCO has yet been created.

8

PUBLIC SECTOR

Energy Management Offices

By mid-1999, all government and public sector buildings had establishedEnergy Management Offices (EMO) in charge of planning energy savingmeasures. Provision had been made for a specific timetable of action;procedures and responsibilities were specified and plans of action suggested.

EnergyCertificate

As of 2000, new public buildings (2004 for all public buildings includingexisting ones) are required to have an energy certificate i.e. an energy identitycard, stating the energy performance of the building based on an energy audit.The cost of this instrument is estimated at €1,130 million by 2010; energysavings are estimated at 0.14 Mtoe/year and the reduction of CO2 emissions0.53 Mt/year in the Greater Athens area. A proposal for the methodology andprocedures for energy certificates has been prepared under the EU SAVE IIProgramme but the final details still have to be issued by the Ministry ofEnvironment, Physical Planning, and Public Works. The certificate system willbe launched together with an introduction of the new building energy code.

Third Party Financing

Third Party Financing is forbidden in the public sector. However, a draft law topermit third party financing in the public sector is under preparation


Mandatory Inspections

According to the law 1350/83, regular technical control of vehicles ismandatory. The control takes place at the Centres for Technical Control ofVehicles (to date, 58 centres operate all over Greece). As the frequency ofcontrols carried out was not satisfactory due to problems in the prefecturesrelated to infrastructure and personnel, Law 2963/2001 was introduced. Thislaw provides for the establishment of private technical control centres, theimprovement of public ones and the development of a special service that willsupervise the operation of the above-mentioned centres.

Since 1994, an exhaust control card (renewed annually) is required for allvehicles. The implementation of the measure was expanded beyond the Atticaprefecture and in 2001 covered 34 prefectures in total (covering 85% ofvehicles). The card is issued exclusively by certified auto-mechanics repairshops. By 2001, approximately 4 000 shops have been certified.

Furthermore, for the inspection of the implementation of the measure, mobileinspection units have been established. By 2001, there were ten such units inthe Attica prefecture and ten more in the other prefectures. During 2000, theunits carried out some 28 000 vehicle inspections.

Renewal of the Car Fleet

Law 1921/91 provided for reduced taxes on new car purchases if the buyerscrapped an old automobile without a catalytic converter. By 1995, some395 000 cars had been withdrawn from service and imports of vehiclesequipped with catalytic converters reached 652 000. These figures aresubstantial in relation to the 1995 automobile stock of about 2.2 million. Theincentive was stopped in 1993. In 1997 the Finance Ministry proposed asecond round of tax reductions for the period 1999 to 2004, but this has notyet been implemented as law as other measures, such as the reduction of thespecial tax for new car purchases, are also being considered.

Restrictions on the use of Private Cars

Access to the commercial centre of Athens by all types of vehicles (includingtaxis and motorcycles, but excluding public buses) has been prohibited since1995. This measure resulted in a significant improvement in traffic conditions

9

and, in combination with the circulation of flexible mini-buses, promoted theuse of public transportation. Since the mid-1980s, an alternating traffic system has restricted the use ofpassenger cars in central Athens. During the busiest hours, cars with odd-numbered plates may be used only on odd-numbered days and cars witheven-numbered plates only on even-numbered days. It is not clear, however,what the impact of the measure has been on energy efficiency and thereduction of environmental pollution given that the car users buy second carswith low energy efficiency and often more polluting with a different licenceplate number.

Vehicle Taxation

Vehicle taxation (Law 2682/99) is differentiated according to engine size andenvironmental performance.

Improvements in Transport Infrastructure

The efforts of the Ministry for the Environment, Physical Planning and PublicWorks to enhance the existing infrastructure have primarily focused on thefollowing targets: (a) Road grid improvements in large urban centres. The major part of these

improvements refers to the broader Athens area. During the three years1994 to 1996, significant infrastructure work on the existing road networkwas carried out, while an additional ECU 50 million has been spent onroad grid improvements during the period 1998 to 2000.

(b) Reconstruction of the major highway arteries. A number of significant

infrastructure works in the national highway grid are actually in progress.Specifically:

� Construction of the highway linking Patras-Athens-Thessaloniki (total

length: 730 m, total budget ECU 2 433 million). This highway will crossthe country from the north to the south and will link five administrativeregions, ten prefectures, 14 towns and five ports.

� Construction of the Egnatia highway in northern Greece (total length:680 km, total budget ECU 2 333 million). The work will permit directaccess to 19 large towns in Northern Greece, five ports, eight airports,ten important industrial areas. To date, 122 km have been completedand 280 km are under construction.

� Construction of the Rio-Antirrio bridge (total budget ECU 733 million).The work will be completed by 2004. It will significantly reduce thetravelling distance from Peloponnese to Central and Northern Greece.

� Undersea highway of Maliakos Gulf (total budget ECU 333 million).The new highway will reduce the travelling distance by 44 km comparedto the existing road grid. The work will be completed by 2002.

� Construction of the Stavros-Elefsina highway (total length: 70 km, totalbudget: ECU 1 667 million). The work will be completed by 2002 andwill link the west part of Attica with the new airport of Spata, which isoperative, without the need to cross the town of Athens.

(c) Improvements in the traffic light system. Within the framework of theprogramme Attica SOS (an on-going programme developed in 1994 inorder to tackle the serious environmental problems in the Attica region),improvements in four major road arteries of Athens have been carried out.In addition, a computerised system for the control of the traffic light systemin the centre of the Piraeus area has been completed. Additional work isin progress in the town of Thessaloniki, within the framework of theprogramme Thessaloniki SOS (an initiative similar to the one for theregion of Attica).

10

Interventionsin PublicTransport

(a) Improvements in the existing Athens metro line. Additional wagons havebeen added to the existing trains, increasing capacity during peak hoursby 15%, thus reducing car traffic.

(b) Construction of metro lines. Two new metro lines have been designed tosupplement the already existing Athens underground service. To date,most of the work has been completed.

(c) Efficiency improvements in buses. In Athens, old buses have beenreplaced by 614 new more energy-efficient and less polluting ones. By1998 approximately 1 000 more new buses had been purchased. Theprovision of 295 CNG buses, as well as the construction of a central refuelingstation in Athens was financed. The program was completed with success and thebuses have entered the bus network of Athens.

(d) Interventions in the traffic network of buses. New bus-lines in Athens weredeveloped and set into operation, while some of the existing ones wereexpanded. These bus-lines cover areas of the centre where there is heavytraffic during peak hours. The programme, co-ordinated by the competentbody for public transportation in Athens (OASA), is still in progress and sixmore bus-lines are going to be completed by 2002.

In order to further promote the use of public buses, OASA placed itinerarymaps in 3 500 bus stations. This action forms part of a large programmeto provide information to passengers. At the end of the programme, all7 000 bus stations in Athens will be equipped with such maps. Inaddition, in order to promote the combined use of public transport meansin Athens (buses, subway, trolleys, train etc.), itinerary maps –continuously updated – were placed in train and subway stations.

(e) Improvements in the Athens suburban railway network. This measureincludes the improvement of railway stations, the provision of vehicles, therenewal of traffic lights and the development of park-and-ride stations.The work is in progress.

(f) Reconstruction of the national railway network. The Railway OperationalPlan is financed by the Community Support Framework 1994-1999 with atotal budget of ECU 490.1 million. The Plan includes the following sub-programmes:

� Improvements in the railway line of Athens-Thessaloniki-Edomeni.� Provision of railway material and maintenance installations.� Improvements in the rest of the railway lines grid.� Connection with the port of Kavala, in Northern Greece.

The progress of work is satisfactory.

Furthermore, additional work is financed by the Cohesion Fund of theEuropean Union with a total budget of ECU 497.4 million, including theconstruction of two supplementary railway lines, electrification of thePiraeus-Athens-Thessaloniki railway line. This will facilitate a shift ofgoods and passenger transportation from gasoline and diesel vehicle torailway.

(g) A pilot project cofinanced by the OPE provides for the operation of busesfuelled by natural gas. It also includes construction of the necessaryinfrastructure.


The Greek government is aware that the biggest challenge to theimplementation of its energy efficiency and climate change programmes is theneed for accurate monitoring and assessment mechanisms. For the climate

11

change programme, it is planned to establish a Special Action Unitresponsible for monitoring and assessment. The accepted projects under theOperational Programme for Energy 1994-1999 (OPE) have been monitoredon a regular basis and their results will be assessed. In the 2001 in-depth review of the energy policies of Greece, the IEA stated:

The Government of Greece should:

� Establish an effective monitoring system to achieve energy efficiencytargets . Ensure that all programmes are evaluated objectively, preferablyby a third party, so that new programmes can be better designed.

Furtherinformation


Ms. Helen GratsiaHead of Energy Statistics SectionMinistry of DevelopmentEnergy Policy Directorate80 Michalakopoulou str.Athens 101 92Tel: 30 1 77 03180Fax: 30 1 77 17612email: [email protected]

mailto:[email protected]

IEA Energy Efficiency Update

HUNGARY

Updated July 2003

BACKGROUND

Energy Policy Concept

The Energy Policy Concept was approved by the Parliament in April 1993 (Resolution 21/1993 (IV.9) OGY). It identifies the following strategic objectives: • Security of energy supply through diversification of energy sources and

elimination of import dependence on the former Soviet Union (mainly Russia).

• Contribution to environmental protection. • Modernisation of the supply-side energy systems. • Increased demand-side energy efficiency through the modernisation of

supply structures and better management of electricity consumption. • Improvement in public information on energy consumption. • Attracting foreign capital for the necessary investments. • Approaches to the EU and other international organisations. Hungary became a member of the IEA on 3 June 1997. The Energy Policy Concept included an objective to increase the share of renewable energy sources in the primary energy balance to 5-6%, almost double the current figure. The estimated total utilisation of renewables can at present be put at 35 PJ, or 3% of total primary energy supply. For Hungary, the main objective is accession to the European Union; after the general elections of May 1998, the Energy Policy Concept was reoriented to be in line with the European legal system. The National Energy Savings and Energy Efficiency Improvement Programme was established in the framework of the Energy Policy Concept. This programme, adopted by the government in 1995, aimed at analysing the current situation, the savings potential and the ways in which the legal, institutional and financial framework of Hungary's energy efficiency policy could be strengthened.

Energy Saving Action Plan

Based on this National Programme, the Energy Saving Action Plan 2399/1995 (XII.12) (ESAP) was adopted by the government in 1996. ESAP consists of four major sets of measures: • Penetration of renewables. • Energy efficiency improvement. • Energy efficiency labelling. • Education, information and encouragement of technology innovation.

Hungarian Energy Policy Principles

In 1999, following developments in Hungary and the European Union (e.g. privatisation of the Hungarian energy sector, the EU liberalisation Directives, the Kyoto commitments, etc.), the government deemed it necessary to adapt the country's energy policy. This adaptation resulted in the government approved document The Hungarian Energy Policy Principles and the Business Model of the Energy Sector (Decision 2199/1999 VIII.6). It defined the following objectives: Creation of an efficient domestic energy market functioning as an

integrated part of the single European energy market, but respecting national particularities, serving the competitiveness of the economy and protection of consumers (competitive natural gas and electricity markets,

2

competitive district heating sector, market compatible regulation, detachment and regulation of monopolies).

Preservation and increase of the security of supply. Enforcement of environmental protection requirements on both future

developments and existing generating and energy-consuming plant. Improvement of public scrutiny and information, democratic control, and

for the remaining monopolies, transparent price regulation. The report recognises that energy efficiency must be brought up to a level close to that of the EU Member States. It stresses the main energy efficiency policy actions that Hungary should implement as a matter of priority in order to do this. The report mentions that it is important that Hungary fulfil its international obligations regarding environmental protection through some major measures. The document on Hungarian Energy Policy Principles states that an overall energy conservation programme must be drawn up to address the issue of co-ordinating individual energy conservation programmes already operating in Hungary, to prepare a proposal on earmarking funds for energy conservation in the state budget, to explore further channels of funding from international sources, and to find a way of handling such funds in a more co-ordinated manner.

Szécheni Plan

The 2000 "Szécheni Plan: A National Development Plan" covers all areas where Hungary’s distance behind the European Union slows down the development of the economy as a whole and hinders the process of closing the economic gap. This is not a complex economic political strategy, but a system of focal areas and breakout points that can be assimilated to the already existing economic political strategy. As such, the Szécheni Plan includes energy-savings programmes; the 2001 objectives of the Energy-Saving Programmes of the Plan included various programmes entitled: Communal, Local Government, Public Lighting, District Heating, Production Company Audit, Local Government Audits, Energy Saving Projects for Small and Medium-sized Enterprises, etc. The Energy Conservation and Energy Efficiency Improvement Action Programme (see below) is part of the Szécheni Plan.

Energy Conservation and Energy Efficiency Improvement Action Programme

Based on the principles in Business Model of the Energy Sector and related policy decisions, the government adopted the new Energy Conservation and Energy Efficiency Improvement Action Programme (Decision 1107/1999) that began in 2000 and is to run for ten years until 2010. This Action Programme is part of the Szécheni Plan, a broad effort to fund modernisation of the Hungarian economy launched in 2000. The Action Programme also includes initiatives related to renewables. The Programme lists 15 sectors and areas for financial support. It targets a 7-8% reduction in energy consumption per year (approximately 1.8 Mtoe) until 2010 in those 15 sectors and areas. This Action Programme has an annual budget of Ft 1 billion. In 2000, measured in terms of total final consumption savings, the Programme was thought to be successful, and the government increased its annual budget to Ft 5 billion in 2001. The Action Programme estimates that Ft 200 billion (€ 820 million) is needed to finance this programme over its duration, of which Ft 50 billion will come from the state. Support for the residential sector mainly involves grants of up to 30% for new and additional investments. Other sectors are offered a variety of measures ranging from loans with favourable interest rates to full grants. The Action Programme is reviewed every two years and amended by the government according to the results of the reviews.

3

From 2003 the support programmes of the earlier Szécheni Plan are being run under a new name – the National Energy Saving Programme.

Energy Centre To facilitate the administration of this programme, two earlier organisations, the Energy Centre and the Energy Information Agency, were merged. The Energy Centre1 founded by government decree 1031/2000 is a non-profit company, with around 50 work stations2. Its capital is owned by the founders: Ministry of Economic Affairs and Transport 60% Ministry for Environmental Protection 25% Hungarian Energy Office 15%

The Energy Centre has the following main functions: To administer the Energy Efficiency Improvement Action Programme by

presenting a shortlist of applicants to an inter-ministerial committee on energy efficiency (established in 1999). The agency provides a substantial contribution to the policy formulation process for energy efficiency programmes supervised, hosted or guided by the government. More targeted information aims at helping government bodies in the selection of instruments, allocation of resources and refining of programmes and policies for energy efficiency and the environment.

To manage the implementation of international energy efficiency projects using multilateral or European funding (UNDP/GEF energy programme for municipalities, EU-PHARE programme).

To produce energy information and statistics: the agency is responsible for operating Hungary's energy data system. It reports directly all required data to the IEA and provides relevant information to EUROSTAT via the Hungarian Statistical Office

The Energy Centre is also responsible for preparing a number of legally binding documents which are used by the Ministry of Economic Affairs and Transport and the Hungarian Energy Office in their daily operations (e.g. business plans reporting format to be used by energy companies, standard licensing agreements, etc.).

Hungarian Energy Office

The Hungarian Energy Office also plays a role in the energy field; it has the following responsibilities: Licensing of companies operating on the gas and electricity markets. Calculating wholesale and end-user regulated gas and electricity prices

and preparing the corresponding decrees which are then signed by the Minister of Economic Affairs and Transport.

Protecting interests of consumers. It covers electricity, gas and heat which is sold by power stations to district heating (DH) facilities (roughly equal to 50 MW of capacity). Issues related to DH are otherwise in the hands of the municipalities.

Hungarian Competition Office

The Hungarian Competition Office (HCO) monitors competition and mergers in the energy sector. The 1994 Electricity Act (act XLVIII of 6 April 1994 on the Production, Transport and Supply of Electric Energy) describes the tasks and responsibilities of the HCO (Magyar Energia Hivatal) (see below under District Heating and Combined Heat and Power).

1 Also known as the Energy Efficiency, Environment and Energy Information Agency. 2 The number of staff is high as some are working only part time, on secondment.

4

In the 2002 in-depth review of the energy policies of Hungary, the IEA stated: The government should: • Build on the positive steps already taken in establishing the Energy Centre

and provide it with adequate budget, staff and executive powers to allow it to fulfil its tasks at both national and international levels.


Hungary has been a signatory state to the United Nations Framework Convention on Climate Change (UNFCCC) since 1994. Under Annex B of the Kyoto Protocol, Hungary is committed to reduce its carbon dioxide (CO2) emissions by 6% in the time period 2008-2012 (six gases). As an economy in transition, Hungary has the right to choose its base year, and has opted for 1985-1987 as its base line period. Hungary submitted its First National Communication under the UNFCCC in 1994, six months after the ratification instrument was deposited. The Second National Communication: Hungary: Inventories, Stabilisation and Scenarios of the Greenhouse Gas Emissions and Removals of 1998 takes into account the new and substantial developments arising since the First Communication and presents the main policies and measures adopted or planned in the field of energy efficiency.

Climate Change Programmes

Hungary’s first National Environmental Programme (NEP) was adopted by Parliament in 1997. The NEP covers a six-year period (1997 to 2002). Specific quantitative targets have been set for the protection of air, water and soil, the built environment (human settlements, human health), nature and landscape, as well as special environmental issues (waste management, noise and vibration abatement, environmental safety). The NEP takes into account relevant international environmental policy action plans and programmes, such as the Environmental Action Programme for Central and Eastern Europe, the EU Fifth Action Programme and the Agenda 21. The government adopted the Hungarian Strategy on Climate Protection on 13 September 2000 (Government Resolution 2206/2000). The Strategy identifies the most important tasks in the various sectors, namely energy production and supply, transport, industry, agriculture and forestry. The energy sector has the highest priority since two-thirds of GHG emissions come from fossil fuel combustion. The Hungarian Strategy follows dual objectives: on the one hand it defines the governmental and non-governmental tasks in the light of preparation for accession to the European Union; on the other it gives a general planning and conceptual framework until 2012. In particular, the strategy aims to: Meet the Kyoto commitment entirely through domestic measures. Develop and select measures through a dialogue with the different

economic and social interests groups in the country. Support the development of an efficient monitoring and reporting system

for greenhouse gas emissions but also emission reduction projects, to minimise administrative costs of Joint Implementation.

Use the flexibility instruments under the Kyoto Protocol only for additional emissions savings. A system for Joint Implementation – the reduction of emissions through specific projects and the transfer of these reductions to other Parties – and emissions trading is to be developed in the longer term.

5

In the 2002 in-depth review of the energy policies of Hungary, the IEA stated: The government should: Establish a clear institutional framework for Joint Implementation projects

to facilitate access of foreign investors and minimise transaction costs. Consider whether to use the existing emission trading surplus under Kyoto to encourage early investment in Joint Implementation projects.

Consider broader participation in international emission trading under the Kyoto Protocol and how it can be managed by the government to improve the environmental performance of Hungary, e.g. through financing of additional projects to reduce greenhouse gas emissions.

Define a timetable for joining an emission-trading regime. Maximise transparency on environmental issues, leading to a wider range

of alternatives and bringing public acceptance of the decisions.




Most of the existing energy efficiency standards are considered obsolete and it has been decided to review and upgrade them all. In this context, and to match the European Union regulations, the Ministry of Industry, Trade and Tourism and the Hungarian Energy Office are involved in the preparatory work to upgrade the standards for buildings, motors and appliances. The document Hungarian Energy Policy Principles and the Business Model of the Energy Sector mentions that energy consumption efficiency can be expected to increase when prices reflect the actual costs of energy production. Tariffs based on actual costs will significantly improve the pay-back conditions of energy efficiency investments both in manufacturing industry and in households.

Building Codes

The Hungarian Insulation Standard MSZ 04-110-2-192, which regulates buildings, the walls, floors, doors and windows, and defines the k insulation ratio, has been in force since 1992. But although Hungary adopted very strict mandatory building codes, comparable to the strictest standards in the EU, enforcement and quality control in buildings are lacking. As numerous standards in place were not respected, the government made the standards voluntary in 1994. The architect has to include in his report a statement that the design of the building is correct in this respect. Parliament has introduced the Act on the Formation and Protection of the Built Environment LXXVIII. Based on this new Act a ministerial decree 39/1997(KTM-IKIM r.) was introduced on the qualification requirements of the building materials in line with the European Union Directive (89/106/EEC) relating to construction products.

Energy Labelling

To comply with the EU regulations, five ministerial decrees regulate the energy labelling of household electric refrigerators, freezers and their combinations (5/2002 GM decree of the Minister of Economic Affairs and Transport), the labelling of washing machines and dryers (6/2002 GM decree of the Minister of Economic Affairs and Transport), the energy labelling of household dish washers (7/2002 GM decree of the Minister of Economic Affairs and Transport), and the energy labelling of household lamps (4/2002 GM decree of the Minister of Economic Affairs and Transport).

6

The ministerial decree (12/2002 GM-KöViM-KöM decree) is about fuel efficiency and carbon-dioxide emission requirements for newly distributed cars. Based on this decree it will be obligatory for dealers to indicate clearly for consumers – by labelling the cars and advertising on posters at the dealer point – the fuel consumption and carbon-dioxide emission data of the product based on the technical documentation. This data must be displayed on all advertisements. The Ministry for Environment and Regional Policy established an environmentally friendly labelling scheme in 1994. Energy efficiency is one of the requirements with which applicants have to comply. One of the barriers to the introduction of labelling is lack of funds to finance related research and qualification activities, and to maintain accredited laboratories. Although manufacturers would be willing to pay for the labels, this would not be sufficient to finance the operation of the institutional background for qualification.

Building Certificates

In order to introduce the building’s certification system required by the Energy Saving Action Plan, two feasibility studies have been undertaken to work out the data sheet related to energy consumption, heat supply, heating, hot water production, gas and electricity supply. The introduction of such certification should increase the energy performance of each building.

District Heating/

Because of its hot water springs, Hungary has more than 60 years of experience with district heating, and the first district heating (DH) system involved geothermal steam piped from Margit Margaret Island in Budapest. However, DH was only developed on a large scale in the 1960s, when major housing construction programmes began. Today, Hungary has 142 DH companies which operate 240 systems in 109 towns and cities. These companies supply some 644 000 apartments, which represent about 16% of the roughly 4 million households in Hungary. Total final consumption of heat was 2.29 Mtoe in 1990, but fell to 1.42 Mtoe in 1997. Natural gas accounts for 66% of the fuel used for district heating; coal and oil account for 19% and 11%, respectively; and renewables, waste and other fuels represent 4% of inputs. About 19 of the 103 municipalities distributing heat buy it from the independent generators who operate combined heat and power (CHP) plants near the big cities. An example is the privately-owned Budapest Power Plant Company, which operates several CHP plants on the outskirts of Budapest. Those municipalities who do not buy heat from the Hungarian Power Company (MVM) generally produce it themselves in CHP or heat-only plants. For a long time, DH companies received significant amounts of financial support from the central government, through a 30-40% subsidy to end-user prices. These subsidies were abolished in 1991. The issue of strong regional price discrepancies and remaining amounts of cross-subsidies led to consideration of a uniform, national regulatory framework for district heating: a District Heating Law was adopted by the Hungarian Parliament in March 19983. Before that, the ownership of DH companies was handed over to the municipalities through the Municipality Act. Special rules of the District Heating Law of 1998 and the Law on Concessions allow a restricted privatisation of up to 49% of the capital, maintaining ownership of the majority of the shares by the municipality. A private concession for the operation of the DH system is also allowed if 100% of the capital remains in the hands of municipalities.

3 The District Heating Law defined rules and responsibilities in district heating; however it could not solve the problem of cross-financing.

7

Responsibility for municipal DH, including the setting and control of end-user prices, was also transferred to municipalities in 1998, through the District Heating Law. The Minister of Economic Affairs exercises the power to settle prices of heat supplied by power plants over 50 MW. Price determination and DH licensing falls under the responsibility of the Hungarian Energy Office insofar as it involves an electricity production capacity of 50 MW or more4. District heating companies operating under the authority of municipalities have to purchase heat at artificially high official prices while their tariffs for selling heat to their customers are kept low for social and political reasons and in the context of strong competition from natural gas suppliers in the residential sector. Gas prices are official prices also decided by the Minister, and kept artificially low. The document Hungarian Energy Policy Principles and the Business Model of the Energy Sector states that it is necessary to improve the whole district heating system, to modernise it and make it competitive. The complete reorganisation of the network involves the following actions: • Renovation and modernisation of heat generating plants. • Reconstruction of district heating supply systems (pipelines and heat

centres). • Provision by local governments owning the systems to create competition

between DH operators, to remove the current monopolies in service provision, thus paving the way for more technically advanced and more economical service.

• Reconstruction and renovation projects for residential buildings served by DH.

• Introduction of charges based on metering of building's actual consumption, as provided by the Act on DH supplies.

• Implementation at the discretion of individual residential communities of output-side cost sharing and control-per-radiator.

The document mentions that the current environmental regulation must be modified to enable the environmental advantages of DH systems to be more fully exploited. In its action No. 15, The Energy Conservation and Energy Efficiency Improvement Action Programme of October 1999 considers that the reconstruction of the district heating system is of high priority, the objective being to save 10 PJ of energy per annum until 2010. The modernisation of the systems benefited from a total € 19 million in 2001 on the supplier and consumer side in the form of non-reimbursable direct capital support, based on the government’s Szécheni Plan. The maximum of the subsidy was 30% of the investment cost. The new government has now changed its support to preferential credits. There are also other funds for improving the district heating available, such as the Environment Protection Fund, the German Coal Aid Revolving Fund-GCARF.

Combined Heat and Power (CHP)

Total capacity of CHP in 1999 amounted to 873 MW. CHP produced 4.8 TWh of electricity and 46 PJ of heat in 2000. According to the Ministerial Decree 55/1996, the electricity transmission company (MAVIR) or electricity distribution companies are required to purchase electricity produced from renewable sources and from small scale CHP (from 0.5 MW up to 20 MW) at guaranteed prices. Under the new Electricity Law of 2002 (to enter into force in 2003), mandatory purchasing will be enforced with guaranteed prices from 0.5 MW up to 50 MW (up to 5 MW only for industrial CHP and hydro-power), and with market prices above the given limits. Since 1 January 2001, purchase prices are very attractive (between Ft 14 and-15 per kW) and are

4 The 2002 Electricity Act raised the limit from 20 MW to 50 MW.

8

also applied to heat prices. Future prices for electricity and heat will be regulated by the Hungarian Energy Office. In the 2002 in-depth review of the energy policies of Hungary, the IEA stated: The government should: Investigate through the Hungarian Energy Office (HEO) and the Hungarian

Competition Office (HCO) whether prices for heat are being set on a reasonable cost reflective basis and, if not, devise and implement an appropriate solution to avoid harmful price distortions between heat and power affecting negatively investments and modernisation of CHP and district heating systems.

Education, Public Awareness

During the 1990s the awareness activities launched by the central administration decreased. By the middle of this period, many actors recognised the need to increase energy efficiency awareness. Promoting energy efficiency is also of concern to the electricity industry. Both the Hungarian Power Co. (MVM) and the distribution companies launched local public relations campaigns that included energy saving related elements. MVM opened an education facility in Budapest, where information related to energy saving is provided to the general public. The gas utilities are also beginning to show some interest in this activity. Another promising initiative is the Green Bridge movement. Starting in Pécs, energy utilities established a local organisation to promote energy efficiency and environmental control. They publish and distribute pamphlets, organise schools programmes, launch campaigns and provide advice to consumers. Hungarian Energy Policy Principles of July 1999 states that a national programme must be set up to spread awareness of energy conservation and the use of renewable energy sources, conveying their advantages and the means of implementing them. A key target should be to communicate their importance convincingly to young people. Basic training on energy saving should also be integrated into vocational skills training. The Action Programme of October 1999 stresses the need to strengthen information on energy savings in the educational system, to support advisory networks and consumer offices and to spread widely advertisements, brochures for consumers and media campaigns to encourage consumers to save energy. The widespread use of energy efficiency labelling is also recommended. The objective is to save up to 10 PJ energy per year until 2010: to this end Ft 25 million of grants was to be spent in 2000 and Ft 50 million in 2001, with the target of increasing this to Ft 100-200 million per year. In 2002, in the framework of the Szécheni Plan, a public awareness programme was implemented and directed mainly at the education sector. Non-governmental organisations have played an important role in this field. The Energy Efficiency Advisory Network launched by environmental NGOs, the Enterprise Development Agency (MVA), the Hungarian Alliance of Technical and Science Association (MTESZ) form a group of some 20 Regional Energy Advice Centres throughout the country. To develop these energy advice centres, Hungary benefited from funds channelled through the EU PHARE Programme and the Dutch energy agency NOVEM.


Revolving Fund

The energy saving programme German Coal Aid Revolving Fund (GCARF) came into force on 1 August 1991 relying on a German coal support facility.

9

The original target was to provide finance to the private sector to support energy efficiency investments and at the same time reduce environmental pollution. The GCARF is administered by the Hungarian Credit Bank and is an integral part of the bank’s lending operations. Its scope has been expanded to municipalities, enterprises and institutions they own. The main objectives of GCARF are to replace traditional energy sources with renewables or waste related energy sources, to induce energy saving businesses and to reduce energy waste at the lowest possible cost. The preferential interest under this facility is one-third of the central bank’s base rate with an additional 2.5% interest. From 1 August 1991, the date at which the credit application scheme started until the end of 2002 the total amount of investments approved for “live projects” by the Professional Jury in charge of managing the programme has run to Ft 19.5 billion, of which Ft 11.9 billion is made up of preferential credits. In 2000, the GCARF allocated more than Ft 1 billion in preferential credit for small and medium-sized enterprises, which resulted in an energy saving potential of 325 TJ/year and in a total investment of Ft 1.6 billion. In 2001 with the total sum of Ft 0.89 billion preferential credit started investments with a value of Ft 1.41 billion. The estimated energy saving potential was 0.22 PJ/year. In 2002 the amount of the preferential credit was raised to Ft 1.51 billion. The total investment of Ft 3.53 billion will result an energy saving of 1.04 PJ/year. The GCARF has achieved substantial success, allowing an annual energy saving of 8.16 PJ up to 2002 which corresponds to an annual saving of Ft 7.091 billion. The expenditures envisaged for the development project are refunded after an average of two or three years. About 83% of the approved energy rationalisation projects have already been completed and monitored and the value of energy savings with the commissioned facilities has surpassed the overall target figures laid down in the bank contracts by 8%.

Energy Efficiency Grant for Households

To modernise the large number of poorly insulated housing blocks, Hungary launched a reconstruction programme (the SZT-EN-1 Programme) within the Szécheni Plan. This non-reimbursable grant is given to people wishing to make energy efficiency investments in their houses, such as heating reconstruction, additional insulation and window and door replacements (Ft 60 000 per apartment). In 2001, the Energy Centre supported around 4 000 applications; total grants amounted to Ft 1.51 billion. In 2002 out of 8 400 applications 7 900 were supported (the rest were not because of lack of available grant) and may reached Ft 2 475 billion for 2002. The new Hungarian government launched the same type of energy efficiency support scheme with a new name: National Energy Efficiency Programme. This new programme is also managed by the Energy Centre and the available amount for the year 2003 is Ft 2.97 billion. The SZT-LA 2 Programme offers non-refundable grants to carry out energy efficient renovations in residential buildings made with prefabricated technology and for retrofitting of company buildings with industrial technology (block houses). In 2001, total grants amounted to Ft 2 billion.

Pilot Panel Programme

In 1996, a Pilot Panel Programme (PPP) was launched to improve the thermal insulation of buildings. The first phase of the PPP aimed at improving the thermal performance of almost 5 000 apartment blocks. The Central Environmental Fund provides almost Ft 60 000 in grants to upgrade the insulation of each individual dwelling. The average payback time of the investment is less than ten years. The pilot programme is managed by the Hungarian Foundation of Enterprise’s Development. The association of

10

producers and sales representatives of insulation materials and technologies are also involved in the project’s implementation. After evaluation of experiences gained in 1997, the programme is expected to be extended.

Preferential Interest Borrowing Facilities

In the first half of 1996 the government adopted a decision according to which preferential interest borrowing facilities have to be offered to collectivities wanting to carry out energy-efficient renovations in buildings made of prefabricated components. Any residential building made with prefabricated technology and consisting of at least ten apartments or one or several blocks of apartments may be the object of an application when the energy resource used is inefficient and the renovation is expected to result in energy saving. A credit may also be used for any other residential building or blocks of such buildings for which the renovation results in energy saving. The state support is designed to help pay the interest on the loans provided by financial institutions for the implementation of energy efficiency projects, if the residential building does not meet the heat-engineering standard. The work of renovation, modernisation and heat insulation has to cover the outside walls, roofs and ceilings, and the replacement of outside doors and windows. In the case of prefabricated technology-based residential buildings, composed of at least ten apartments, the interest subsidisation amounts to two-thirds of the interest charged by the financial institution. It is refunded by the budget to the financial institution on a monthly basis. Regarding other residential buildings, the amount of support provided to the credit facility based on deferred interest payment is 4% of the principal owed at the beginning of the period of amortisation or of the period of new interest calculation in the first five years of the amortisation; it is 3% in the second five years.

Non-reimbursable Support

As proposed by the professional association of domestic manufacturers and distributors of heat insulators, Phase I of the National Building Insulation Programme started in 1997 with the co-operation of the Hungarian Foundation for Enterprise Development. The Programme’s goal is to supply heat insulation to 5 000 apartments, for which a non-reimbursable support of Ft 300 million (Ft 60 000 per apartment) will be provided through the applications scheme by the Central Environmental Protection Fund. In the 2002 in-depth review of the energy policies of Hungary, the IEA stated: The government should: Give priority to strengthening energy efficiency in the building sector,

through the implementation of energy efficiency standards in the household sector with reference to the EU regulations, improve and enforce the mandatory thermal insulation standards, and strengthen the programme for retrofitting the energy inefficient housing stock.

INDUSTRY


In the production sector, a growing number of industrial companies realise the interrelation between energy wastes and profit losses. Many of them know at least what ought to be done. Recently, as more and more companies become stabilised, they are starting to implement energy efficiency plans. Certain big companies such as Mol (oil company), MÁV (national railways), Richter (pharmaceuticals), Cereol (vegetable oil), Nitrokémia (chemicals) and others have made good progress in energy efficiency programmes on a voluntary basis and without governmental co-ordination or obligation.

11

Energy Audits:

Within the framework of the Szécheni Plan, non-refundable grants are provided for energy audits in companies with energy costs of Ft 30 million per year or higher. In 2001 32 company audits were supported for a total amount of Ft 119 million. In 2002, the support amounted to 50% of the total audit (maximum amount per application: Ft 5 million). Eight company audits were supported with an amount of Ft 20 million. In the 2002 in-depth review of the energy policies of Hungary, the IEA stated: The government should: Strengthen energy audits in industry (including small and medium

enterprises), and measures to encourage the audited enterprises to implement recommended cost-effective measures.

Financial Incentives

The government has designed financial support to promote energy efficiency in industry by soft loans or through support systems based on the German Coal Aid Revolving Fund, the Central Environmental Protection Fund and the PHARE Energy Efficiency Credit Fund. The Hungarian Energy Policy document states that incentives must be provided for investments increasing the efficiency of energy production and transformation, and efficiency will also be served by imposing the least-cost principle on new energy projects.

ESCOs

Seven ESCOs operate in Hungary: they focus on heating projects, in particular gas-fired boiler plants, and, to a lesser extent, on public lighting and thermal insulation. The Hungarian Energy Efficiency Co-financing Programme (HEECP) developed in 1997 by the World Bank and funded by the Global Environmental Facility Programme (GEF) facilitates the establishment of ESCOs and maintain the stable economic conditions for their development.

PUBLIC SECTOR


PHARE Revolving Fund

One of the various PHARE projects of the European Union is the PHARE Revolving Fund (PRF) established as a soft-loan credit facility to support the energy efficiency investments by medium-sized and small enterprises from the private sector and by municipal-owned companies and institutions. The investments are co-financed by the European Investment Bank (EIB) and/or by one of the two Hungarian commercial banks selected for the operation of the credit scheme. A grant of ECU 5.0 million was provided by PHARE in two portions in 1998 and 2000 and it is used as a revolving fund. The scheme functions as a preferential credit scheme where the interest on the PHARE share is zero while the share of the international financial institutions (i.e. EIB) and/or that of the Hungarian banks bears a market interest. The two can then be mixed into a preferential “interest”. The loans are offered by the two commercial banks and the Energy Centre is responsible for the project evaluation and co-ordination. The facility is supervised by an inter-departmental steering committee. Full operation of the PRF started in the winter of 1998. By the end of 2002 over 90 loan applications were submitted to the two banks operating this credit scheme, of which 77 projects were found eligible for

12

funding. The total investment cost of eligible projects is over € 45.6 million, with a total loan amount of about € 28.4 million, including € 7.5 million interest-free PHARE component. The total savings in energy are estimated at 2 241 TJ/year of primary energy, corresponding to a reduction of CO2 emissions of about 203 kt/year.

Energy Saving Credit Programme

The Energy Saving Credit Programme (ESCP) was launched at the end of 1996 as a preferential-loan facility following a government decree by the Ministry of Industry, Trade and Tourism. In 1997, the main objective of the ESCP was to support the energy efficiency investments aimed at the modernisation of energy use in municipality-owned institutions (schools, hospitals, social and health care buildings, etc.). In the first year, 1977, the credit line amounted to Ft 780.5 million, provided by commercial bank loans. The preferential interest rate was at 50% and the cover for it was provided by the Provisions for Economic Development. An important criterion is that at least half of the costs saved by the investment should be reached by the reduction of the energy bill. One other criterion prescribes a minimum (specific) saving on the primary energy use, therefore the simple fuel switching projects (without efficiency improvement) are not accepted. As a result of the 1997 programme, an annual fuel saving totalling a heat value of 256 TJ has been achieved with a CO2 emission reduction of about 18 000 tonnes. The government adopted a resolution which rules that, first, the energy-saving projects of the municipality-owned public institutions should be further encouraged; second, a multi-year programme has to be started for the modernisation of the district heat supply system; and, third, the principles of “third-party” financing and the relevant institution have to be elaborated. In 1998, the municipality-related programme continued following approval by the government. Subsidies/preferential loans amounted to Ft 971.3 million for a total investment of Ft 1 277.6 million, corresponding to an energy saving of 270.8 TJ and a CO2 emission reduction of 18 000 tonnes. In 1999 and 2000, the subsidies reached Ft 877.9 and Ft 1 024 million for total investments of Ft 975.8 and Ft 1 612 million respectively. This resulted in energy savings of 189.8 TJ in 1999 and 325 TJ in 2000. The CO2 emission reductions amounted to 11 000 tonnes and 31 000 tonnes. The Hungarian Energy Policy document stresses that the Energy Saving Credit Programme will be extended by the launch of the district heating reconstruction sub-programme. There is a programme for the reconstruction of the DH supply side launched in 2000 and continued in 2001 with a budget of Ft 315 million.

Activities Implemented Jointly (AIJ)

In March 1995, the governments of Hungary and the Netherlands expressed their wish to realise jointly a series of AIJ projects. The aim of these projects would be to promote AIJ as a feasible concept. One of the projects involves energy conservation in local municipalities. The project is a small-scale energy efficiency project for municipalities and utilities managed by NOVEM (National Energy and Environmental Agency of the Netherlands) together with EGI (Institute for Energy Management, Hungary) consulting and engineering in Budapest. In this simulation study, a number of energy efficiency projects initiated by local governments are analysed. In most cases, these projects are identified based on expert advice provided earlier through the Dutch bilateral PSO programme and through twinning arrangements with Western European cities within the EU — PHARE/ECOS/UVERTURE “urban twinning” programme. A

13

total of 62 projects are monitored in 12 different cities. In addition, a combination of a small-scale cogeneration (CHP) project and a demand-side management (DSM) project at the Technical University of Budapest is incorporated. These projects were developed by the Dutch utility Westland and the Budapest gas utility Fögáz and are implemented by a joint venture of both companies. Implementation of the measures is financed by the local governments themselves. This is done either from own resources or by attracting external funds. These external funds can be commercial loans, but soft-loan arrangements (e.g. the German Coal Aid Revolving Fund) or third-party financing have also been used by local governments to generate the financial resources required. These varying financing mechanisms generate additional experience and input for the AIJ simulation.

SCORE Programme

The SCORE programme (1997-2000) (Supporting the Co-operative Organisation of Rational Use of Energy) was supported by the Netherlands Ministries of Economics, Environmental Protection and Foreign Affairs, and its implementation was supported by the Hungarian Ministry of Industry, Trade and Tourism, the Ministry of Environmental Protection and Regional Affairs, and the Ministry of Finance. The programme aimed at improving energy efficiency in Hungary by the establishment of institutions and the support of demonstration-type projects. The Netherlands ministries provided Ft 65 million in support of the SCORE programme, and an additional Ft 100 million was subsequently made available from other Dutch sources for the implementation of projects. Three major projects have been identified and implemented: • The study on Macro-Economic Assessment of Energy Efficiency reviewed

and evaluated strategic concerns of energy efficiency. It developed models that help understanding of the effects of energy efficiency on the state budget, and on economic and environmental processes.

• The project entitled Development of Energy Awareness initiated changes in people’s behaviour and encouraged them to undertake actions they can implement themselves. The core of the effort was a series of short films broadcast by national television, and several regional and local television companies. This was supported by background activities including publication of the film material in brochures, establishing a network of local advisory centres, a co-ordinated campaign of other media and active participation of utilities, manufacturers, etc.

• The third project covered the selection and establishment of a demonstration region for energy efficiency where the various alternatives of energy saving were presented. Demonstration-type energy efficiency projects were carried out which could subsequently be implemented in other regions in a similar way. Two organisations have been selected for these activities in Miskolc and Debrecen.

The programme was finalised in 2000 including several successful programmes carried out in the last year, such as a national energy efficiency contest for schoolchildren, an energy efficiency advisory campaign in shops selling household appliances, etc. One of the most important objectives of the Score programme was the establishment of a sustainable infrastructural background of energy efficiency and in this respect the programme was absolutely successful. The network of the energy efficiency advisory centres was formed from green NGOs, enterprise development agency offices and from the MTESZ offices. The SCORE programme made this uniform network possible by providing a training course for the organisations.

14

UNDP/GEF Programme on Public Sector Energy Efficiency

This programme, funded by UNDP, the Global Environment Facility (GEF) and with additional funding from the Hungarian government through the national energy efficiency programme, aims at improving the country's energy efficiency in the public sector, thus mitigating GHG emissions, mainly CO2. It seeks to remove barriers to energy efficiency in municipal buildings (including schools, hospitals and other public buildings). Preparation for the implementation of the programme started in January 2001. The programme has to achieve three broad objectives:

Improve the development of energy efficiency policy, increase

awareness, and improve co-ordination of energy efficiency policies. Identify, develop and finance energy efficiency projects in municipalities.

A fund co-financing energy audits and feasibility studies helps to achieve this objective.

Improve the knowledge base on energy management and energy efficiency technologies. Most training curricula targeted regions with specific needs and initiated some training activities which will be supported by the Regional Advice Centres. Information materials will be disseminated as "Best Practice" series.

The Energy Centre runs this programme. In the 2002 in-depth review of the energy policies of Hungary, the IEA stated: The government should: Continue and strengthen the close co-ordination between all energy

efficiency plans involving national, European and international institutions to make the optimal use of such expertise and funding.

Public Lighting

A subsidised programme of preferential credits is to be launched to moderate the costs of public lighting (change of bulbs, voltage regulations). Energy savings amounting to 1.2 PJ per year will be achieved. The programme was launched in 2000 and continued in 2001 with a total budget of Ft 150 million per year.

Energy Management in Local Governments

To improve the energy management in all local governments, the Action Plan of October 1999 provides grants to help them to design local energy saving concepts, energy supply plans and for audits on energy losses. The total available resources are a Ft 125 million loan at a rate of 06% below BUBOR. The support is a subsidy on the interest at a rate of 50% of the rediscount rate.

Other Programmes

In addition to the above programmes, other international support facilities are available. For example, in the framework of the European Union, there is the SYNERGY programme designed to help shape energy policy, the THERMIE programme for the implementation of energy technology related and other developments and projects, and the SAVE programme which have been opened up to associate countries of the EU (including Hungary).

TRANSPORT In June 1996, the Hungarian Parliament passed a new framework transportation policy, which is designed to guide policy development up to the year 2000 while integrating policy objectives for after 2000.

Road Transport

Import Restrictions

Because of the high share of relatively old, fuel-inefficient cars, the profile of the vehicle fleet is problematic with regard to air pollution and fuel economy. The government took steps to limit the inflow of old, polluting cars by

15

prohibiting imports of vehicles more than six years old and those with two-stroke engines. In 1996, the age limit was tightened to four years.

Vehicle Scrapping

To stimulate fleet renewal, a vehicle scrapping programme offering Ft 30 000 in public transport tickets has been set up as an incentive to retire old two-stroke Trabant cars from the fleet. This programme resulted in the scrapping of 10 000 vehicles in 1993; 100 00 vehicles were retrofitted with subsidised catalysts.

Mandatory Vehicle Inspection

Mandatory vehicle inspections are carried out at licensed service stations; owners whose vehicles do not meet the standards have 15 days to make improvements. Since 1992, the number of vehicles passing the yearly emissions tests has increased and average emission levels have dropped. Since 1995, emission standards for new and imported used petrol vehicles are equivalent to those introduced in the European Union in 1993; the application of emission standards (UN-ECE standard 49.2) for new diesel vehicles including buses and trucks is strict.

Development of Transport Systems

The 1996 Transport Policy cites as one of its principal objectives the building “at the earliest possible date” of major motorways from Budapest to the country’s borders. In addition, a system of connecting roads to the primary radial network is necessary. For Budapest, the completion of the city ring road is cited as a development plan. Further objectives include increasing national highway capacity; building bypasses in congested areas; and repairing and completing existing infrastructure. To improve the organisation of freight transport by road, the Energy Centre will launch an Internet site with a wide range of relevant data on the freight and the vehicles with their different destinations. This system could be extended in the future to water and rail transportation so that road transport can be shifted towards shipping and rail.

Urban Transport

The 1996 Transport Policy calls, inter alia, for the following measures: • Improvements to parking facilities at railway and bus stations, park and

ride opportunities. • More attractive fee structure to attract ridership. • Re-examination of state and local government authority over public

transport. • Renovation of bridges across the Danube and increased river-crossing

capacity. To help the Budapest Transport Company (BKV), discussions on credit opportunities have begun, and in 1995 investments from the World Bank and the EBRD were accorded to improve the tram, bus and metro systems. Renovation of the vehicle fleet has also been undertaken, including purchases of new buses and reconstruction of bus engines. Tariffs have been significantly raised over the past five years as subsidy support has been reduced. Further increases in tariffs are envisaged over the coming years as BKV aimed to attain a 50% cost recovery requirement by 2000 that was imposed in the international loan conditions.

Rail Transport

Objectives outlined in the 1996 Transport Policy for railway transport development from 1995 to 2000 include the following: • Restructuring and renewal of railway organisation, increased safety,

improvement in service quality and competitiveness, and capacity improvements.

• Implementation of an investment programme for track maintenance. • Modernisation and upgrading of lines along EU transportation corridors to

16

a 160 km/h limit. • Reorganisation of MAV (Hungarian National Railways); restoration of the

organisation’s solvency. These objectives are considered by the government to be ambitious and difficult to reach given the time frame provided and the poor economic and financial situation of MAV.

RABA/IKARUS Project (AIJ)

The RABA/IKARUS project will transfer technology to enable Hungarian industries to produce buses with compressed natural gas engines. The technology will be provided by Deltec, a producer of gas-fuelled engines, and the TNO research organisation, both in the Netherlands. Participating firms are the Hungarian RABA, producer and installer of bus engines, and IKARUS, the Hungarian bus manufacturer. It is estimated that some 3-4 000 buses provide transportation in the major Hungarian cities. Most of them currently run on diesel oil and emit CO2 and other pollutants to an extent that varies with the type of engine and the size of the bus. The installation of CNG engines on all Budapest buses that currently have an old diesel engine would prevent emissions of 6 400 tonne of CO2 per year. The AIJ partners estimate that in Budapest all full-size buses (90 passengers or more) together cause CO2 emissions of 120 000 tonne per year. In the 2002 in-depth review of the energy policies of Hungary, the IEA stated: The government should: Establish and implement a comprehensive long-term energy efficiency

Transport Plan with clear objectives supported by adequate cost effective measures and investments funded on the long-term to limit the growth of road transport. Include measures to stimulate investments in public transport, on driver behaviour (car labelling for example) and on the diffusion of cleaner fuels and low emission vehicles.


Monitoring the efficiency of the programme of measures requires the installation and operation of an appropriate measurement and control network. A conceptual plan and the related action plan for developing the national measurement network have been prepared.

Assessment of policy instruments mainly in the field of energy efficiency

This research project was initiated by the University of Applied Sciences of Zittau (Germany) for eight energy agencies in transition countries based on the experience of East-Germany. The basic concept is the analysis of implemented policy instruments in the field of energy. The consumption patterns of transition countries are inadequate because of the application of inefficient technologies, inadequate energy management within the industry, due to lack of measuring tools, defective regulating technology, insufficient building insulation within heat supply in buildings. Subsidised energy prices give unsuitable signals for households. The project aims at mapping the barriers to energy efficiency: laws, regulations, standards, requirements and prohibitive rules will be examined in the frame of this project. The different experiences with policy instruments will be evaluated. Cross-country comparisons will be made of results arising from the implementation of different energy policy concepts. The purpose is to detect the strengths and weaknesses of transition countries in the field of energy efficiency. The most successful instruments will be recommended to all

17

participants. The instruments examined are the following: Effectiveness of energy price and fiscal policy. Subsidies received for the use of renewable. Existing standards for energy consumption (buildings, household

appliances). Subsidies for the introduction of CHP. Subsidies for the implementation of effective heating systems. Implementation of measurement and control devices to determine energy

consumption. Identification of applied management methods. Identification of existing institutional obstacles of energy efficiency. The duration of the project: 40 months.

In the 2002 in-depth review of the energy policies of Hungary, the IEA stated: The government should: Strengthen the appropriate measures and capacities to carefully monitor

and assess all the energy efficiency programmes and measures to adjust them according to the changing economic context.

Further information

For further information, please contact: Mr. Gabor Bartus Director of Strategic Division Energy Centre H-1092 Budapest Raday u. 42-44. Tel: +36-1 456 43 79 Fax: +36-1 456 43 01 E-mail: [email protected]

1

IRELAND Updated July 2002 BACKGROUND National Development Plan 2000-2006

The Economic and Social Infrastructure Operational Programme of theNational Development Plan (NDP) 2000-2006 sets out as a key priority thoseareas of expenditure that will assist Ireland in complying with its obligationsunder the Kyoto Protocol. The NDP made a provision of € 222.52 million forthe promotion of energy efficiency and renewable energy initiatives.Sustainable Energy Ireland (SEI) (see below) has sub-divided the funding intothe following categories: � Strengthening the activities of Sustainable Energy Ireland; € 46.7 million. � Built environment: € 36.56 million.� Research and Development: € 72.43 million.� Renewable and Grid: € 66.83 million.

Energy and theEnvironment

Ireland signed the UN Framework Convention on Climate Change in Rio deJaneiro on 13 June 1992, ratified it on 20 April 1994 and submitted its first andsecond National Communications under the United Nations FrameworkConvention on Climate Change in October 1994 and July 1997 respectively.

In December 1997, under the Kyoto Protocol, the EU agreed to reducegreenhouse gas emissions by 8%. Under the EU Burden-Sharing Agreement1of 17 June 1998, Ireland is allowed to increase its emissions of a basket ofgreenhouse gases to 13% above 1990 levels, which represented a reductionof approximately 15% below a business as usual scenario. The commitmentperiod for the target is for 2008-2012; the Protocol also requires thatdemonstrable progress be made towards achieving this target by 2005.Carbon dioxide is the largest component of Ireland's greenhouse gases (60%in 1999). Energy use is responsible for 32% (1990 levels) of emitted carbondioxide.

Ireland published its National Climate Change Strategy in October 2000. Itsobjectives are to put in place a framework for action required to meet Ireland'scommitment under the Kyoto Protocol. Key energy-related initiatives include:

� Expansion of renewable energy.� Introducing greenhouse gas taxation from 2002, giving priority to carbon

dioxide.� Participating in international trading in emissions.� Ensuring that measures to improve energy supply would permit the

ceasing of coal-use and fuel switching towards less carbon-intensivefuels.

� Measures on fuel efficiency, demand management and modal shift.� Measures to reduce emissions from the built environment, including

improved land-use, further review of building regulations to promote betterinsulated and more energy-efficient new buildings, and restructuringgrants for new houses to favour more energy-efficient houses.

� Full liberalisation of CHP.

Ireland's Second National Communications under the United NationsFramework Convention on Climate Change reflects policy developments sincethe First National Communication and outlines a range of measures which arein place to mitigate greenhouse gas emissions in all sectors. Sincepublication of this report in July 1997, there have been a number of furtherpolicy developments which, inter alia, address climate change and energy:


2

� Increased support for renewables including the launch of five AlternativeEnergy Requirement (AER) Schemes.

� The reduction of excise duty on LPG (liquefied petroleum gas) in theDecember 1998 budget.

� Revised Technical Guidance Documents under the Building Regulationswill result in better insulation in new buildings with projected CO2reductions of 300 000 tonnes per annum by the year 2012.

� The extension of integrated pollution prevention control licensing (IPCC)by the Environmental Protection Agency to the power generation sector,will mean that all large-scale new and existing power generation plants willbe required to operate using the best available technology (BATNEEC,Best Available Technology Not Entailing Excessive Costs).

� The establishment of Sustainable Energy Ireland to promote renewableand energy efficiency initiatives; matched by a government commitment of€ 222.52 million funding.

The Third National Communication will be submitted in September 2002.Ireland also deposited its instrument of ratification of the Protocol at UNHeadquarters on 31 May 2002.

The Green Paper on Sustainable Energy was published by the Department ofPublic Enterprise in September 1999. The Green Paper indicates how Irelandwill progress towards meeting its energy requirements in an environmentallyand economically sustainable way having regard to forecast economic growthand security of supply objectives. It highlights the measures necessary topromote energy efficiency among all the energy consuming sectors.Implementation of the Green Paper remains a priority for the government andinitiatives already launched include a € 21.1 million R&D programme forenergy efficiency and a € 12.7 million Public Sector Design Programme.

EmissionsTradingGroup

A Consultation Group on Greenhouse Gas Emissions Trading wasestablished December 1998 with the following terms of reference:

To examine and advise the Minister for the Environment and LocalGovernment on the options for greenhouse gas emissions trading, bothdomestically and in the context of developing international and EUrequirements, and to offer advice on the Irish position on internationaltrading as required.

The Group reported in July 2000, and the report was published together withthe National Climate Change Strategy in early November 2000.

The main recommendations of that report were:

� An acceptance of the importance of International Emissions Trading.� A desire to see as many greenhouse gases as possible included in the

system rather than limiting the scheme to CO2.� Almost all members of the group expressed the view that auctioning would

be the best allocation mechanism in the long run but that some form offree allocation was likely in the short term.

� Opposition to the EU’s proposal for a concrete ceiling.

Significant progress has been made in establishing the principles, rules andmodalities for international emissions trading and the Kyoto flexiblemechanisms, including at COP6bis in July 2001, and COP7 in November2001. The EU Commission also presented a draft Directive on greenhousegas emissions trading to the Council in December 2001.

3

Terms of ReferenceIn light of these developments the Interdepartmental Climate Change Teamre-established the Emissions Trading Advisory Group with revised terms ofreference:

In conjunction with potential participants in emissions trading and Kyotoflexible mechanisms systems, to examine and advise the Inter-Departmental Climate Change Team on Irish participation, and to offeradvice on the Irish position in international negotiations as required.

Membership of the GroupThe group is chaired by the National Treasury Management Agency (NTMA)and attended by representatives of organisations such as:

Irish Business and Employers ConfederationIndustrial Development AuthorityIrish Farmers AssociationThe Environmental Institute, University College DublinThe Environmental Protection AgencyElectricity Supply Board (ESB)Aughinish AluminaStatoil

and observers from the Departments of Environment and Local Government,and Enterprise, Trade and Employment.

In the 1999 in-depth review of the energy policies of Ireland, the IEA stated:

The Government of Ireland should:

Environment

� Develop a national database on greenhouse gas emissions andprojections, as a basis for quantifying and evaluating the cost-effectiveness of policy options to reduce the growth in greenhouse gasemissions.

� Develop and announce detailed response measures to achieve itsgreenhouse gas emissions target, including an assessment of expectedquantitative outcomes in physical terms.

� Publish the report of the advisory group on domestic emissions tradingand the implications for Ireland of an international trading regime; reviewthe report in light of the possible economic advantages to Ireland ofdeveloping and exporting skills in financial services related to emissionstrading.

A national inventory on greenhouse gas emissions, which complies withUNFCCC guidelines, is complied on an annual basis by the EnvironmentalProtection Agency (EPA). Emission projections, for the powergen andindustrial sectors, are produced by the Economic and Social ResearchInstitute by means of medium-term macro-economic modelling. Agriculturalemissions are profiled and projected by Teagasc using the FAPRI-Ireland ten-year agricultural markets model. These projections will need to bestandardised if they are to be used as the basis for full cost-effectivenessanalysis.

INSTITUTIONALFRAMEWORK

An Energy Advisory Board was appointed in September 1994 by the thenMinister for Transport, Energy and Communications. The Board containedrepresentation from the main energy utilities and energy consumers and was

4

charged with overseeing national programmes and providing advice for theMinister for Public Enterprise on matters of national policy regarding energyefficiency, renewable energy and related research. The Board has not hadoccasion to meet in recent times and the role of advising the Minister on thematters aforementioned is now the responsibility of the Board of SustainableEnergy Ireland (SEI).

SustainableEnergy Ireland(formerly the IrishEnergyCentre)

The Irish Energy Centre (now Sustainable Energy Ireland, SEI) is a jointinitiative of the Department of Public Enterprise and Enterprise Ireland (theNational Industrial Development Agency). Funded by the EU through theCommunity Support Framework the Centre's mission is to promote thedevelopment of a sustainable national energy economy. The Centre beganoperating in September 1994 and provides technical advice and support onenergy issues in all sectors of the economy, co-ordinates a range ofpromotional and educational initiatives and promotes a number of EU energyprogrammes in Ireland.

A key element in the implementation of the Green Paper on SustainableEnergy was the legislation to establish the Irish Energy Centre as anindependent statutory body. It proposed a framework for energy efficiency inIreland and envisaged a major role for the Irish Energy Centre in implementingthe government’s strategy on sustainable and renewable energy, particularlyin helping Ireland meet its obligations under Kyoto. It was recognised that anindependent Irish Energy Centre would be required to fulfil its role in thisregard. Legislation entitled The Sustainable Energy Act, 2002 was passed bythe Lower House in February 2002 to provide for the establishment of theCentre on a statutory basis with a new title Sustainable Energy Authority ofIreland and a working title of Sustainable Energy Ireland. The new Authoritywas established on 1 May 2002. Importantly it gives the new Authority theindependence and resources to fulfil its mandate under the Green Paper, theNational Climate Change Strategy and the National Development Plan.



� Develop a programme of energy efficiency measures to replace thecurrent programme of the Irish Energy Centre, which includes the use ofpricing and mandatory regulations, and is based on quantitative analysisof possible cost-effectiveness..

EU SAVE Programme

The SAVE (Specific Actions for Vigorous Energy Efficiency) programme of theEuropean Union is a major component of the country’s energy efficiencypolicy through the implementation of technical measures such as directivesand standards on, inter alia, boiler efficiency, insulation, energy audits,performance standards and energy labelling.



Building Codes

The national building regulations, which came into effect on 1 June 1992,detail the minimum legal requirements in relation to the design andconstruction of new buildings and reconstruction of existing buildings. It isestimated that 1 million of the current housing stock of approximately 1.2million dwellings were built prior to 1 June 1992. Part L (and the associatedTechnical Guidance Document) of the regulations sets out the requirements

5

relating to Conservation of Fuel and Energy. Overall energy use in newbuildings is estimated to have been reduced by up to 20%, as a result of theintroduction of the regulations in 1992.

In December 1997, the Minister for Environment and Local Governmentpublished a revised building control package, which came into effect on 1 July1998. Part of the revised package included the use of heat energy rating asan optional method in demonstrating compliance with Part L. On 6 June 2002 the Minister signed into law Regulations amending Part L ofthe Building Regulations. The new Regulations will require new dwellings tobe much better insulated. New thermal performance standards forreplacement external doors, windows and rooflights (roof windows) in existingdwellings where work commences on or after 1 July 2003 were also set.These improved Regulations are a key part of the commitment to improve theenergy efficiency of the built environment as set out in the National ClimateChange Strategy. These Regulations are projected to reduce CO2 emissionsby 300 000 tonnes per annum by the year 2012.

Efficiency Standards

Statutory Instruments covering minimum efficiency requirements for new hotwater boilers fired with liquid or gaseous fuels, and efficiency requirements forhousehold electric refrigerators, freezers and combinations thereof, are now inforce. The details of these regulations are as follows:

S.I. No. 260 of 1994 RegulationsEuropean Communities efficiency requirements for new hot water boilers firedwith liquid or gaseous fuels regulations, 1994.Transposed on 27 July 1994 with transition period up till 31 December 1997.Amended by S.I. No. 72 of 1995 on 23 March 1995

S.I. No. 482 of 1997 RegulationsEuropean Communities efficiency requirements for household electricrefrigerators, freezers and combinations thereof regulations, 1997.Transposed on 4 December 1997. Came into force on 3 September 1999.

S.I. No. 511 of 2001 RegulationsEuropean Communities (Energy Efficiency Requirements for Ballasts forFluorescent Lighting) Regulations, 2001 transposing EU Directive on energyefficiency requirements for ballasts into Irish Law.

VoluntaryAgreements

In December 1998 a Voluntary Agreement between CECED (Conseileuropéen de la construction d'appareils domestiques)and the EU Commissionaimed at reducing the specific energy consumption of domestic washingmachines by 20% in the period 1994-2000 came into force. This agreementhas been successful and has resulted in about 1 100 models of washingmachine being withdrawn from the market and the elimination of all machineswith energy ratings of D, E, F or G. A revision of the Labelling Directive forWashing Machines is now necessary and is being discussed by the EnergyLabelling Regulatory Committee (ELRC).

Negotiations are now underway between the EU Commission and TelevisionManufacturers on a voluntary agreement for televisions. These negotiationshave some way to go before being ratified.

Energy Labelling

European Union Council Directive 92/75/EEC is the framework directive for allenergy labelling, and it is transposed in conjunction with the CommissionDirectives which implement energy labelling of the various appliances.

Regulations now in force include the following:

6

S.I. No. 122 of 1995 RegulationsEuropean Communities energy labelling of household electric refrigeratorsand freezers regulations, 1995. Transposed on 17 May 1995.

S.I. No. 109 of 1996 Regulations European Communities energy labelling of household electric washingmachines regulations, 1996.Transposed on 18 April 1996 with six month transition period.

S.I. No. 110 of 1996 RegulationsEuropean communities energy labelling of household electric tumble dryersregulations, 1996.Transposed on 18 April 1996 with six month transition period.

S.I. No. 208 of 1997 Regulations European Communities energy labelling of household electric washingmachines (amendment) regulations, 1997.Transposed on 13 May 1997.

S.I. No. 319 of 1997 RegulationsEuropean Communities energy labelling of household combined washer-drierregulations, 1997.Transposed on 21 July 1997 with six month transition period.

S.I. No. 210 of 1998 RegulationsEuropean Communities energy labelling of household dishwashersregulations, 1998.Transposed on 15 June 1998. Transition period runs till 31 July 1999.

S.I. No. 170 of 1999European Communities (Energy Labelling of Household Lamps) Regulations,1999.

S.I. No. 171 of 1999European Communities (Energy Labelling of Household Dishwashers)(Amendment) Regulations, 1999

Boiler Services

A number of companies, including the gas company Bord Gáis Éireann(BGE), operate heating installation inspection and maintenance schemes(including boiler inspections) for their customers. Sustainable EnergyIreland’s Boilers Initiative comprises a set of integrated measures designed tosupport, encourage and educate boiler users and service providers. Theinitiative aims to raise operational standards, increase energy efficiency andimprove competitiveness. The measures are complementary and supportiveof each other and are designed to engage those in Industry, Commerce andthe Services Sectors on a Partnership for Progress basis. The Annual Boiler Awards Competition, organised by Sustainable EnergyIreland was first launched in 1996. Since its inception, it has achieved savingsof over € 20.3 million in some 180 participating companies, primarily byrecognising and rewarding innovation and best practice in the operation andimplementation of energy efficient boiler technology. The Steam Boiler System Evaluation Scheme ran from 1997 to 2000. Itinvolved a subsidised boiler audit in which Sustainable Energy Irelandsupported up to 40% of the cost of a boiler-house audit survey. The Schemewas targeted at the 420 largest operators of steam boilers in the country andapproximately one in seven of these had an audit completed under the

7

scheme. Average savings identified were 9.5% of fuel usage with half ofthese savings being achievable at low cost, i.e. with a payback period of lessthan six months. The information collected through this exercise has alsocontributed significantly to the design of new programmes for this sector.

Energy Action

Energy Action is a Dublin-based charity, established in 1988, offering a free-of-charge energy conservation service to the needy and elderly. The EnergyAction Programme is focused on simple cost-effective improvements such asattic insulation, draught proofing and installing energy efficient light bulbs. It isaimed at improving the living conditions of the poor and elderly. It is alsoinvolved in the provision of training and work opportunities to unemployedpeople that are creative, sustainable and ecologically sound. The provision ofimprovements in the energy efficiency of the dwellings of the needy and fuelpoor, reduces costs and atmospheric pollution, while at the same timeincreasing comfort and health. Since 1988, Energy Action has provided in theregion of 18 000 houses with insulation services .

Low IncomeHousingProgramme

A situation review of fuel poverty in Ireland was commenced in 2001, as partof a process leading to the development and implementation of an extended€ 7.62 million programme administered by Sustainable Energy Irelandtargeting fuel poverty in low income homes nation-wide.

House ofTomorrowResearch,Development andDisseminationProgramme

The House of Tomorrow Programme 2001-2006 launched in September 2001,offers support for research, development and demonstration projects aimed atgenerating and applying technologies, systems, practices and informationleading to more sustainable energy performance in Irish housing. The mainfocus of the programme which has a proposed budget of € 21.1 million inimplementation over six years (within the National Development Plan) is onstimulating widespread uptake of superior energy planning, design,specification and construction practices in both new home building and homeimprovement markets.

INFORMATION/ MOTIVATION

Energy Awareness Week

Energy Awareness Week, co-ordinated by the Sustainable Energy Ireland(SEI) in association with the Department of Public Enterprise (now theDepartment of Communications, Marine and Natural Resources), representsthe most important series of activities for providing domestic consumersaccounting for about 26% of energy use in Ireland with a clear understandingof the benefits of energy efficiency and the opportunity to make realbehavioural change. Energy Awareness Week was first held in 1992. Theprimary objective of Energy Awareness Week in 2001 was to create greaterawareness for consumers of the importance of sustainable energy withreference to matters such as sources of energy, the various environmentalimpacts and national/international obligations. The awareness campaign alsohighlighted the benefits of sustainable energy use including: added comfort,cost savings, environmental protection and future energy availability. Theimpact of the week is measured in terms of increased consumer investment inthe target products such as compact fluorescent lamps (CFLs), laggingjackets and energy efficient appliances. In 2001, during the period of thepromotion there was an increase of over 400% in sales of these items, withCFL sales growing from an average 52 000 units to a remarkable 293 000units. This will result in an annual reduction of CO2 emissions of almost16 000 tonnes.

Branding The Goldshield Home concept was launched in 1986 by the Electricity SupplyBoard (ESB) and since then more than 50 000 such homes have been builtand sold by house-builders. The original aim in designing the all-electricGoldshield concept was to provide the customer with a comfortable,

8

economical-to-run and energy-efficient home, using just one energy source –electricity. The Goldshield concept included the following items in anintegrated design:

� A high standard of thermal insulation and draught-proofing.� Individual room temperature control.� Factory-insulated hot water cylinder with special controller.� A combination of electric storage heating and panel/convector heating.� Nightsaver electricity.

Bord Gais Eireann (BGE) promotes the Home Energy Rated brand as follows:

New homes built with natural gas central heating as standard are “energyaudited” to determine the amount of energy required to maintain a high levelof comfort in the home. The rating is given in terms of the number of kWhrequired per square metre per year. The lower the energy rating, the less fuelrequired.

Homes that achieve a rating of 250 or less are branded Natural Gas EnergyRated Homes. This 'brand' has its own logo and is promoted through:

� Property press advertising.� Trade press advertising.� Showhouse certificates.� Development signage/flags.� Range of print material including brochures, for sale/sold. � Showhouse stickers etc.� Seminars for builders.� Video.

Regional Energy Offices

Sustainable Energy Ireland operates a number of regional offices from whichsome of the key initiatives are led. These include: � The Energy Policy Statistics Support Unit.� The Public Sector Investment Programme.� The Renewable Energy Information Office.

Leaflets Sustainable Energy Ireland (SEI) publishes and distributes a wide range ofleaflets on energy efficiency aimed at the domestic, industrial, commercial,public and renewable energy sectors. They vary from general information toin-depth technical advice and recommendations.

Television Series

The About the House television series sponsored by SEI reaches a weeklyaudience of more than 450 000, which research has demonstrated are veryreceptive to the message of improved energy efficiency. The TV series deals with all aspects of home building and home improvementand as a result of the involvement of SEI carries significant emphasis on allenergy matters. The presenter has also been involved with SustainableEnergy Ireland in the presentation of local information sessions as part of anEnergy Roadshow during Energy Awareness Week.

Educational Initiatives

For a number of years Sustainable Energy (SEI) Ireland has been developinga wide range of programmes towards active energy education within theschool system. Activities are based on carefully researched and pilotedschemes which integrate closely with the curricula at primary and secondarylevel.

9


Heat Energy Rating

SEI led the development of a heat energy rating software package for use byarchitects, designers and building contractors. The purpose of this package isto enable the users to demonstrate compliance with the updated BuildingRegulations, as it relates to consumption of fuel and energy for buildingsconstructed after the Regulations came into effect. The Building Regulationsare to be revised in January 2003 and Sustainable Energy Ireland will updatethe package to address the more stringent requirements.

SEI has initiated a programme to develop a comprehensive Home EnergyRating Scheme. This line of activity will establish an energy rating system forhomes and ensure that those homes rated are included in a nationaldatabase. The emphasis will, in the first stages at least, be on the pre-1980housing stock where energy performance is particularly poor.

The energy rating of houses will be promoted with the aim of making energyefficiency a significant factor in rental and purchase decisions.

PUBLIC SECTOR Measures already existing and/or being improved

Government Buildings

The Green Paper on Sustainable Energy outlines the need to make significantenergy savings in the public sector as part of the wider obligation to reduceGreenhouse Gas emissions. In that context the government decided in July2001 to require all public sector Departments, agencies, non-commercial statebodies, health boards and local authorities with responsibility for new buildingconstruction or major refurbishment to use best practice in both materials andtechnology and to avail of opportunities being promoted by the Irish EnergyCentre (now Sustainable Energy Ireland). In addition the government decidedthat all government departments and state bodies be required to reportannually in their Annual Reports to Government and the Oireachtas (the twohouses of Irish Parliament) on measures to reduce energy usage in buildingsoccupied by them.

The programme consists of a number of complementary schemes that willpromote innovation and develop the market for goods and services tostrengthen existing energy efficiency measures in the wider arena.

The Economic and Social Infrastructure Operational Programme within theframework of the National Development Plan 2000-2006 provides€ 12.7 million (Ir£10 million2) for energy efficiency initiatives in public sectorbuildings.

The Design Study Support Scheme, launched in June 2001, will providefinancial support of € 2.02 million (Ir£1.6 million) to public sector bodies for thepurposes of procuring external professional expertise to examine and reporton the technical and economic feasibility of energy efficient design andtechnology solutions in new building and refurbishment projects.

The “Model Solutions” Investment Support Scheme, launched in August 2001,will provide investment assistance of € 9.08 million (Ir£7.15 million) to selectedprojects undertaken by public sector organisations whereby they proposeadditional investment in building energy conservation technologies or

2 On average in 2001, Ir₤1 = US$ 1.138.

10

measures in new or existing buildings.

A scheme to provide financial support of € 1.6 million (Ir£1.25 million) toenergy management bureau operations to encourage the development ofenergy management service companies to provide off-site energy control andmanagement for public sector buildings has just been launched.

The Irish Energy Centre (now SEI) administers these schemes and plans willbe developed by them to extend the example given by public sector buildingsto the private commercial sector.

The installation of a comprehensive Building Energy Management System isthe latest on-going development in this sector and is central to the success ofthe energy conservation programme for state buildings. This system conceptwhich was developed with the support of SEI, when completed, will facilitaterapid collection and analysis of energy data relating to the 150 largestgovernment department buildings. Included in the benefits will be the timelyreceipt and processing of the data which will allow for faster intervention in theevent of abnormal specific energy consumption being detected.

Local Authorities Buildings and Public Housing

National House Conditions SurveyAn energy module has been included in the current survey, with a strongfocus of energy use and energy conservation, allowing a greater integration ofenergy efficiency considerations into housing policy in the future. A number ofquestions on heating and types of heating fuel consumption and methods ofinsulation have been included. It is expected that fieldwork will continue untilMay 2002, and the final report will be published in the autumn.

New House GrantsThe Housing (Miscellaneous Provisions) (No 2) Bill 2001, published inDecember 2001, contains a provision enabling the making of regulationsproviding for greater flexibility for the payment of new house grants in thefuture, including differential rates to encourage more efficient use of energy,and the use of renewable forms of energy.

Regeneration of Housing AreaCurrent regeneration programmes have a positive impact on greenhouse gasemissions, as all new units are to current standards and refurbished existingunits are brought to a higher standard than heretofore.

INDUSTRY Measures already existing/and or being improved

Energy Management

SEI organises seminars, workshops and publishes case studies and guides insupport of energy managers in industry and commerce. Recent and currenttopics covered under these activities include building energy managementsystems, boiler efficiency, variable speed drives, compressed air, lighting andlighting controls and combined heat and power.

Voluntary Agreement

The Annual Self-Audit and Statement of Energy Accounts Scheme is avoluntary agreement to which companies subscribe as a public commitment togood energy management practice. The Scheme, administered bySustainable Energy Ireland, was established in 1994. Companies committhemselves to setting out an energy management policy, the core of which willbe an annual internal audit of their energy performance, coupled with a publicstatement of energy accounts, including targets and plans for the coming year.

11

The performance and targets set are recorded in the Scheme's Annual reportwhich also summarises the technical and organisational measures undertakenby firms to achieve their energy savings targets.

The fourth annual report was launched in late 2001 and showed that thescheme accounts for over a third of the energy use in the industrial sector witha total energy spent in 2000 of approximately € 234 million. In 2000, the Self-Audit Scheme resulted in the reduction in CO2 of in excess of 124 000 tonnes,representing a cumulative energy saving of € 16 million.



� Discuss with industry the need for mandatory energy efficiency targetsand measures, possibly implemented through enforceable agreementsentered into voluntarily.

Information/ Technical Assistance

Sustainable Energy Ireland (SEI) has responsibility for various nationalinformation and technical assistance activities. Most of the workshops havean industrial focus. Many energy efficiency seminars have been run as part ofor in association with the EU programmes THERMIE and SAVE.

DSM DSM Performance (1997-2000)The Electricity Support Board (ESB) commenced its demand-sidemanagement (DSM) programme in 1991 both to delay future investment inpower generation and to reduce environmental emissions by encouragingcustomers to use electricity more efficiently.

ESB maintained the DSM programme in its original format until the end of2000. Modifications to the programme were introduced in 2002 related to thenew electricity supply industry structure. The DSM programme secured totalsavings of 324 GWh (Gigawatt-hours) over the period 1997-2000 inclusive.These savings are based on the savings achieved in a single year for themeasures implemented. The corresponding savings in tonnes of CO2emissions for each of the individual years 1997 through to 2000 were 100 000,60 000, 50 000 and 40 000 respectively.

DSM/Energy Efficiency Performance (2001)The changed approach to DSM and promotion of energy efficiency reflectschanges in roles and responsibilities in this regard arising from marketliberalisation. Forty per cent of the Irish electricity market is now open tocompetition. All customers were given access to green suppliers in 2002.

During 2001, ESB Customer Supply entered into discussions with theCommission for Electricity Regulation (CER) on its future role in deliveringenergy efficiency services. For the period 2002-2005, CER agreed to allowESB Customer Supply funding for ongoing energy efficiency programmeswithin ESB’s regulated revenue stream as the Public Electricity Supplier.

ESB Customer Supply also agreed to change the basis of the reporting ofenergy savings starting in 2001. This means efficiency savings would bereported on the basis of lifetime savings for the measures implemented ratherthan for a single year as with the 1991-2000 programme. Also, it was agreedthat ESB would report savings for projects significantly influenced by ESBsince the market for energy efficiency products is now well established. In the1991-2000 programme, huge efficiency savings were claimed, especially inthe residential sector, because of ESB’s key role in market transformation. As2001 represented a transition year, ESB reported efficiency savings based onthe lifetime of the measures. The total lifetime energy savings achieved in

12

2001 amounted to 126.5 GWh, equivalent to 100 000 tonnes of CO2.


At the end of 1997, there were 53 CHP installations operating in Ireland with atotal installed capacity of 86.65 MW. The Fourth Alternative EnergyRequirement Scheme (AER4) competition was launched in September 1997to support the competitive development of CHP. The Department of PublicEnterprise (formerly the Department of Transport, Energy andCommunications) appointed the UK Agency ETSU to run the competition onits behalf. The AER4 competition, the results of which were announced inAugust 1998, produced offers of up to 50 MW. The objective of thiscompetition was to secure 25 Mwe of newly installed electricity-generatingcapacity from existing similar systems. In actual fact, only 18.35 Mwe wascommissioned. This period of incentivisation resulted in slow but continuousgrowth and by the end of 1999 122 Mwe was installed in 78 plants around thecountry.

Another critical component of the Green Paper was the commissioning of areport from Sustainable Energy Ireland, to examine the status of combinedheat and power (CHP) in the current Irish market, in the light of marketliberalisation, technology advances, fuel sources, extension of gas grid andfinancial incentives. The government clearly indicated its aspirations for CHPin this strategy document in response to the Kyoto Protocol. This strategyallocates 0.25 Mt CO2 per year saving from the use of CHP by the year 2010.This equates approximately to the installation of an additional 250 Mwe ofCHP plant, a tripling of current capacity. The report – An Examination of theFuture Potential of CHP in Ireland was presented to the Minister of State inDecember 2001 and was subsequently put out to public consultation. Thisconsultation is now complete and following consideration of its results, adecision will be taken on the necessary measures to facilitate the achievementof the target in the National Climate Change Strategy. In the 1999 in-depth review of the energy policies of Ireland, the IEA stated:


� Give priority to gas market issues which impact on electricity sectorreforms, such as non-discriminatory allocation rules for potential gas-firedpower generators, including small cogenerators in the commercial andhousehold sectors.


Operational Programme for Transport

Rail networkTotal investment in the mainline rail network will amount to about € 1.3 billionfocusing on track renewal, modern signalling systems and rolling stock,encouraging greater use of the railways for passenger and freight transport.

Road NetworkThe overall target of the operational programme is to provide a national roadnetwork to give an inter-urban travel speed of 80 km/h. With a total plannedinvestment of over € 6 billion over the course of the National DevelopmentPlan 2000-2006, this commitment is aimed at improving the road networkbetween the main urban centres, removing bottlenecks on those routes andreducing urban congestion by the provision of new river crossings, ring-roadsand relief roads.

13

Modal shift from private to public transport is an important facet of Ireland’sapproach to reducing greenhouse gas emissions. The government’s transportstrategy for 2000-2016 for the Greater Dublin Area (A Platform for Change)aims to reduce growth in the demand for transport, particularly for privatetransport, and to reduce the need for car commuting by improving thereliability, availability and quality of public transport. The strategy is based onthe two interdependent elements of demand management and public transportinfrastructure/service improvements, and will be reinforced by complementaryland use policies.

Through demand management it is intended to reduce growth in travel and toencourage modal transfer from the private car to sustainable modes of travel,such as public transport, cycling and walking.

Vehicle Testing

Car testing which is a requirement under EU Law was introduced in Ireland on4 January 2000. Its introduction will enhance road safety and environmentalprotection.


Sustainable Energy Ireland is currently working on a transport programmestrategy, the details of which have not yet been put out to public consultation.


The Green Paper on Sustainable Energy was published by the Irishgovernment in September 1999. In preparing the Green Paper, the views ofinterested parties were sought through a public consultative process. In all 67submissions were received from a wide range of interests.

In May 1998, the Energy Advisory Board commissioned a report LondonEconomics Study on Energy Efficiency Policy post 1999 on future options forenergy efficiency policy. The report was also a part of the consultations, whicheventually culminated in the Green Paper on Sustainable Energy.

The report covers the period 2000-2005 and assesses the potential scale ofimprovements in energy efficiency in Ireland; reviews the objectives of Irishenergy efficiency policy; reviews international best practice in energyefficiency measures and their relevance to Ireland; developsrecommendations on future programmes, institutions and funding.

Furtherinformation

For further information, please contact: Ms. Ciara O’SullivanSustainable Energy DivisionDepartment of Communications, Marine & Natural ResourcesLeeson LaneDublin 2Irelandtel. +353 (1) 604 1596fax +353 (1) 604 1274email [email protected]


1

ITALY Updated January 2003

BACKGROUND NEP’88

The 1988 National Energy Plan (NEP’88) includes the improvement of energyefficiency and conservation as a primary objective of general energy policy.

Law No. 10/1991

The basic law on energy efficiency is Law No. 10/1991, entitled Regulationsfor the implementation of the National Energy Plan with regard to the rationaluse of energy, energy savings and the development of renewable energysources. It is a framework law to introduce regulations aimed at the efficientuse of energy sources in all end-use sectors including the specific reduction ofenergy consumption in production processes, especially in buildings andheating plants. The law provides for tax relief and the payment by localauthorities of incentives to support the adoption of the most efficienttechnological solutions.

Situation andPerspectives in theEnergy Sector

At the end of 2001, the Italian Parliament, via its Commission for theProductive Activities of the Chamber of Deputies, promoted a major nationalinvestigation into the energy situation and its perspectives. After intensivework, the Parliament Commission approved and published on 18 April 2002 adocument entitled Situation and perspectives in the Energy Sector. Thisdocument indicates three strategic paths, including the increase of energyefficiency in end uses, taking into account that a mix of energy efficiency andrenewable energy sources allows for the costs incurred by the reduction ofgreenhouse gas emissions to be minimised.


Italy signed the Framework Convention on Climate Change (FCCC) in Rio deJaneiro during UNCED in June 1992. Parliament approved Italy’s agreementFCCC by Law No. 65 of 15 January 1994. The Programma Nazionale per lalimitazione delle emissioni di anidride carbonica nel 2000 al valore del 1990(National Programme for Limiting Carbon-related Emissions to 1990 levels by2000) was approved by the Interministerial Committee for Economic Planning(CIPE) in the session of 25 February 1994. This National Programme describes, inter alia, existing measures for energyefficiency and sets out in broad terms additional actions that Italy could take.The First Italian National Communication of January 1995 is based on theinformation and programmes contained in the National Programme forLimiting Carbon-related Emissions which gave high priority to energyefficiency through the following steps: � Financial incentives in the industrial and transport sectors.� Efficiency standards in transport, industry and residential sectors.� Voluntary government-industry agreements on energy efficiency.� Demand reduction programmes in the residential sector.� Information dissemination and expanded product labelling and certification

in the transport and residential sectors.

A report was prepared by CIPE (Governmental Economic PlanningCommittee) for the Second National Communication to the FCCC andreleased on 3 December 1997. The report envisaged several measures to betaken, i.e. regulatory measures, economic investments, promotion ofrenewables and voluntary agreements with industry.

At the Fourth Conference of the Parties (COP-IV) to the FCCC held in Kyotoin December 1997, the European Union as a whole agreed to reduce theemissions of a basket of six gases by 8% from 1990 levels by the period2008-2012. In June 1998, the European Union Council of Environment


2

Ministers reached a Burden-Sharing Agreement1 on emission reductioncommitments, to re-allocate internally the 8% reduction agreed at Kyoto. Thereduction commitments are expressed as a percentage of 1990 levels for the2008-2012 period. Under the Burden-Sharing Agreement, Italy is committed to reducing itsemissions by 6.5% between 1990 and 2008-2012. In June 2002, the Italian Parliament approved the Law No. 120 to ratify theKyoto Protocol. According to this Law, a suitable national plan aimed atreducing GHG emissions and increasing absorption will be submitted, before30 September 2002, to the Interministerial Committee for Economic Planning(CIPE). An interministerial group was created, comprised of the Ministries of Industry,Transport, Research, Public Works, Finance and Agriculture and chaired bythe Ministry of the Environment. According to the report released inNovember 1998, in a business-as-usual scenario, greenhouse gas (GHG)emissions would increase 12% to 622 Mt in 2010. The report lists moredetailed measures than those in the 1997 plan to decrease GHG emissions byabout 100 Mt from business-as-usual growth and to meet the Kyoto target.

CIPE Deliberation137/98

The guidelines and actions for the containment and reduction of GHGemissions were identified by the CIPE Deliberation 137/98 published on10 February 1999. It includes, inter alia, the following measures:

� Increasing energy efficiency in the production sector and amongconsumers.

� Reducing GHG in the transport sector and in sectors other than theenergy sector.

� Reducing GHG in the generation, transport and distribution of electricity.� Promoting international co-operation for the reduction of global emissions.

Legislative Decreeof June 2001

On June 2001, the Ministry of the Environment enacted a Legislative Decreeproviding the list of selected programmes and related funding according toDecree No. 337/2000. The total amount addressed to supportive actions andprogrammes for GHG emissions reduction is worth € 25 million for nationalprogrammes and € 17.5 million for international co-operation programmesregarding Kyoto mechanisms. For the former, selected programmes relate todemonstration projects in the fields of cogeneration plants in the productionand civil sectors; improvement in energy efficiency in the industrial,residential, tertiary and transport sectors and development of engines at low orzero emission.

Institutional Arrangements

As far as energy is concerned, the Legislative Decree of 31 March 1998(No. 112/1998) as modified by the Legislative Decree of 29 November 1999(No 443/1999) shares the responsibilities among the state, the regions andthe local authorities.

The state is still responsible for the elaboration and definition of energy policyobjectives and guidelines, and for action to address and co-ordinate energyplanning at the regional level. The new text of article 117 of the Constitution,introduced by the Constitutional Law of 18 October 2001 (No. 3) has inserted,among the subjects of current legislation, the production, transport andnational distribution of energy: this means that the State sets the policy, themain guidelines and the general objectives by law, while the Regions concurto determine specific laws and rules for the realisation of the objectives.


3

The Region's main responsibilities are as follows: - The drafting and adoption of programmes aimed at promoting energy

efficiency and renewable energy sources.- Funding energy savings and controlling energy efficiency of industrial

plants.- Assisting local authorities responsible for the control of energy savings,

rational use of energy and other rules laid down by regional legislation. - Licensing for the building and management of electricity plants below 300

MW th.- Granting licences for onshore hydrocarbon production. A Programme Agreement between the regions and ENEA (the NationalAgency for New Technology, Energy and Environment) was designed toprovide a framework for co-operation. ENEA provides expertise upon request,and regions pay for the service. A Regional Co-ordination Group for Energywas created in which ENEA acts as a secretariat to deal with issues under theregions' jurisdiction. Responsibility for energy policy lies primarily with the Ministry of ProductiveActivities (formerly Ministry of Industry, Commerce and Crafts), in co-ordination with other Ministries (including the Ministry for the Environment),interministerial Committees, government organisations and independentagencies. The Interministerial Committee for Economic Planning (CIPE) co-ordinates national energy policy with economic policy. It issues deliberationswhich give a framework to energy policy. In the 1999 in-depth review of the energy policies of Italy, the IEA stated:

The Italian Government should:

� Clearly define the responsibilities of the regions and the local authoritiesfor energy efficiency measures and ensure that they are carried outeffectively in co-operation with ENEA. Ensure that regions focus on themost cost-effective measures.



BuildingStandards

Regulations on mandatory efficiency codes, drawn up by ENEA, for all newbuildings and renovation of old buildings, were introduced in October 1993.ENEA is also preparing additional non-mandatory building codes. Ministerial Decrees of 7 October 1991 and 6 August 1994 revised themandatory minimum energy efficiency standards for the shell of newlyconstructed buildings, residential and non-residential, and the introduction ofrules and methods of calculation to determine the seasonal energyconsumption of buildings. Ministerial Decree of 13 December 1993 sets out the procedure forsubmission of the technical report, described in Article 28, Law No. 10/91,confirming the respect of rules limiting energy consumption in buildings. At present, two new decrees are being prepared by the Ministry of PublicWorks to implement Article 4c 1-2 of Law No. 10/91. These decrees will setcriteria for design and maintenance of buildings and will furthermore reduce

4

the limit values of specific power lost by transmission. Emissions of CO2should be reduced by 10% in two years in the new built residential sector. In the 1999 in-depth review of the energy policies of Italy, the IEA stated:


� Continue to tighten building codes and to ensure that they areappropriately implemented at the local level, especially in the renovationof buildings.

Energy Audits

Since 1991, energy audits of buildings have been implemented by ENEA onthe basis of a voluntary agreement concluded between ENEA and the Ministryof Public Works. In four pilot towns, energy audits were performed in 10 000apartments.

Inspection of Boilers

Presidential Decree No. 412 of 26 August 1993 implementing Law No. 10/91sets regulations limiting energy consumption with special reference to thedesign, installation, running and maintenance of heating plants. Twelvemillion heating plants are concerned. The programme, begun in 1994,requires plants to be inspected every one or two years depending on the sizeof the boiler. Air temperature in heated buildings must be 20°C + 2°C.Sanctions for non-compliance are foreseen but are not yet in place. ENEAsupports the programme by providing training and information to themunicipalities who are responsible for the inspection.

Billing Billing of heating, air-conditioning and hot water costs is covered under LawNo. 10/91. Costs for heating are apportioned by surface. For new buildingsand existing buildings undergoing major renovation, it is compulsory to makeallowance for individual measurement, but it is not compulsory to install themeasuring equipment (Article 2.6 of Law No. 10/91). By requiring it at thedesign stage, it will be easier to introduce individual metering if it becomesmandatory. The local administration is requested to respect the norms. Alimited number of local administrations are tightening controls.


Law No. 449/97 allows a fiscal reduction of 41% of the cost (VAT included)related to building restructuring carried out during 1998 and 1999. Thereduction applies only to building owners who have to pay personal tax(IRPEF) and is subdivided into five to ten annual rates. The reduction isapplicable for costs limited to € 77 468 per building unit per person per year.About 200 000 requests were submitted in 1998. This law was not specificallydesigned for energy purposes but to support the construction sector.

Information Campaigns

A five-year energy information campaign, co-ordinated by the Ministry ofIndustry (now, the Ministry of Productive Activities), ENEA, ENEL (the nationalelectricity utility) and ENI, the oil and gas company was launched in 1993.ENEA’s activities (ERG-PROM, the Rational Use of Energy Division ofENEA’s Energy Department) include the dissemination of information throughregional energy consulting centres and training programmes, particularly forsmall and medium-sized industries. An agreement between the Ministry of Industry and ENEA established abudget of € 150 000 a year to support information on energy efficiency for theresidential/commercial sector.

Energy Labelling and Certification

Italy has transposed the EU Directive on Energy Performance Standards forrefrigerators and freezers and, in November 1998, the EU Directive on EnergyLabelling for refrigerators and freezers. The Ministry of Industry envisaged anincentive scheme for households which are willing to replace old applianceswith more energy-efficient ones.

5

In the 1999 in-depth review of the energy policies of Italy, the IEA stated: The Italian Government should: � Implement EU Directives on Energy Labelling and Standards in a timely

way and contribute positively to the development of other measures.


Energy Audits

Under Laws No. 9/91 and 10/1991 and Decree 15/2/92, Italy supportedenergy audits in small and medium-sized enterprises. The programmesstarted in 1992 and ended in 1995. About L 9 billion2 were provided for suchenergy audits. Some 600 audits were undertaken.

Energy Managers

To implement Article 19 of Law 10/91, circulars of the Ministry of Industry No.219/f of 2 March 1992 and 226/f of 3 March 1992 issued regulations on thecompulsory appointment of energy managers for all industrial, commercial,public and transport sectors companies and organisations consuming morethan 10 000 toe per year (industry) or 1 000 toe per year (other); 750companies have appointed energy managers. Energy managers can alsooperate within an Energy Saving Company (ESCO) to recognise, plan,manage and eventually finance energy saving interventions. Companies thatfail to comply with this regulation are not eligible for grants for energyefficiency investments and are liable to be fined. The FIRE (Italian Federation for the Rational Use of Energy) associationcollects and represents the 2 000 Italian energy managers on behalf of theMinistry of Productive Activities. The FIRE web site (http://www.fire-italia.it)contains a forum which actively aims to define energy efficiency indicators forseveral energy-saving interventions Through an agreement between the Ministry of Industry, ENEA and FIRE anannual budget of € 400 000 is available to support this network of energymanagers in all sectors.


Since 1998, the Italian government has developed a joint voluntaryprogramme with FIAT, the major Italian car manufacturer, for the developmentof low consumption vehicles. FIAT is committed to the following goals: by2000, a general public model with a consumption of 4.5 litres/100 km, by2005, a model in production with a consumption of 3 litres/100 km and by2010, the average vehicle produced should consume less than5.5 litres/100 km. Furthermore, FIAT should build a platform for used carrecycling. Another voluntary agreement dated 31 July 1996 between the governmentand FIAT is aimed at producing low impact gas, electric and hybrid fuelledvehicles. The glass industry has concluded a voluntary agreement with the governmentestablishing a programme to reduce GHG emissions by about 10% by 2005.This agreement includes monitoring mechanisms and if the manufacturer failsto comply with the agreement, the government imposes standards at thenational level.

2 On average in 1999, L 100 = US$ 0.056. In 2001 L 100 = US$ 0.046.

6

In November 1998, the industry entered into a framework agreement with thegovernment entitled Patto per l'energia ed ambiante that will later lead tovoluntary agreements to reduce CO2 emissions through increased energyefficiency and use of renewable energy sources. In July 2000, ENEL, the Ministry of Productive Activities and the Ministry forthe Environment signed a voluntary agreement on demand side managementfor collaborating in GHG reduction, through the following actions: � Supplying energy services after the meter.� Increasing energy efficiency in electrical end-uses.� Optimisation of public lighting.� Development and dissemination of electrical equipment and technologies.� Defining agreements with its suppliers in order to produce and use low

GHG emission products and equipment. In the 1999 in-depth review of the energy policies of Italy, the IEA stated:


� Continue to develop Voluntary Agreements with industry, taking accountof the experiences in other countries, and monitor their results to ensurethat these Voluntary Agreements lead to energy efficiency improvementssignificantly beyond the business-as-usual trend.


As of December 2001, total installed power of CHP (combined heat andpower) plants accounted for some 11 900 MW, of which:

� 7 700 MW were from IPPs.� 4 200 were from auto-producers.

According to the provisions of the Legislative Decree of 16 March 1999(No. 79/99) entitled Implementing the European Directive 96/92/EC withcommon rules for the single market of electricity:

� The GRTN (the public transmission system operator) must ensureprecedence for the co-generation plants' dispatching (immediately afterthe plant fed by renewable sources): there is the obligation for anyproducer or importer handling more than 100 GWh/year to feed thesystem with at least 2% of CHP or renewable sources produced by plantsthat entered into production after 1 April 1999.

� From 1 January 2002, outputs from cogeneration plants are exempt fromthe obligation to introduce into the electricity network (or to acquire) aquantity of electricity from renewable sources equal to 2% of the electricitygenerated by conventional sources.

In early 2002, the Regulatory Authority for Electricity and Gas defined theconditions under which a CHP plant can be considered a cogeneration plant.The criteria take into account the efficiency of generation and the relevantsavings as compared to a separate production of the same quantity of powerand heat. Furthermore, a minimum value (15%) has been set for the ratiobetween the heat and the total energy produced by the plant.

Industrial DSMPromotion andAssistance

Legislative Decrees No. 79/1999 and No. 164/2000, enacted to comply withthe European Directives concerning the opening of the electricity and gasmarkets, specify that the government concession to companies to undertakethe distribution of electricity and gas shall include the implementation ofmeasures for the improvement of energy efficiency in end-uses according toquantitative targets.

7

The quantitative targets, the modalities for designing and implementing theprogrammes and the monitoring and assessment procedures of the energysaving programmes were defined by two Decrees issued on 24 April 2001 bythe Ministry of Productive Activities in collaboration with the Ministry of theEnvironment. The Regulatory Authority for Electricity and Gas is drawing upguidelines for the identification and selection of suitable projects and themonitoring of the results achieved. The targets are progressive from 2002 to 2006. In the first year (2002), theprimary energy saving should be 0.50 Mtoe (0.3 for the electric sector and0.2 Mtoe for the gas sector); in 2006, the energy saved should exceed2.9 Mtoe/year of which 1.60 Mtoe for the electric sector and 1.30 Mtoe for thegas sector. The obligations are in force for those distributors providingelectricity or gas to more than 100 000 end-users by 31 December 2001. Thequota of energy saving to be achieved by a single distributor is proportional tothe ratio between the electricity or gas it distributes at a local level and thetotal electricity or gas distributed at a national level. Fines are envisaged fordistributors who do not achieve their assigned targets. The projects designed to comply with the requirements of the Decrees may beimplemented in three ways: a) Actions carried out directly by distributors.b) Through companies owned/controlled by the distribution companies

themselves.c) Through ESCOs.

The costs incurred by distributors for the implementation of projects can becovered with part of the annual proceeds coming from the carbon-tax andfrom tariffs paid by all end-users (either captive and eligible customers).

It is expected that the implementation of energy efficiency programmes carriedout under the two above-mentioned Decrees will achieve by 2006 a GHGemissions reduction of 7.3 Mtoe, that is about 15% of the Italian commitmentunder the Kyoto Protocol. Under the 1991 planning agreement between the Ministry of Industry andENEL, negotiated under Law 9/91 and covering 1991-1995, ENEL undertookto promote savings in electrical end-uses through technical assistance, adviceand information dissemination. Programmes focused on efficient heat pumpsfor water heating and air conditioning; compact fluorescent light bulbs; solarpanels in the residential and commercial sectors; capacitors to improve powerfactors on customer premises; and cogeneration in small and medium-sizedenterprises. The separation of generation, transmission, distribution and supply phases isa fundamental issue of the energy market reform in Italy. Relevant effortsaddressed at disaggregation of the power industry resulted in a restructuringof ENEL. The following companies have been set up: in the generation area,Enel Produzione together with Erga for activities in the sector of renewablesources; three new companies (Euroen, Elettrogen and Interpower) to be soldon the market, with power plants having an overall net capacity of 15 000 MW;in the area of the transmission, Terna which has the ownership of the high-voltage grid; in the distribution area Enel Distribuzione together with EnelTrade for the contracting and selling of electricity to eligible clients and Enel.sifor post-meter services. The main options that have been identified includeefficient lighting systems, heat pumps, solar panels, insulation andtemperature control, and motive power and power factor correction, includinghousehold appliance labelling and efficient industrial transformers. Finally, the

8

management of public lighting plants has been entrusted to So.l.e.

Financial/ Fiscal Incentives

Under Law No. 10/91 and Decree 15/02/92, financial contributions wereprovided to support investments in energy efficiency and renewables in allenergy sectors. The main contributions which were made to help industry andthe industry sector were stopped in 1994 at the central level but some regionalsubsidies are still in operation. A total of 211 projects have been completedand 132 projects are currently under way. A total budget of 1 040 million ECUwas presented (in 1991 currency), but 330 million ECU (in 1994 currency) waseffectively engaged and 145 million ECU (in 1996 currency) has already beenallocated. The government’s financial difficulties have led to these successivepostponements of funding for these grants. Under Law No. 9/91 and the Decree of the Prices Committee No. 6/92, thepublic utility ENEL purchases at avoided costs the electricity produced byrenewable sources, waste and cogeneration. This regulation came to an endin 1997. Proposals for about 16 000 MW were presented but ENEL acceptedonly 7 200 MW, i.e. 3 700 MW of cogeneration, 1 400 MW for plants based onwaste and 2 100 MW based on renewable sources. A total of 5 000 MW isalready in operation; plants must be completed by 2001. Avoided costs andincentive premiums paid by consumers to producers are provided for the firsteight years. This resulted in 1998 in a total surcharge on electricityconsumers of about € 1 200 million. By Decision of the Council of Ministers of 26 November 1999, the amount ofL 300 billion will be used to fund sectoral compensating measures withincentives for energy efficiency, emissions reduction and renewable energysources. In 1999, the interventions eligible for co-financing were:

� National actions for emissions reduction, such as reduction of energyconsumption in transportation (sustainable mobility, intelligent transportsystems, hybrid and electric vehicles for public fleets); reduction of energyconsumption in the civil and industrial sectors (energy efficiency in end-uses of electricity, highly efficient systems for heating and air conditioning,efficient energy components in industry).

� Programmes for information on climate change and for research onclimate.

� Encouragement of Kyoto mechanisms (financial support up to 50%).

Information ENEA and FIRE provide information on energy efficiency and organiseupdating courses. Several institutions organise local educational courses.


Energy Managers

As mentioned under INDUSTRY above, Law No. 10/91 makes it mandatoryfor all administrations consuming more than 1 000 toe (primary sources) toappoint an energy manager. Local administrations in charge of energyregulation should use the network of energy managers to resolve sectoralproblems.

Local Energy Plans

Law No. 10/91 requires communities with a population of over 50 000 toestablish local energy plans with emphasis on renewable energy sources andcombined heat and power (CHP). Due to weak administrative managementand budget constraints, few plans have been developed so far, with theexceptions of Rome and Turin and some smaller cities like Padua or Rovigo.However, Italian municipalities were to set up their energy budgets and

9

develop reduction plans for the years 2005 and 2010 by December 1998.


The state is in charge of railways, air, maritime and fluvial transport as well asmotorways and national roads. The Italian authorities are well aware of theneed for a better distribution in transport flows between road and rail traffic,improvement of the public transport system and for increased efficiency of thevehicles themselves but stress that these tasks are complex and costly toimplement. In recognition of these insufficiencies, transport policy is movingaway from direct state intervention to a more market-based strategy. In the 1999 in-depth review of the energy policies of Italy, the IEA stated: The Italian Government should: � Increase the share of public transport and ensure that regions effectively

co-operate on inter-regional transport issues.

The GeneralTransport Plan

The General transport Plan (PGT), revised every three years, sets out nationaltransport objectives. In accordance with these objectives, Regional TransportPlans are to be developed by regional authorities, Urban Traffic Plans (PUT)and Urban Mobility Plans (PUM) by municipal authorities, and mobility plansby companies with over 300 employees. The 2001 PGT reiterates many of the 1994 objectives, with the primary goalsof bridging the gap between transport supply and demand and improvingeconomic efficiency and environmental effectiveness.

Vehicle Taxation

Vehicle taxation is proportional to engine power and is equal to € 2.58/kW peryear for unleaded gasoline or Eco-gas-oil vehicles in the entire territory, withthe only exception of Venetia (€ 2.84/kW/year) and Marche (€ 2.79/kW/year).The tax is increased for polluting vehicles and strongly reduced for lowenvironmental impact vehicles. For example, the tax on gas-oil vehicle (non-Eco-gas-oil) amounts to € 7.82/kW/year); for hybrid (gasoline/methane orgasoline/LPG vehicle, the tax is € 2.58/kW/year and only € 0.65/kW/year forelectric vehicles – after five years – and for methane or LPG vehicles. Electricvehicles benefit from a zero tax the first five years.

Local Public Transport

Local public transport is not yet as cost-effective as it could be. It suffers fromlack of rail infrastructure, relatively low levels of equipment and services, andheavy reliance on congested road transport (67%). Urban bus use fell by 6%between 1990 and 2000, whereas private car use for urban trips increased by37%. While efforts to expand urban railways are showing initial results, theoverall supply remains low; underground lines in Milan, Naples, Rome andGenoa total some 122 km, whereas tram lines in Turin, Milan, Rome, Naples,Genoa and Trieste total some 407 km. Financial assistance to regions and municipalities provided by government,supports environmentally-friendly public transport and the modernisation oflocal public transport services and vehicles. The purchase of new buses ispart of a ten-year plan (1998-2008) and of the 2001 PGT.

Vehicle Certification

In 1998, energy performance monitoring in vehicle certification was set up andis being progressively implemented.

Railway Network

The weakest part of the transport system has always been the railways withlow train frequency, lack of punctuality, inadequate train schedules andobsolete rolling stock. To overcome these problems, which discouragepotential travellers, the government has launched a complex investment plan

10

to expand the railway network and a plan to build high-speed lines is beingimplemented. The cost would be L 88 000 billion by 2000 of whichapproximately L 39 000 billion was already covered up to 1998.

Incentives forRenewal ofCar Fleet

Government incentives were introduced in 1996 to progressively eliminate oldcars and reduce the share of vehicles bought after 1990 to 75% by 2000.Combined with incentives for low-emissions vehicles, they have resulted inrenewal of the car fleet and reductions in air emissions. The proportion of oldpassenger cars has fallen to 37.2%; the share of cars equipped with catalyticconverters increased from 8.5% in 1992 to almost 50% in 2000. However, thenumber of cars in use and the average engine size have increased. The shareof vehicles over ten years old remains considerable where trucks (50.8%),buses (60.9%), and two-wheelers (56.6%) are concerned. In the period 2001-2003, the Ministry for the Environment will support purchases by citizens ofnew electric, methane or LPG vehicles and the retrofitting of cars withLPG/methane investing a further € 7.7 million per year.


Intermodal Transport

Inter-modal transport (i.e. combined sea-land and rail-road transport) hasprogressed with the growth of trans-shipment terminals at several Italian ports,inter-port hubs, and connections with rail and road networks. Containermovements at Italian ports have increased by 219% since 1990.

Carbon-EnergyTax

Among substantial decisions adopted to fulfil the Kyoto commitment, aCarbon-Energy Tax was established by Law No. 448/1998 of December 1998with the twofold purpose of reducing CO2 emissions and reviewing fiscal rateson oil in order to harmonise energy products taxation in the European Unioncontext.

The Law established the value of the excise taxes for 1999 (€ 0.52 per metrictonne of coal, petroleum coke and "orimulsion" used in combustion plants) andthose for 2005, to be reached progressively. The increases between 1999 and2004 were to be decided on a yearly basis by the government and set byDecrees of the President of the Ministers' Cabinet. However, in September2000, the CO2 tax increases were suspended by Decree No. 268/2000. Thestructure of energy taxation has not changed since 1998, and the governmentis presently considering revising the methodology of excise tax increases.

The proceeds from the tax are about L 2 180 billion for 1999 and L 2 271billion in 2000 and 2001. They will be used to fund a reduction of manpowercost, a reduction in employers insurance contribution and a contribution tofinance environmental projects.

On 22 November 2000, a decree was issued allocating L 300 billion fromproceeds of the 1999 carbon tax to measures and programmes for GHGemissions reduction, including the promotion of renewable energy and energysavings.

The interventions in energy efficiency eligible for co-financing are:

� Reduction of energy consumption in the transport sector: this concernsformulation and updating of urban traffic plans, intelligent technologies fortransport systems (ITS), innovative vehicles (i.e. electric, hybrid) and fuels(bio-fuels, natural gas) for urban mass transport fleets.

� Reduction of energy consumption in the industrial, residential and tertiarysectors: this concerns energy-environment audits in industry, highefficiency electric components (motors and drives) and appliances, low-impact innovative fuels in industry.

11


In recognition of the need to update the guidelines on energy policy and set upa joint framework for both administrative and operational initiatives, thegovernment approved at the end of March 1998 the organisation of a NationalConference on Environment and Energy that took place in November 1998.The Conference focused on environmental, social and economic aspects ofthe energy sector: the primary goal is to achieve voluntary agreementsamong government, companies and unions to pay increased attention to theimportance of energy availability for development, environmental protectionand achievement of national objectives. In the concluding document, the government set, inter alia, the followingobjectives: to promote sustainable development and to account forenvironmental concerns in energy policy. The government plans to devote atleast L 5 000 billion from 1999 to 2004 to specific actions which were decidedat the National Conference, including increased efficiency in final energy use,especially in the transport sector and to start a programme to reducegreenhouse gas emissions.

Furtherinformation

For further information, please contact: Ing. Dario ChelloMinistry of Production ActivitiesDirectorate for EnergyVia Molise 2I – 00100 Rometel. +39 (06) 4705 2651 fax +39 (06) 4705 2269 email [email protected]


1

JAPAN Updated December 2002

BACKGROUND Long-Term Outlook

The 1990 Long-Term Energy Supply and Demand Outlook of elaborated bythe Advisory Committee for Energy, the advisory board of the Minister ofInternational Trade and Industry (MITI) was first revised in June 1994 andapproved by the Council of Ministers in September 1994. It illustrated thetargets for future supply and demand under the fundamental objectives ofJapan’s energy policy, the so-called “3Es”: economic growth, energysecurity and environmental protection. This Long-Term Outlook was revised again in June 1998 and presentsJapan’s supply and demand outlook for the year 2010, with reference to theframework of the third Conference of the Parties (COP3) of the UN FCCagreed in Kyoto in December 1997. On the demand side, it stresses theneed to control energy demand through the implementation of steady energyconservation measures that are, to the extent possible, technologically andeconomically feasible. At COP3, Japan committed itself to achieve the target of reducing by 6%over the period 2008 to 2012 the emission level of global warming gasescompared to the 1990 level. This represents a cut of about 150 milliontonnes of CO2 equivalent from 1995 emission levels. Japan's target forenergy-related carbon dioxide emissions, which account for about 80% of allgreenhouse gas emissions, is stabilisation at the fiscal year (FY) 1990 levelby FY 2010. To achieve this goal, the government established theGuidelines of Measures to Prevent Global Warming. The Japanese Diet approved ratification of the Kyoto Protocol on curbingglobal warming at its plenary session on 30 May 2002. The ratificationdocuments were then submitted to the United Nations on 7 June 2002, andJapan became the 74th of the 111 signatories to ratify the treaty.

Guideline ofMeasures to Prevent GlobalWarming

The Guideline of Measures to Prevent Global Warming of 19 June 1998proposed a full package of measures, of which energy demand-sidemeasures such as: introduction of the "Top-Runner" method; rationalisationof energy use at factories and development of action plans for energyconservation; development of infrastructure to improve the efficiency ofdistribution, introduction of sophisticated road traffic systems to reduce trafficcongestion; development and diffusion of new energy conservationtechnologies, including clean energy vehicles. To achieve the Kyoto Protocol commitment, Japan revised and approved on19 March 2002 the above-mentioned Guideline as a national plan: indeed,the original Guideline of 1998 was considered insufficient to comply with theKyoto target. The new Guideline introduces 45 fresh approaches includingfurther promotion of renewable energy and energy conservation and energyefficiency, giving a total of more than 100 approaches. In light of theseapproaches, Japan has introduced two energy-related bills: one is the"Amended Law Concerning the Rational Use of Energy" and the other is the"Special Measures Law Concerning the Promotion of the Use of New Energyby Electricity Suppliers" The new Guideline features present the reduction goals to be imposed oneach sector for the first time. The industrial sector is required to carry out a7% cut of GHG emissions, while a 2% reduction is sought in the residential/commercial sector. It also calls for the transport sector to halt growth of gasemissions at 175 above the 1990 level. Thus, the reduction of CO2


2

emissions from energy use in the form of fuel combustion is expected to goback to the 1990 level. The new Guideline also indicates that Japan will achieve 0.5% of the 6% cutthrough the reduction of emissions not from energy use, 2% through thedevelopment of innovative technologies and citizens' efforts, 3.9% throughforest absorption, and 1.6 % through the so-called Kyoto Mechanism. Sincethere is also a 2% increase in some GHG emissions, the total reductionexpected to be achieved is the targeted 6%.

1993 LawConcerning theRational Use ofEnergy

In this context, in 1993 it was judged essential to amend the Law Concerningthe Rational Use of Energy, known as the Energy Conservation Law, and atthe same time establish the Law Concerning the Rational Use of Energy andRecycled Resources Utilisation, known as the Energy ConservationAssistance Law, and apply it to actions assisting business operators whovoluntarily tackle such activities as the rationalisation of energy use andutilisation of recycled resources. The promotion of energy conservation measures included the promotion ofenergy conservation equipment and systems; the accelerated developmentand practical application of energy conservation technologies; theformulation and proper application of guidelines based on the LawConcerning the Rational Use of Energy, enhancing awareness of energyconservation through publicity, etc., and the active promotion of an energyconservation labelling system.

1998 Revised LawConcerning theRational Use ofEnergy

An important development in energy efficiency in Japan was the revised LawConcerning the Rational Use of Energy that was issued on 5 June 1998. Themain points of the revision approved by the Japanese Diet in June 2002 (tobecome effective on 1 April 2003) are that more factories, automobiles andappliances will have to comply with stricter energy efficiency standards. (Fordetailed information, see the following developments.) The revised Energy Conservation Law must be considered in the generalcontext of the efforts made by the government which resulted in the settingup in December 1997 of “the Headquarters of Measures to Arrest GlobalWarming” to address comprehensive energy conservation measures tocontrol CO2 emissions.

CO2 EmissionsEstimated byAdvisoryCommittees in March 2001

The Joint Advisory Committee showed that the energy-related CO2emissions in FY 2010 would exceed by about 20 million tonnes of carbonequivalent (of which about 6 million tonnes would be attributed to thedemand side) the current countermeasure scenario in Japan. It thereforeshowed that it is necessary to persist with the existing measures and monitorthe progress of their implementation to maximise their effectiveness, withadditional measures being introduced if necessary. The total energy conservation effect in the residential/commercial sector,industrial sector, transportation sector and cross-sectoral measures is57 million kilolitres (kl), i.e. � Share of existing measures: 50 million kl.� Share of new measures: 7 million kl.

Government Energy Organisation

In January 2001, the Ministry of International Trade and Industry (MITI)became the Ministry of Economy, Trade and Industry (METI). The Agencyfor Natural Resources and Energy (ANRE) has been reorganised into fiveunits, and is still responsible for comprehensive energy policies to ensurestrategic energy security, realise an efficient supply and promote energypolicies in harmony with the environment.

3



Energy Efficiency Standards and Labelling

For items designated “specified equipment” by government ordinance, theEnergy Conservation Law established standards for improved energyefficiency for manufacturers and importers (“manufacturers”) and madeenergy efficiency labelling mandatory. Under the 1993 Energy Conservation Law, if a manufacturer fails to complywith a directive for appropriate labelling, the Minister of International Tradeand Industry is empowered to make the case public and issue an order. Amanufacturer who fails to obey an order is subject to a penalty. The Revised Law of June 1998 sets a new fine for manufacturers andimporters of appliances in the case of non-compliance with governmentinstructions. The energy efficiency standards adopted in the framework of the 1993Energy Conservation Law are as follows: � Energy efficiency standards for single-purpose air-conditioners and

combined air-conditioners and cooling units call for an averageimprovement of 5-6% in energy efficiency over the FY 1992 results bythe end of September 1998.

� Standards for fluorescent lamps call for a 3-7% improvement in energyefficiency by 2000 compared to that of FY 1992.

� Standards for televisions call for a 5-25% improvement in energyefficiency by FY 1998 compared to that of FY 1991.

� Standards for copying machines call for a 3% average improvement inenergy efficiency by FY 2000 compared to that of FY 1992.

� Standards for electronic computers call for a 30% average improvementin energy efficiency by FY 2000 compared to that in FY 1992.

� Standards for magnetic disk units call for an average improvement inenergy efficiency of 60% for single disk units and 80% for multi-diskdrives by FY 2000 compared to that of FY 1992.

Top RunnerProgramme

One of the main points of the revised Energy Conservation Law in forcesince 1 April 1999 is the Top Runner Programme; according to the Long-Term Energy Supply-Demand Outlook of Japan, the country must adoptdrastic energy-savings measures of 56 million kl to reach the Japanesecommitment of the Kyoto Protocol, thus making energy consumption in 2010similar to the 1996 level. Foremost among the measures needed aremeasures imposed by legal action that aim to realise energy savings of 27million kl. The Top Runner Programme is expected to achieve a saving of 9million kl and reduce the emission of GHG by 6% by 2010.

In the Top Runner Programme, the energy efficiency target is based on theproduct having the highest energy efficiency of all the products in the samegroup that are sold on the market and where efforts are made to reach thetarget number by the time set for each type of product. The Programme willapply to both Japanese and imported products. It will apply to the following12 categories of product: passenger cars, diesel passenger cars, trucks,diesel trucks, air-conditioners, fluorescent lights, electric refrigerators, TVsets, computers, VCRs, magnetic disk units, and copying machines.

4

Since each of the products has a variety of models with different sizes andfunctions, it is unreasonable to apply the same single energy efficiency to allof them: so, the Top Runner Programme divides each product into severalgroups and establishes an energy efficiency target for each of the groups.The principle is that the target is chosen from the model having the highestenergy efficiency of each product group and if a further improvement inefficiency is expected by the target year as a result of technical progress,this is added to the current highest efficiency.

If manufacturers fail to reach the target set by the programme, measuressuch as a recommendation to take steps to raise energy efficiency areissued by METI, followed by the publication of their name, etc. Ifmanufactures do not follow the recommendation, a penalty is imposed tomaintain the programme's effectiveness. Whether the target is reached isnot determined for each product; instead, it is assessed whether theweighted average of the energy efficiency of the products which belong to agroup having the same target is above the target level or not for eachmanufacturer or importer.

Expansion of the Top RunnerProgramme

In June 2002, the Japanese Diet approved the expansion of the Top RunnerProgramme to come into force in April 2003. Committees of experts settarget values relative to 2000 level and target years as follows:

- Gas Space Heaters- Oil Space Heaters- Gas Cooking Appliances- Gas Water heaters- Oil Waters Heaters- Electric Bath Seat Warmer- Vending Machines- Distribution Transformer- Oil-immersed- Moulded

-1.4% in 2006 -3.8% in 2006 -13.9% in 2006 -4.1% in 2006 -3.5 % in 2006 -10.0 % in 2006 -33.9 % in 2005 < AC 7 000 V -30.3% in 2006 -30.3% in 2007.

Reference: http://clearing.e-gov.go.jp/cgi-bin/HpSchearch.cgi?LANG=

New Target Values

In the framework of the revised Law, more appliances — for examplerefrigerators — will be added by Ordinance to the currently designated homeand electric appliances. Furthermore, this future energy efficiency targetvalue will be strengthened, i.e. set at a level higher than that of the appliancewith the highest energy consumption efficiency of the currentlycommercialised products (except special items).

Standby Power Reduction

In Japan, 10% of energy consumed in the domestic sector is standby power.Three major manufacturers associations have set voluntary targets forproducts requiring standby power to satisfy their functions to reduce thisstandby power to 1 W or less by fiscal year 2003 (by the end of FY 2004 forair-conditioners). Their voluntary target for standby power of the otherproducts is close to zero by the end of fiscal year 2003.

New Energy Efficiency Labelling System

The current systemUnder the revised Energy Conservation Law of 5 June 1998, energylabelling of the product's name, model, energy consumption efficiency andthe electric power consumption of designated products is mandatory.However, this labelling system does not require the energy consumptionperformance of a product to be labelled in terms of a relative comparisonwith that of other products. Hence, the new labelling system is aimed atcomplementing this current system, so as to allow relative comparisonsbetween products and to provide the consumer with readily understandableinformation regarding energy efficiency performance when selecting aproduct.

5

Background of the new systemAfter an in-depth study of the advantages and disadvantages of the labellingsystems in the United States (the Energy Star Program) and in the EuropeanUnion, the Energy Conservation Standard Subcommittee of the AdvisoryCommittee for Energy, an advisory body to the METI Minister, developed aproposal to display the rate of the existing Top Runner Standard on labels inJapan; the proposal was submitted for consideration by the JapaneseIndustrial Standards Committee (JIS), as the government's policy is topromote the new system as a voluntary labelling system based on the JIS.

Scope of the new systemThe products subject to the Top Runner Programme can be grouped intothree categories: automobiles, electrical appliances for commercial use, andelectrical appliances for home use. The automobile group will not be subjectto the new labelling system, as the mandatory requirement to label thedistance travelled per litre of fuel is estimated to be sufficient to informconsumers on comparisons with the energy efficiency of other automobiles.As for the energy efficiency of electrical appliances, it is believed that suchan indicator was not available to allow consumers to make accuratejudgements on energy efficiency, including comparisons with other products,as in the case of automobiles. As for electrical appliances for commercialuse, since procurement departments within corporations generally makepurchase decisions, it follows that specialist opinion is required with regardto energy efficiency as well. Thus, it was decided to apply the new labellingsystem only to electrical appliances used by general consumers.

ImplementationAfter this matter was studied by the JIS in May 2000, the World TradeOrganisation procedure was fulfilled: the new JIS labelling system wasestablished in July 2000 and at the same time the details were made public.

Energy Conservation Target of Designated Machinery

Target Year Energy Saving Effect

Air conditioner (for heating and cooling) 2004 (partly 2007) 63%Air conditioner (exclusively for cooling) 2007 14%Television set 2003 16%Video tape recorder 2003 59%Fluorescent light fixture 2005 17%Copying machine 2006 30%Computer 2005 83%Magnetic disk device 2005 78%Electric refrigerator/electric freezer 2004 30%

Energy saving effect : improvement from the 1997 performance

Energy Star Programme

The International Energy Star Programme is intended to use joint energyconservation standards and a common logo in the approved countries(Japan and the United States). This has the effect of mutual recognition thatthe products satisfy the standards. The Energy Star logo affixed to productsis also valid in the other approved country. Products concerned are personalcomputers, displays, printers, facsimile and copying machines. Japaneseproducts meeting the standards may have the international Energy Star logoaffixed to them in the other approved country. The Energy ConservationCenter, Japan (ECCJ) is responsible for this programme.

Committee on Advanced DSM

Until now, energy conservation measures have focused on the supply side.However, with newly developed technologies, it is possible to implement

6

measures on the demand side: for instance, ECCJ selected 800 householdsat random across the country and installed meters that showed powerconsumption in both volume and cost terms in real time. A survey found thatthese households' electricity consumption in FY 1998 was reduced by anaverage of about 20% from the previous fiscal year. Based on thisexperience, the Agency of Natural Resources and Energy under METI(METI/ANRE) set up in March 2000 the Committee on Advanced DemandSide Management as an advisory body to the Agency's Director General.The Committee is studying DSM from the consumer's side with particularemphasis on the residential/commercial sector where energy consumption isexpected to grow strongly in the near future.

Matters under investigation focus on:

� Ways of encouraging users to install systems that allow them to gain anaccurate knowledge of energy costs incurred.

� The introduction of systems that encourage energy conservation.� Policies for the promotion of businesses that provide support for energy

conservation activities.� Policies that will encourage users to invest in energy-saving equipment.

Following the positive experience of metering realised by the EnergyConservation Center, Japan the Committee on Advanced DSM is examiningdifferent plans to promote the installation of such metering systems. As forthe systems that promote energy conservation, various schemes havealready been devised in relation to electricity and gas rates, such asincrease of unit cost as the total power consumption increases, discounts forsupplies at night. In office buildings consuming large amounts of energy, it isnow mandatory to appoint someone in charge of energy management, whichwill certainly increase interest in ESCo services. Regarding the question ofhow to encourage investments in energy conservation equipment, theCommittee plans to examine ways to promote co-generation and block heatstorage systems.

Publicity Activities

The EnergyConservation Centre

The Energy Conservation Center, Japan (ECCJ) is responsible fordisseminating information on energy conservation. Newspaper, magazine,radio and television advertisements were sponsored by ECCJ in bothsummer and winter since FY 1977. Promotional activities such as energyconservation republics, poster contests by the students of elementary schooland high schools have been operated by ECCJ. ECCJ held the Smart Life 2001 Campaign. This campaign invited consumersto use energy efficiently and promoted simplicity in many aspects ofJapanese life (clothing, meals, houses, offices, education, etc.). Examplesof this activity include proposals to reduce energy consumption for air-conditioning; educational initiatives to deepen environmental awareness andenergy efficiency; a proposal for fuel efficient driving.

Energy Saving Republic

The Energy Saving Republic is one of the activities of the EnergyConservation Center, Japan (ECCJ). It is the group of people who implementenergy saving actions, recycling, and better environment to contribute tosolving the problems of energy and global warming. Elementary schools andlocal communities are at the centre of this activity which is planned to beexpanded to include corporations, shopping associations or universities.

Support provided by ECCJ includes distribution of the tabloid paper "EnergyConservation Ambassadors", issued six times a year; tools for publicity,

7

information leaflets on Republics; the Republic's web site; implementation ofenergy audits; and subsidies for community's energy conservation activities.As of 31 December 2000, the number of the Republics amounted to 37, 26of them for elementary schools.

To promote conservation as a nation-wide movement, the government hasestablished: � The Energy Conservation Day on the first day of every month to create

greater opportunities to review energy conservation activities and ensuretheir results.

� The Energy Conservation Month in February as a nation-widemovement involving general consumers and public institutions,implementing energy conservation programmes in industry, holdingexhibitions and various campaign events on energy efficiency.

� The General Check-Up Day for Energy Conservation on 1 August and1 December, for a check-up and review of daily energy conservationactivities and habits.

Housing

Insulation Standards

In February 1992, the performance standards for housing installationsdesigned in 1980 were strengthened to levels comparable with those of thecold regions of Europe and North America. Stricter application of building standards for heat insulation was enforced inApril 2001. The new standards could save 20% of energy use for air-conditioning and are expected to cost around ¥ 1 million1 per house.


EnergyTaxationSystem

Two alternative special taxation measures are offered to promote investmentin the installation of energy-efficient equipment.

� A tax deduction amounting to 7% of the equipment acquisition cost(which should not be more than 20% of the income tax or corporate taxpayable).

� A special depreciation that allows the company to depreciate amaximum of 30% of the acquired value, in addition to the normaldepreciation in the year of acquisition.

Home and BuildingEnergy ManagementSystems

METI provides subsidies through the New Energy and Industrial TechnologyDevelopment Organisation (NEDO) to introduce Home Energy Managementand Building Energy Management Systems. These help manage energyconsumption of appliances such as lighting, air conditioning, and hot-watersupply by using information technology systems. These systems enableautomatic management of several appliances at the same time leading toenergy savings and reduced environmental impact.

Commercial

Standard Values

For five kinds of buildings (offices, shops, hotels, hospitals or clinics, andschools) standards for prevention of heat loss and efficient utilisation ofenergy in air conditioners, mechanical ventilators, lighting systems, hot watertub equipment and elevators were established in July 1993, based on theEnergy Conservation Law, setting thermal performance values and energyconsumption efficiencies.

1. In July 2001, ¥ 100 = US$ 0.801.

8

Fiscal/FinancialMeasures

Taxation measures for energy investment have been set up for buildingequipment with high energy efficiency, including heat pumps, floor heating,and thermal storage air-conditioning and hot-water equipment.

The 1993 Energy Conservation Assistance Law established guarantees ofobligation and interest subsidies where the builder of a commercial buildingadequately meets the energy conservation levels in the guidelines forvoluntary energy conservation efforts laid down by the ministry concerned.

Since FY 1993, the Japan Development Bank has provided long-term low-interest loans for the total construction costs of buildings having high energyefficiency and incorporating measures to reduce the environmental burden("eco-care buildings").

From this fiscal year, facilities to produce energy-efficient appliances, whichcomply with the revised energy conservation law, qualify for financing withlow interest by the Japan Development Bank, etc.

Enterprises that adopt appliances certified by the International Energy StarProgramme can also apply for low interest loans from the JapanDevelopment Bank, etc.

Energy Efficiencyand the Management of Cities

Design costs are subsidised for efficient energy use systems located inareas undergoing extensive urban renewal.

Project feasibility studies are subsidised for "environment-harmonised districtdevelopment", which provides a large number of energy-efficient buildingswhile integrating the efficient use of energy at the district level.

The Energy/Resources Conservation Promotion Meeting recommended theaction plan which government should implement by itself. This meeting willbe held to carry out action plans for dissemination and publicity of energyconservation particularly in summer and winter when energy consumption ishighest, for the purpose of stabilising awareness of the necessity for energyconservation and promoting energy conservation.

The action plan enacted in 1995, originated by the Basic Environmental Planwhich was enacted in 1992, has also been carried out. Surveys of itsimplementation status have been conducted and published annually.

The new Green Procurement Law which promotes purchasing equipmentwith lower environmental impacts was enacted in May 2000. Definition of thegroup of equipment for which the government should take the initiative forpurchasing with the procedure was reviewed. Hybrid vehicles and/or naturalgas vehicles will be introduced soon.

In the 1999 in-depth review of the energy policies of Japan, the IEA stated: The Government of Japan should: � Consider strengthening energy conservation standards for buildings,

adopting energy conservation information systems for residentialbuildings and developing a process of energy audits/certification forbuildings as part of the documentation prepared when buildings are sold.

9

EnergyConservationEffect Proposedby the Committee

Energy conservation effect in residential/commercial sector: 18.6million kl intotal.

Share of existing measures: 14 million kl� Improvement of equipment efficiency via Top-Runner performance

control: 5.4million kl� Improvement of energy conservation performance of houses and

other buildings: 8.6 million klShare of new measures: 4.6 million kl

� Widening of equipment subject to Top-Runner performance control:1.2 million kl

� Accelerated introduction of high efficiency equipment: 500 000 kl� Reduction of standby power consumption: 400 000 kl� Introduction of residential energy management systems: 900 000 kl� Introduction of commercial energy management systems:

1.6 million kl

Note: 1 million kl is to be achieved through activities of ESCos.

INDUSTRY

Measures already existing and/orbeing improved

Energy-ControlDesignatedFactories

In 1979, the Ministry of International Trade and Industry (MITI) issuedstandards for items that included rationalisation of fuel combustion andheating, prevention of heat loss and recovery and utilisation of waste heat.They applied to designated energy management factories (a factory or placeof business with an annual fuel consumption equivalent to at least 3 000kilolitre of crude oil or an annual electricity consumption of at least 12 GWh).This concerns about 3 500 factories.

The 1979 Energy Conservation Law required designated energy-management factories to hire a certified energy manager and report thestatus of their energy consumption every year to MITI and the Ministryresponsible for the sector concerned.

The 1993 Energy Conservation Law was accompanied in July 1993 by acomplete revision and strengthening of the standards with the aim ofreducing domestic energy consumption by at least 1% annually on averagefor all operators.

Under the 1993 law, for an operator who fails to prepare a rationalisationplan, the appropriate ministers are authorised to publicise the case andissue an order. He is also subject to a penalty. It is mandatory fordesignated energy management factories to report annually to theappropriate ministers on their energy consumption.

Newly EstablishedEnergy Control

The revised Energy Conservation Law of June 1998 established a newcategory of “designated energy-management factories”, those with anannual fuel consumption equivalent to over 1 500 kilolitres of crude oil or anannual electricity consumption over 6 GWh, designated by Ordinance. Thisconcerns about 9 000 medium-sized factories and business sites. Themeasures to promote energy conservation include:

� Obligation to make efforts to conduct rationalisation according to thejudgement standards. The judgement standards are instituted by METIand concern energy control and the targets of rationalisation to ensureproper and effective implementation of the rationalisation of energy use

10

in factories.� Obligation to select energy managers.� Obligation to attend lectures on energy conservation.� Obligation to record the conditions of energy use.

A Recommendation is issued by the METI Minister when records ofrationalisation are markedly insufficient compared with the judgementstandards.

The Energy Conservation Law stipulates that the METI Minister can instructa designated energy management factory to create a rationalisation plan ifsuch a factory is found to be substantially lacking in its efforts to rationaliseits energy use; however, this provision has never been implemented and theprocedure has to be established. As the need to strengthen energy efficiencyis becoming more urgent than ever, it is necessary to establish a transparentprocess and criteria so that factories can be instructed to createrationalisation plans when necessary.

On-site surveys at factories conducted up to now have focused mainly onefforts to broaden and enhance awareness of the Energy Conservation Law.With the new guidelines, the policy is to check each principal item ofequipment at factories with regard to whether or not energy managementmanuals have been compiled, measurements are taken and recorded, andmaintenance and inspections are carried out, and to evaluate such checkitems. These specific checks constitute the core requirements to be met bythe factories under the Energy Conservation Law. As for evaluation, surveyforms sent in advance to factories are completed by them, and then METIand the Energy Conservation Center carry out on-site survey at each factoryand cross-check the evaluations. If the evaluation shows results below acertain level, an on-the-spot inspection is carried out, and if the situation isnot satisfactory, the factory will be instructed to draw up a rationalisation planin accordance with Article 12 of the law.

Implementation of the on-site surveys based on the new guidelines on anindustry-wide basis started in April 2001. All designated energymanagement factories are to be checked within about five years. In fiscalyear 2001, the steel industry, paper and pulp industry and the non-ferrousmetal manufacturing industry were checked.

EnergyAudits

Energy audits for small and medium-sized companies began in 1978 andapproximately 5 600 assessments have been carried out nation-wide. Thetarget companies are those with a capital of less than ¥ 100 million or lessthan 300 employees. They are free of charge.

Number of assessors: 1-2; number of days: 1-2; items to be assessed:a) advice on heat energy, b) advice on electric energy.

These energy audits are carried out by the Energy Conservation Center,Japan (ECCJ).

For large and medium-sized companies, detailed energy audits are alsocarried out by ECCJ. A fee is charged.

Two or three experts carry out a preliminary survey that is then followed by adetailed survey of the production process. A list of areas in need ofimprovement is drawn up and prioritised. Concrete measures are suggestedto address these priorities and a proposal is made presenting the expectedbenefits from the measures as well as the investment required to implementthem.

11

EnergyConservationAssistance Law

The Law Concerning Rational Use of Energy and Recycled ResourcesUtilisation of 25 June 1993, known as the Energy Conservation AssistanceLaw, will be in force for ten years. Its main purpose is to assist businessoperators who voluntarily undertake such activities as rationalisation ofenergy use and utilisation of recycled resources.

The following three categories of activities are defined as “specific businessactivities”, and any business operator, etc. who is going to carry out theseactivities can prepare and submit an activity plan to the competent ministerfor approval:

a) To install or improve the equipment contributing to the rationalisation ofenergy use in a factory or other business location in one of the followingcategories: manufacturing, mining, electric power supply, gas supplyand heat supply.

b) To use any building material or to install or improve any equipmentcontributing to the rationalisation of energy use in the construction of abuilding.

c) To conduct R&D on the manufacturing technique of an industrial productcontributing to the rationalisation of energy use.

For the specific business activities conducted in conformity with theapproved activity plan, the following assistance measures can be taken:

a) Very low interest rate: The interest rate, as of 16 February 1996, is farlower than the lowest interest for fiscal investments and loans (3% forthe specific activities of factories, etc., and also for those of buildings).Financial institutions (Japan Development Bank, etc.) who lend thenecessary funds have the interest partially covered by the Oil SpecialAccount (budgetary action with no legal provision).

b) Bond under Industrial Foundation Improvement Fund.c) Exemptions from taxation.

LowInterestLoans

A system of low interest loans has been instituted by some bankinginstitutions such as the Japan Development Bank for the installation ofenergy efficiency equipment. Other banks, such as the Smaller BusinessFinance Corporation and the People’s Finance Corporation, provide loans topromote energy efficiency use, mainly in support of environment protectionmeasures.

Financial MeasuresforEnergy-Saving Technology,Development andCommercialisation

In FY 1999 a system of subsidies was established to promote thecommercialisation of energy-saving technology.

Financial support is provided for the development of unused energy sourcesat district level:

Local government support for the introduction of advanced energy-saving equipmentSupport is provided to allow local governments to introduce advancedenergy-saving equipment required for various local efforts and to establishtheir “Local Energy-Saving Vision” to promote energy-saving activities.

Support of grass-roots local energy-saving activitiesSupport is provided to prompt nation-wide efforts by private-sectororganisations (NGOs) which can perform careful energy-saving activities atthe grass-roots level to ensure accelerated promotion of energy-savingmeasures.

Pioneering energy-saving model programme (factories, offices)Under the programme, businesses that have made considerable energy-

12

saving efforts are provided with support to further these activities.

Development of practical energy-saving techniquesExcellent technology possessed by private-sector businesses or producedby the New Sunshine Project is used to support the development of practicalenergy-saving techniques.

Development of techniques for electrical loss reduction and optimumdevice control in operating equipmentTechnical developments are supported to ensure overall energyconservation in entire communities and facilities, to be achieved through thedevelopment of control techniques that permit efficient energy use inoperating equipment and development of control equipment for relatedfacilities and machines.

Medium to small businesses energy conservation programme(Programme for Providing Guidance to Promote Introduction ofEquipment Designed for Efficient Energy Consumption)Energy consumption and heat generation are measured for each factory toenable experts to provide detailed instructions for energy conservation. Theprogramme also provides support for surveys of systems and thedevelopment of energy-saving techniques aimed at efficient physicaldistribution by medium-to-small businesses.

Development for energy-efficient techniques to create new industriesSupport is given to private businesses engaged in technical developmentsthat will help create a new industry by providing techniques to reduce energyconsumption.

Promotion of field tests for the introduction of high-performanceindustrial furnacesDemonstration tests of high-performance industrial furnaces are carried outin various factories to verify their practical performance and reliability, etc.

Promotion of construction and extension of energy-saving housingand office buildingsDemonstration tests are carried out to determine the effectiveness of highenergy-saving energy systems introduced in housing or other buildings.

Development of high-efficiency current-light transference compoundsemiconductors (Technical development under “21st Century’sLighting” Programme)Lighting equipment that incorporates light emitting diodes to achieve a highcurrent-light transference rate is being developed with the aim of puttingcommercial products on the market in around 2007.

Financial/FiscalSupport for CHP

At the end of March 1998, installed cogeneration capacity for the residentialand commercial sector in Japan was approximately 790 000 kW, about 3.51million kW for the industrial sector (except steam turbine) and about 4.3million kW at the total of power generation.

The special taxation and financial support system to stimulate theintroduction of cogeneration is as follows:

� Project promoting environmentally adjusted energy community creation:15% assistance towards the equipment cost for large-scale cogenerationprojects.

� New energy utilities support project: part of project cost (less than one-third) will be provided for energy utilities which introduce new energy ornatural gas cogeneration following the plan based on the Law on

13

Specific Measures concerning the Promotion of New Energy Utility.Debt guarantee is also provided by the New Energy and IndustrialTechnology Development Organisation (NEDO).

� Taxation system to encourage investment in structural reform of energysupply and demand: special depreciation of 30% of the cost obtained atthe first year or tax exemption of 7%.

� Long-term financial assistance at a low rate provided by governmentfinancial institutions such as the Japan Development Bank.

Voluntary Actions by Industry

The Japan Federation of Economic Organisations (Keidanren) has set upthe Voluntary Action Plan on the Environment that includes a total of 36industries and 137 organisations. The Voluntary Action Plan is an entirelyvoluntary effort in which each industry uses its own discretion, free from anyobligation by government or regulatory body. The Plan’s participants coveran extremely wide range of industries including distribution, transportation,construction, foreign trade, non-life insurance and others. Many of theparticipating industries have established quantitative targets for themeasures adopted. This Action Plan is subject to an annual review process,the results of which are made public: the first review was in 1998. Eighteen industries have spelled out their objectives in terms ofimprovements in the level of energy input per unit of output or CO2 emissionper unit of output; 14 industries have defined their targets in terms ofreduction in the total amount of energy used or CO2 emitted and eightindustries have established energy conservation measures to lower energyconsumption. Improving the efficiency of energy use includes theformulation of careful and detailed innovations related to operation control,including energy conservation in offices, improvements in equipment andprocesses and engaging in and implementing the developments fromtechnological research. In this Keidanren Voluntary Action Plan on theEnvironment, the Japan Mining Industry Association decided that by 2010,the non-ferrous metal industry (copper, zinc, lead, nickel) will reduce itsenergy input per unit of output by 12% from the 1990 level. The JapanChemical Industry Association will make efforts to reduce the energy inputper unit of output in 2010 to 90% of the 1990 level. This provisional plandrafted by the 80 organisations of the Chemical Industry Association will bereviewed and efforts made to improve it. In the 1999 in-depth review of the energy policies of Japan, the IEA stated: The Government of Japan should: � Evaluate the applicability to Japan of policies used in other IEA Member

countries to monitor and enforce voluntary agreements with industry.

Publicity Activities

A newsletter on energy conservation is also available for industrialassociations.

EnergyConservationEffect Proposedby the Committee

Energy conservation effect in industrial sector：20.5million kl in total � Share of existing measures: 20.1million kl

Voluntary action programme for environment of Keidanren, JapanFederation of Economic Organisation.Regulatory control under the Law Concerning the Rational Use ofEnergy.

� Share of new additional measures： 0.4 million kl Introduction of High-performance industrial furnaces to small tomedium-size companies.

14

MeasuresUnder consideration

Revised LawConcerning theRational Use ofEnergy in Non-ResidentialBuildings

The June 2002 revision of the Law Concerning the Rational Use of Energy tobecome effective on 1 April 2003 requires that plans to build non-residentialbuildings with a floor space of 2 000 square meters or more would have toinclude specific energy-saving measures. Non-residential buildings thatwould fall under the planned regulations include offices, stores, hotels andhospitals.

If authorities determine a building fails to meet the energy-saving standardsand the building’s owner does not comply with orders to change theconstruction or remodelling plans, his name would be publicised. If a buildingowner fails to report construction or remodelling plans beforehand to thelocal government, he would face fines up to 300 000 Yen.

in Industry

The government expects 2 000 to 3 000 plans for building or renovating non-residential buildings of that size to be submitted annually to localgovernments. The local governments would press for measures such asthermal insulation in the outer walls. If the measures are found to besubstandard, they would order the plans changed.

The June 2002 revision of the Law concerning the Rational Use of Energy,to become effective on 1 April 2003, stipulates that the first categorydesignated energy management factory, which is currently limited tomanufacturing and four other industrial factories that use substantialamounts of energy will be expanded to all industries, including large-scaleoffice buildings and other similar sites. Those designated businesses will besubject to the mandatory preparation and submission of future energyconservation plans (mid and long-term) and regular reporting.

In addition, based on the same revised Law, the second categorydesignated energy management factories will be subject to regular reportingon energy consumption.


The original 1979 Law Concerning the Rational Use of Energy presentedenergy efficiency standards for gasoline-fuelled passenger vehicles andmade labelling mandatory to indicate energy efficiency by the manufacturerand importer (“manufacturer”). The 1979 fuel efficiency standards were settowards 1985 and actually increased the average fuel efficiency ofpassenger cars by 12.3% from 1978 to 1985. The 1993 Law Concerning the Rational Use of Energy strengthened theguarantees for mandatory labelling. If a manufacturer fails to comply with arecommendation for labelling, the law empowers METI and the Minister ofTransport to publicise the case and issue an order. A manufacturer who failsto obey an order is subject to a penalty. The energy consumption standardswere issued on 27 January 1993; the current fuel efficiency targets forpassenger cars for FY 2000 classified by vehicle weight are as follows: � Passenger cars weighing less than 827.5 kg (light and economy cars):

fuel efficiency target = 19.0 km/litre.� Passenger cars weighing 827.5 kg up to 1 515.5 kg: fuel efficiency

target = 13.0 km/litre.� Passenger cars weighing 1 515.5 kg and over (standard-sized cars):

fuel efficiency target = 9.1 km/litre.

15

On average, the fuel efficiency improvement rate of passenger cars in FY2000 was enhanced by 8.5% compared to that in FY 1990. For gasoline-fuelled trucks, standards set fuel economy targets for FY 2003at an average improvement of 4.8% to 5.8% over the 1993 results,depending on the type of vehicle.

Revised Fuel Efficiency Targets

The revised Law Concerning the Rational Use of Energy of June 1998requires the government to set further strict standards equal to more thanthe best performance in each size category. Diesel automobiles will also berequired to set similar standards. The new standards may be 25% forgasoline cars and 15% for diesel cars to improve energy efficiency from1995 to 2010. These measures are expected to cost ¥ 500 billion a year formanufacturers and may lead to consumers paying more for cars andpremium gasoline.

Energy Conservation Target for Machinery

Target Year EnergyConservation Effect

Passenger car (gasoline-powered) 2010 23%Passenger car (diesel-powered) 2005 15%Truck (gasoline-powered) 2010 13%Truck (diesel-powered) 2005 7%

Energy saving effect: improvement from the 1995 performance

Other Transport Modes

In the framework of the revised Law Concerning the Rational Use of Energyof June 1998, the following measures have to be implemented: � Promotion of clean energy cars: Measures such as subsidies, tax

incentives and low interest loans will increase the number of electric andhybrid cars to 1 million by 2010.

� More efficient logistics, distribution: Development of an informationinfrastructure to promote television conferences and satellite office orSmall Office Home Office (SOHO) which could lead to reducing theamount of traffic and encouraged use of railway and oceantransportation.

� Encouraged use of public transport: The Traffic Demand Management(TDM), including demand control of traffic and differentiation of starttimes of office work to avoid traffic jams, and the IntelligentTransportation System (ITS: advanced navigation system, andautomated toll collection system).

EnergyConservationEffectProposedby the Committee

Energy conservation effect in transport sector: 16.9 million kl in total � Share of existing measures: 15.9 million kl

Improvement of equipment efficiency via Top-Runner performanceregulation: 5.4 million klWider use of clean energy motor vehicles: 800 000 klEnergy conservation measures involving transportation systems: 9.7million kl

・ Share of new additional measures: 1 million klAccelerated introduction of vehicles meeting Top-Runner performancecriteria: 500 000 klPromotion of widening of line-up of hybrid and other alternative vehiclesand like: 500 000 kl

16


ECCJ conducted a field survey on energy saving diagnosis of 16 industryfactories (chemistry, iron, steel, oil refinery, electronic appliancesmanufacturing, etc.) between 1997 and 2000. Results and proposals forfurther savings for each industry were published in 2001. In the 1999 in-depth review of the energy policies of Japan, the IEA stated: The Government of Japan should: ・ Review policies to achieve improved energy efficiency, taking care to

distinguish between improvements attributable to government policies andimprovements that would have happened otherwise, and utilise the resultsof reviews undertaken to adjust the package of policies intended to meetJapan’s Third Conference of the Parties (COP 3) target, in particular thepossible need to adjust the balance between energy demand and energysupply policies.

Further information For further information, please contact:

Takeo IjuinANRE/METI1-3-1 Kasumigaseki 1-chome Chiyoda-kuTokyo, 100Tel: +81 (3) 3501 1728Fax: +81 (3) 3580 5308E-mail: [email protected]


1

REPUBLIC of KOREA

Updated July 2002

BACKGROUND Rational Energy Utilisation Act of 1979

As the Republic of Korea relies on imports for about 97% of its energy, it hasfor many decades given high priority to energy conservation, particularly afterthe two oil crises of 1974 and 1979. In December 1979, the Koreangovernment began to implement comprehensive energy conservationprogrammes based on the Rational Energy Utilisation Act, amended severaltimes thereafter, the legal basis for the enforcement of the government'scurrent energy efficiency policy.

Law on theRationalised Useof Energy

The Law on the Rationalised Use of Energy and the Enforcement Ordinance(Industry and Energy Department notice No. 2000-101 of 23 November 2000)form the basis of the country's energy efficiency policy. Its main articles are:

� Article 17 related to the designation by the Ministry of Commerce, Industryand Energy (MOCIE, see below) of minimum energy efficiency standardsand energy labelling of the most widely distributed products.

� Article 18 related to measures adopted by MOCIE in case of non-compliance with the energy efficiency standards by the manufacturer,importer or seller of the product concerned.

2000 Blueprint

In 2000, MOCIE formulated the 2000 Blueprint to "implement policiesharmonising energy, economy and environment". It stresses that "the nationneeds to improve energy efficiency while securing a safe supply of energyresources, thereby establishing a solid economic foundation to buffer changesin international energy market prices".

One of the objectives of the 2000 Blueprint is Transition to a low energyconsumption structure, which includes:

� Positively promote an energy conservation policy to cope with rising pricesof oil on world market (through voluntary agreements with energy-intensive firms, development of ESCOs and other conservation supportmeasures).

� Encourage a spontaneous energy conservation movement by maintainingenergy prices at an optimal level.

� Promote energy technology development and commercialisation (boostingthe role of renewables in the energy mix and overhauling the ten-yearenergy technology development plan of 1996).

� Adopt positive measures to achieve progress under the UN FCCC (seebelow).

� Re-establish the National Energy Strategy to cope with economic socialand other changes in the 21st century.

For 2001, the Korean government prepared a set of comprehensive energypolicy objectives. MOCIE mentions that they are structured around differentpillars, one of them being "Establishing a less energy intensive socio-economic structure".

Five-YearConservationProgrammes

The first Five-Year Energy Conservation Programme was initiated in 1992with special focus on energy-intensive industries to cope with problems facedduring the nation's restructuring into a less energy-intensive economy. Thiseffort called for an investment of 2.344 billion Won1 over a five-year period torealise savings of 10.6% through improved energy efficiency and reduced

1 On average in 2000, Korean won 100 = US$ 0.088.

2

consumption levels.

The second Five-Year Energy Conservation Programme began in 1997 andfocused on mobilising market mechanisms, improving conservation systems,developing energy technology and promoting participation of the private sectorand non governmental organisations (NGOs).

In the 2002 in-depth review of the energy policies of the Republic of Korea,the IEA stated:

The Government of the Republic of Korea should:

� Continue to pursue energy diversification and to improve energyefficiency.

� Ensure that energy efficiency receives high priority in the energy policy.Strengthen energy efficiency policy by additional measures to curb energyuse in all sectors.

� Encourage international benchmarking of Korea's standards and energyefficiency norms.

� Develop further energy efficiency policies in the process of definingspecific policy measures to reduce GHG emissions.


Korea signed the UN Framework Convention on Climate Change (UN FCCC)in June 1992 and ratified it on 14 December 1993. Korea submitted the firstNational Communication in March 1998 but has not yet set a target to stabiliseemissions of greenhouse gases (GHGs). Korea considers itself a developingcountry with a need for continued economic growth and increasing energyconsumption to support that growth. The country, after initiating researchprogrammes to prepare its National Communication under the FCCC,submitted it in March 1998.

Currently, Korea is not a member of Annex I Parties to the UN FCCC:consequently it is not obliged to reduce its GHG emissions under the KyotoProtocol target. As a member of the UN FCCC, the Republic of Korea hasparticipated actively in the successive Conferences of the Parties. It took partin the Asia Least-cost Greenhouse Gas Abatement (ALGAS) projectconducted with other Asian countries under the auspices of the AsianDevelopment Bank and UNDP-GEF. Rapid economic growth and a relativelyenergy-intensive economy have led C02 emissions from fuel combustion toincrease 81% over the period 1990-1997, compared to the OECD average of9.5%.

As the government is well aware of the urgent need to cope with the variousissues of environment protection, it has been implementing various policiesand measures to mitigate GHG emissions. The government has focused onenergy conservation policies as one of the most effective measures formitigating GHG emissions as CO2 emissions per unit of GDP remain high(almost double the level of IEA countries in 1999: 0.72 kg of CO2 per 1995USD for Korea against 0.44 for IEA countries).

To cope more efficiently with the issues of the Convention on Climate Change,the government established in April 1998 the Inter-Ministerial Committee onthe Framework Convention on Climate Change led by the Prime Ministerwhich includes related government agencies, academia, and industry. InDecember 1998, the government formulated the Comprehensive NationalAction Plan to develop action plans for the reduction of GHGs and make useof the Kyoto mechanisms. Korea puts forward the principles of:

� Common but differentiated responsibility.� Partnership among government, industry and the public.

3

� Inclusion of all kinds of gases in every sector.

In November 1999 while attending the Fifth Conference of the Signatories tothe UN FCCC in Bonn, the Minister of Environment noted that Korea opted outof the reduction obligation based on non-binding and voluntary regulations.

Centre forClimate Change MitigationProjects

To maximise efforts to reduce GHG emissions, the Korea EnergyManagement Corporation (KEMCO) established the Centre for ClimateChange Mitigation Projects (CCCMP) at the beginning of 1999. CCCMP hasso far developed the energy consumption and CO2 emission inventory byplant, technology and industrial process, supported the government's policymaking for climate change in the industry sector, particularly in regard todemand-side management and raised public awareness on climate changeand CO2 emission reduction.

International Co-operation on theEnvironment

Through the Technology Co-operation Agreement Pilot Project (TCAPP),CCCMP has established a bilateral partnership with the US government fortechnology transfer under the UN FCCC. A Memorandum of Understandingwas concluded between KEMCO and the US National Renewable EnergyLaboratory in July 1999. Both parties have drawn up the concept documentson energy auditing and ESCO, heat pump technology and landfill gas use. Inrelation to Working Group I (Energy auditing and ESCO), a US ESCO and aKorean ESCO carried out the first pilot project: a joint audit of the Hyundaiplant at Ulsan in September 2000.

KEMCO has been firmly promoting co-operation with international agenciesfor the exchange of technical and policy information, the development of jointprogrammes, and to disseminate information to the interested parties at homeand abroad:

� In the field of bilateral co-operation, KEMCO keeps close relationshipswith partners such as NEDO (Japan), DOE (US), ADEME (France), ETSU(UK), NOVEM (The Netherlands), NUTEK (now STEM, Sweden), etc. toexchange energy information and personnel and to develop training, jointseminars or joint research.

� In the field of multilateral co-operation, Korea has been active in co-operating with international organisations such as IEA, APEC, UNDP,WEC, ESCAP, etc.

� Since the mid-1980s, Korea has participated in the following ImplementingAgreements:- Energy Technology Data Exchange (ETDE).- Energy and Environmental Technologies Information (EETIC), in

CADDET and GREENTIE.- Energy Technology Systems Analysis Programme (ETSAP).- Demand Side Management (DSM).- District Heating and Cooling, including the integration of CHP.- Assessing the Impacts of High Temperature Superconductivity (HTS)

in the Electric Power Sector;- Advanced Fuel Cells.- Hybrid and Electric Vehicles.

� KEMCO has participated in APEC Experts Groups on Energy Efficiencyand Conservation and New and Renewable Energy Technologies.

4

In the 2002 in-depth review of the energy policies of the Republic of Korea,the IEA stated


� Take more international environmental responsibilities, including thoseunder the UNFCCC.

� Strengthen bilateral and multilateral co-operation in order to contribute toenhancing the global efforts for tackling climate change issues.

Institutional Framework MOCIE The Ministry of Commerce, Industry and Energy (MOCIE) is the authority

governing energy matters, in charge of energy policy planning and industrysupervision, climate change issues, price control, as well as energy industryreform. Two main offices are responsible for energy policy: the Energy andResources Policy Office in charge of improving energy efficiency and theElectricity Industry Restructuring Bureau.

In the 2000 Blueprint, MOCIE aimed at "implementing policies harmonisingenergy, economy and environment", at a time when "the nation needs toimprove energy efficiency while securing a safe supply of energy sources,thereby establishing a solid economic foundation to buffer changes ininternational energy market prices".

KEMCO The Korea Energy Management Corporation (KEMCO) is a non-profitgovernment agency established in July 1980 by MOCIE under the Law on theRationalised Use of Energy. Its primary function is the implementation ofenergy efficiency and conservation policy and programmes designed byMOCIE.

KEMCO reports directly to MOCIE and must receive annual approval for itsexpenditures under the Energy Management Fund. KEMCO also participatesin the development of policies and programmes through its interaction withMOCIE.

KEMCO covers a wide spectrum of activities, such as:

� Management of energy-intensive industries, buildings and transportationcompanies through energy audits, technical assistance and post-management.

� Safety and efficiency management of the energy-using equipment throughinspection, standards setting, efficiency labelling, etc.

� Financial assistance for energy efficiency and conservation projects.� Climate change mitigation project.� Voluntary Agreement (VA).� Energy Service Companies (ESCOs).� Assistance to regional energy conservation planning.� Planning, financing and management of RD&D on energy efficiency and

conservation technologies, new and renewable energy technologies,clean fossil fuel technologies and resource technologies.

� Demand-Side Management (DSM).� Education, training and publication, energy information service and public

relations.� International co-operation.

About 50% of KEMCO funding comes from MOCIE and the balance comesfrom services it renders, such as operating the Mok-dong DH/CHP facility onbehalf of the Seoul city government. KEMCO also owns and operates one

5

CHP plant and another is under construction. It earns some revenues from thesale of heat and power, including Mok-dong. In charge of implementing theenergy efficiency policies, KEMCO is the principal funding allocating institutionwith 600 billion Won spent on energy conservation in 2000.

KEMCO supervises the implementation of three major energy efficiencyprogrammes: the Energy Efficiency Standards & Labelling Programme, theCertification of High Efficiency Energy-Using Appliance Programme, and theEnergy-Saving Office Equipment & Home Electronics Programme (seebelow). These programmes aim at stimulating manufacturers to improve theenergy efficiency of their products by giving incentives and to encourageconsumers to purchase more energy-efficient products available on themarketplace.



BuildingStandards

New Buildings Insulation in new buildings has been required since 1979. Building inspectionsare required when buildings under construction are 50% completed to ensurethat standards insulation products and insulation thickness have been used.

Since 1985, the government requests that building permit applications forlarge buildings be accompanied by an energy savings plan for the building:the purpose is to encourage builders to go beyond the minimum requiredprescriptive standards specified by the Law on the Rationalised Use ofEnergy.

Since in 1992, an energy saving plan has to be submitted for new buildingswith a surface area in excess of 10 000 square metres.

Building design standards have been changed from prescriptive (for walls,ceilings, and windows, etc.) to total building performance standards. Buildingstandards vary according to three climatic regions: central, southern andCheju.

ExistingBuildings

Since 1992, large buildings using more than 4 million kWh/year weredesignated for intensive audits and supervision.

Under the Five Year Energy Conservation Plans, some 630 buildings that usemore than 6 million kWh /year and which have saved 10% of their electricityuse, compared with the previous year, would retain 20% of that savingthrough reduced electricity charges.

Energy Audits

Energy audits and surveys have been conducted mainly by KEMCO. Thereare three different types of energy audit programmes for industry, commercialbuildings and transportation.

Energy audits are conducted under real conditions of energy management,while energy surveys are undertaken to detect energy loss in the respectiveenergy-using facility. Currently, KEMCO conducts three kinds of audit:Thermal Energy Audit, Electric Energy Audit and Thermal Video System Audit.

6

The Thermal Energy Audit for heat application equipment or facilities consists,inter alia, of the following:

� Efficiency tests for boilers, furnaces and kilns; energy loss analysis andefficiency improvement options; efficiency test of heat application facilities;waste heat recycling and insulation; heating load analysis of buildings;economic feasibility of new investment.

The Electric Energy Audit analyses electricity saving and improvementpotential in electrical applications in buildings and facilities; it includes:

� Efficiency of electrical supply system; load rate and improvement of loadrate power factor; energy saving options through improvements inoperation; waste heat recovery options.

The Thermal Video System (TVS) Audit examines the surface temperature ofapplied facilities to check operational conditions to an accuracy of 0.1 degreeCelsius. It includes:

� Insulation levels in outer walls of buildings; heat distribution by heatfacilities such as boilers, smelters, heaters, etc.; insulation or heat loss invarious pipes; heat emitting from electrical equipment such as switches,electric motors, wires etc.; accumulator cooling capabilities.

Energy audit candidates are buildings or factories consuming a large quantityof energy; entities in need of cost saving and productivity improvement;entities considering the introduction of new facilities; and entities desiring animprovement in their management skills and quality of working environment.

The results of energy audits, together with recommendations, are reported toclients for them to prepare and implement appropriate improvementprogrammes and apply for further financial and/or technical support byKEMCO.

In the building sector, energy audits are conducted for a fee in largeresidential and commercial buildings at the request of the buildings owner ormanager, while free energy audits are offered for government and publicbuildings. Depending on the results of the audits, technical assistance andenergy efficiency actions, such as thermal insulation and double-glazedwindows, are provided.

KEMCO provides financial support to the buildings, facilities or processeswhen the energy audit shows that energy savings of more than 5% can beachieved within three years.

Applicants can apply for loans of up to 90% of the cost of investment capital at5.5% interest and a five-year payback period.

EnergyEfficiency Labelling

KEMCO supervises the implementation of the Energy Efficiency Standardsand Labelling programme set up in 1992. Its target is to eliminate inefficientdesigns from the market and help consumers choose more energy-efficientappliances. The labels attached to the products grade the energy efficiencyfrom 1 to 5. The label is intended to be attached to the front or side ofappliance where it can be easily seen.

This programme covers nine items: electric refrigerators and refrigerators-freezers (September 1992), electric air-conditioners (January 1993), washingmachines (January 2001), incandescent bulbs (October 1992), fluorescentlamps (October 1992), self-ballast lamps (July 1999), ballasts for fluorescentlamps (July 1994), domestic gas boilers (August 2001) and passenger cars

7

(September 1992). It applies not only to domestic products but also toimported products.

Procedure for Energy Efficiency Labelling:The manufacturers or importers of the nine items have to apply to one of the12 authorised test institutes which will estimate the energy efficiency of theitem and inform them and KEMCO of the results.

KEMCO checks the test report and publishes the energy efficiency grade onthe Internet ( www.kemco.or.kr/efficiency ). Manufacturers or importers shouldlabel each product according to this energy efficiency grade.

Monitoring:Marketplace inspections are taking place to ascertain whether all productscovered by the law are correctly labelled and that the labels accurately reflectthe product's energy efficiency.

Product inspections are made: random sampling tests are carried out toascertain whether testing results match the efficiency and rating reported bythe manufacturer or importer.

Certified items are distributed through various supporting programmes, suchas the Voluntary Agreement (VA) programme, Green Energy Family (GEF)programme, and Energy Service Companies (ESCOs), see below.

Energy EfficiencyStandards

Energy efficiency standards are regrouped into "Minimum EnergyPerformance Standards" to regulate minimum requirements for themanufacture and sale of products, and "Target Energy PerformanceStandards" designed to encourage manufacturers to enhance the energyefficiency of their products to technically feasible and economically acceptablelevels. Such standards are compulsory for 19 items such as induction motors,fluorescent lamps, heat recovery ventilators, etc.

When manufacturers, importers and suppliers fail to meet the "MinimumEnergy Performance Standards", MOCIE can prevent them from selling theproduct concerned on the market, in accordance with Article 18-2 of the Lawon the Rationalised Use of Energy, and they can be fined up to 5 million Wonunder Article 95-2 of this Law.

Certification ofEnergy Efficient ApplianceProgramme

This programme is designed to enlarge the proportion of energy efficientappliances in the marketplace through authorisation and financial support.

KEMCO provides long-term and low interest loans to certified companies. In2000, the financial support for high energy efficient products amounted toUS$ 20 million for equipment installation. There are two kinds of fund: aninstallation fund of US$ 4 million and operation fund of US$ 0.4 million.

For small and medium-sized companies, KEMCO provides test fees. As ofOctober 2000, 19 classified items from 85 companies and 350 productsbenefit from the programme.

PublicInformation

KEMCO is actively engaged in public campaigns to support energy efficiency.Currently, 15 Energy Consultation Centres operating throughout the country.

KEMCO produces and disseminates VTR films, movies, and various publicrelation materials including fans, hats, and street campaign banners;however, mass media such as TV, radio, newspapers and diverse types ofpublications are the major instruments. It also organises exhibitions andvarious cultural events on a regional basis to publicise successful cases ofenergy conservation.

http://www.kemco.or.kr/efficiency

8

November is designated "Energy Conservation Month". The first Friday ofevery month is designated "Energy Conservation Day". An energyconservation exhibition, ENCONEX, has been organised by KEMCO eachyear since 1975 to advertise up-to-date energy conservation technologies andequipment and to provide information on specified technologies for interestedcompanies in the industrial, building and transport sectors.

INDUSTRY


EnergyAudits

In industry, there are two kinds of energy audits, in-depth audits and freeaudits. The in-depth audits or technical service audits are generally conductedat the request of the users, while free audits are offered to small and medium-sized industrial firms whose annual energy consumption is 250-5 000 toe or 1-30 million kWh. Between 1980 and 1998, energy audits took place in 3 639firms. These audits were carried out by private companies that receivedfinancial support if they were able to identify energy savings above 5% withinthree years of the implementation of new equipment.

A total of 196 companies consuming more than 30 000 toe per year aretargeted for energy audits in the second five-year plan through 2001. Underthis plan, the government will seek to reduce the overall energy consumptionof the designated companies by 10%.

VoluntaryAgreement

The voluntary agreement (VA) for energy conservation and GHG reduction, ajoint programme between the government and industry, is managed byMOCIE and the Ministry of Environment.

A company intending to join the agreement should submit a firm action planwithin three months of submitting to KEMCO a letter of intent, specifying theirenergy consumption and GHG emission reduction target. The action planmust contain information on the operating organisation, energy efficiencyenhancement target, GHG emission reduction target, and detailed processdesign. After evaluation of the action plan by KEMCO, the qualified companyand KEMCO conclude the VA contract.

A company which joins the agreement will be supported by low interest loansand tax incentives for energy conservation and GHG reduction. Technologicalsupport as well as public relations promotion for the company will be offered.

The VA record shows that as of 2000, the number of companies involved inVAs totalled 212 in the fields of steel, chemical, textile, paper, ceramics, andthe food industry. The target is to reduce their CO2 emissions by 3 272thousand TC, a 9% improvement in energy efficiency in 2000-2005, throughthe adoption of energy efficiency technologies, the installation of facilitiesusing alternative energy such as CHP, the improvement of manufacturingprocess, generation, the use of clean energy sources and the collected wasteheat and improvement of operation management. As it is considered that thesignatory companies have correctly implemented the agreements, KEMCOwill expand the programme. It is estimated that about 600 companies,accounting for 70% of the industrial sector, will join the agreement by 2004.

In addition, a monitoring method and achievement index to measure the levelof implementation will be developed to encourage the participation of as manycompanies as possible.

9

Energy ServiceCompanies(ESCOs)

ESCOs were introduced in Korea in 1992 under the Law on the RationalisedUse of Energy (Article 22) of 1991 to extend government-led energyconservation programmes to private companies. Boosting up the market forESCOs is one of the top priorities in Korea's energy conservation policy. As of2000, a total of 102 ESCOs had been registered as private companies andinvestments reached 85 622 million Won for 519 cases through credit loanmortgaging on energy cost reduction. The major interventions of thesecompanies are high efficiency lighting, power production by new andrenewable sources of energy and waste heat utilisation. ESCO operations include maintenance service using energy conservationfacilities, business related to energy-efficient facility investment and energyconservation including energy management monitoring.

GovernmentSupport

Financial support:The government provided low interest loans for ESCO investment at the rateof US$ 2 to 4 million per year until 1996. The amount increased to US$ 20million in 1997, US$ 35 million in 1998 and US$ 54 million in 1999.

There are various forms of ESCO financial support, such as support foroperations in small and medium-sized ESCOs, credit loan mortgaging onenergy cost reduction, and factoring system to lighten debt burden for ESCOs.

Tax incentives:The government provides tax reductions for energy users who have investedin energy conservation facilities. ESCOs and their customers are beneficiariesof tax reduction under the "Exceptional Taxation Limitation Law".

Public Relations

To promote ESCOs, KEMCO has held "Energy Mart" annually since 1996.Energy Mart is a fair in which ESCOs meet their potential customers andpropose energy conservation investment plans.

Energy-SavingOffice Equipment

and HomeElectronicsProgramme

This programme, operational since 1 April 1999 under the basis of Article 13of the Law on the Rationalised Use of Energy and MOCIE's notification No.2000-33, 2000.3.16 (Regulation on the Promotional Spreading of EnergySaving Office Equipment and Home Electronics), is a voluntary partnershipbetween manufacturers and KEMCO to reduce the standby electricity used bya product.

The 14 items subject to this programme are: computers, monitors, printers, faxmachines, copiers, scanners, multifunction devices, energy saving andcontrolling devices, televisions, videocassette recorders, home audioproducts, DVD players, microwave ovens, and battery chargers. Energysaving standards have been fixed for the 14 items. Consumers can identifythe energy saving products easily by the energy saving label attached. Inaddition, the products can be identified through the energy saving list postedon the Internet site.

According to the Regulation, it is mandatory for all public institutions topurchase and use the following eight items of energy saving office equipmentwith the energy saving label attached: computers, monitors, printers, faxmachines, copiers, scanners, multifunction devices and energy saving andcontrolling devices.

It is estimated that if it is possible to substitute these 14 items, including the 90million computers in use in Korea, and sell 20 million units per year ofproducts with minimised standby electric power, this could save energy up to5 216 GWh (521.6 billion Won) and reduce the CO2 produced by electricpower production by 690 000 tonnes, thus contributing to the prevention ofglobal warming.

10

Green EnergyFamily (GEF)Movement

The Green Energy Family Movement (GEF) was initiated by KEMCO in 1995to contribute to addressing global environment problems by enhancing energyefficiency through the diffusion of energy-efficient facilities. GEF is apartnership movement to engage the voluntary participation of citizens,companies, NGOs and the press in CO2 reduction and energy savings.

Any entity willing to participate in GEF programmes must submit anapplication to the GEF Centre and establish a voluntary agreement to pursuethe goal of the particular GEF programme.

Currently, GEF movement is directed toward four programmes:

GEF TASK I Green Lighting Programme (1996~)The Green Lighting Programme is a project to replace 90% of conventionallighting facilities with high efficiency bulbs within three years. It aims to reduce20% of electricity use for lighting which accounts for 18% of total electricityconsumption.

GEF TASK II Green Motor Programme (1997~)The Green Motor Programme is a project to replace industrial motors withhighly efficient motor systems. Its aim is to reduce energy use by motors by5.5% within ten years, which is equal to the output of a 2.1 million kW powerplant. Electric motors account for 60% of total electricity consumption byindustry.

GEF TASK III Green Energy Design Programme (1998~)The Green Energy Design Programme is a project to construct new buildingswith lower energy consumption than conventional ones. It demands that greenenergy design standards be applied in more than 90% of total projects fromthe construction design stage, three years after the agreement.

GEF TASK IV Green Cooling Programme (1999~)The Green Cooling Programme is a project to diffuse alternative coolingfacilities to reduce the consumption of electricity for cooling purposes. It aimsat 100% substitution by a green cooling facility within five years. The dramaticincrease of cooling demand, 10% annually, has caused instability in theelectricity supply.

As of 2000, a total of 726 companies participate at 1 529 sites; 477 in theGreen Lighting, 106 in the Green Motor, 66 in the Green Energy Design and77 in the Green Cooling Programme.

Demand-SideManagement

The energy supply companies KOGAS, the state-owned monopoly Korea GasCompany, KEPCO, the Korea Electric Power Corporation, a majority state-owned company and KDHC, the Korea District Heating and CoolingCorporation implement load management programmes, including peakclipping, peak shifting, load shaping and DSM tariff systems.

In 2000, KEMCO conducted DSM activities in the areas of electricity, gas anddistrict heating systems. Electricity DSM projects mainly focus on industrialaudits for estimation of DSM potential of large plants; electricity audits andsurveys of DSM potential for large buildings and for small and medium-sizedbuildings.

IntegratedEnergy Supply

Integrated energy supply refers to district heating and cooling (DHC) andindustrial complex combined heat and power (CHP). To promote theprogramme, the government established the "Integrated Energy Supply Act" in1991.

11

DHC, introduced in 1985, is now supplying heat and electricity to 912 000households in 18 districts, covering 8.1% of total households.

Additional facilities were to be built by 2001 to provide energy to a total of 1.8million households.

A total of 16 CHP plants are in commercial operation at 17 industrialcomplexes and their number will be increased from 16 to 33 in 2001. Incontrast to DHC programmes which are run by public organisations, industrialcomplex CHP projects are privately run.

Integrated energy suppliers can receive low interest loans, tax incentives andsupport for the relaxation of environmental regulations.

Training and Education

KEMCO is in charge of various kinds of training and education courses, suchas:

Practical Business Training Course:Any energy manager or operator of energy-using equipment can be taught forseven hours (one day) on policies of energy conservation, laws andregulations, related to the rational energy use, efficiency and safety of energy-using equipment etc.

Fostering Training Course:Anyone who is not a certified engineer but desires to become the operator ofequipment subject to certification inspection takes this course. In it, thestructure and operation of the boiler and pressure vessel, fundamentals ofboiler management, fuel and combustion control, etc, are taught for 20 hours(three days).

Anyone who is a certified engineer of the equipment subject to either generalor certification inspection, but desires to become a gas boiler operator takesthis course, too. Fundamentals of LPG and LNG, operation, maintenance andsafety control of gas boilers, etc., are taught for 20 hours (three days).

Education for Provincial Energy Planning Officials:In 1999, about 290 provincial officials responsible for energy planning weretrained for five days on regional energy planning guidelines, governmentalenergy conservation policies, etc.

Early Education:A total of 26 elementary and six middle schools were designated by theMinistry of Education as "Demonstration Energy Conservation Schools" in1999. Besides financial assistance of about US$5 417 per school, KEMCOsupports educational aids, such as books, video-tapes and diskettes for thedesignated schools.

Other Training and Education Courses:There are other training and educational courses on energy conservation forstaff in co-operative organisations, in charge of public relation and education,managers of heat-using appliances manufacturing companies, etc.

EnergyInformationService

KEMCO supports the energy conservation business through the collection,analysis, processing and dissemination of information through Internet( http://innonet.ne.kr ), PC communication networks and publications. Analysedand processed information is also offered to end-users such as universities,industries, research centres and the general public.

http://innonet.ne.kr/

12

PUBLIC SECTOR


Two measures have been adopted to promote energy conservation in publicinstitutions: the Energy Utilisation Planning Consultation Programme and theEnergy Conservation Guideline for Public Organisations.

Energy Utilisation PlanningConsultationProgramme

Under the Law on the Rationalised Use of Energy of 1993, the EnergyUtilisation Planning Consultation Programme was launched in 1993 toexamine energy utilisation plans and provide technical guidance andassistance prior to launching a project or constructing a building that exceedsa certain size. For instance, targeted projects are: urban development over600 000 m2; tourist site development over 500 000 square metres; railwayconstruction with an extension of over 10 kilometre; harbour construction withannual loading capacity of over 1 million tonnes, etc.

The features of the Consultation Programme are a feasibility study on CHP,installation of energy efficient equipment and facilities; utilisation plans forwaste heat and alternative energy, and consideration of CO2 emissionreduction options and effectiveness analysis. As of September 2000, theConsultation Programme had completed consultation and monitoredinstallation of facilities in 224 cases, of which 126 in urban and tourist sitesand 49 in industrial complexes.

EnergyConservationGuideline forPublicInstitutions

The Energy Conservation Guideline for Public Institutions founded in 1997requires that collective public institutions establish, implement and estimate anannual plan for energy conservation. Targeted institutions are centraladministrative offices and public institutions; local governments (state, city)and their corporations; government agencies and government corporations.The main features of the Guideline are: establishment and implementation ofan energy conservation plan; agreement on and management of annualenergy conservation targets; energy conservation initiatives by ESCOs;energy loss reduction and energy efficiency improvement through energymanagement audits.

Every public institution has established and implements its energyconservation plan. When the plan is completed, the institutions are expectedto have achieved a 10% energy consumption reduction by 2000 (base year1997).

Individual institutions will receive an incentive or penalty in accordance withtheir performances and achievements. An exemplary case will be publicisedand promoted to other institutions.

Regional EnergyProgramme

The Regional Energy Programme supports various local governmentsactivities to help stabilise energy demand and supply and rationalise energyuse in the regions. MOCIE grants subsidies to local governments to implement the regionalenergy programme. KEMCO provides technological consulting, informationservice, and education and training courses for public servants in charge ofthe Regional Energy Programme. The Regional Energy Programme consistsof two sub-programmes:

� Infra build-up programme, such as regional energy planning, feasibilitystudy of the unused and new and renewable energy sources in the region,public relation and education on energy conservation, etc.

� Model-project to invest in energy conservation facilities or the use ofunused and new and renewable energy.

13

TRANSPORT Fuel Efficiency Targets

The Law on the Rationalised Use of Energy (Articles 17 and 18) and MOCIE'snotification No. 1998-99 of 27 October 1998 established fuel efficiency targetsto encourage automobile manufacturers to make vehicles more efficient. Thetarget was to improve fuel economy within each vehicle category by 5% by1996 and 10% by 2000 over the 1991 base year. The overall weightedaverage fuel economy target would be 14.3 km/litre in 1996 based on the1991 estimate of 13.6 km/litre.

The following organisation should test the fuel efficiency and report the resultto the Korea Energy Management Corporation and the applicant:

� The National Institute of Environmental Research.� The Korea Institute of Energy Research.� The Korea Automotive Performance Test Research.� The Korea Automotive Technology Institute.

Fuel Efficiency Labelling

MOCIE has implemented a Fuel Efficiency Labelling Programme to informconsumers about the relative fuel efficiency of the vehicle they intend topurchase. Since January 1988, sales advertisements have been required toinclude information on vehicle mileage rating. This applies to domesticpassenger cars and imports. Since September 1992, new passenger carshave been required to exhibit KEMCO's mileage ratings label on the vehicle toprovide consumers with better information on vehicle fuel economy. Vehiclesare classified into one of eight categories based on engine capacity. Withineach category, there are five gas mileage labelling ranks (first through fifth)with 42% of all vehicles (domestic and import) falling into the third ranking.This Fuel Efficiency Labelling Programme applies to 317 vehicle models ofdomestic and imported passenger cars using gasoline and LPG (as of 1998).

Compared with cars of grades 2-5, a grade 1 car emits less emission (0.7 to3.2 tonnes, or 20 to 50 % less per year) and reduces annual fuel costs by asmuch as 17-50%.

Taxation byEngine Size.

The government has imposed progressive taxation on cars according toengine size to reduce the demand for motor vehicles and control the demandfor large cars. The taxation on private cars with an engine size above3 000 cc is 370 Won/cc, while that on private cars with an engine size lessthan 800 cc is 100 Won/cc. Households with more than one car pay doubletax on the additional car.

Promotion ofSmall CarOwnership

The government encourages the purchase of light fuel-efficient cars. Variousincentives including tax reduction for light cars, such as a 2% registration feeinstead of the 5% for large or medium-sized vehicles and a 50% deduction inthe licence fee are provided.

Car Pooling

Since February 1992, public sector employees have participated in thevoluntary Car Shift System Programme to encourage those with privatevehicles to take every tenth day off and ride with a colleague. The system hasalso been encouraged in large industries and is promoted through a variety ofpublic information campaigns.

Public Transport Systems

Since 2000, the government funds the replacement of current diesel-poweredbuses by CNG buses. The ultimate plan is to replace 20 000 city buses by2007. At first, 5 000 buses will be replaced by early 2002 in cities hosting the2002 World Cup.

14

In the 2002 in-depth review of the energy policies of the Republic of Korea,the IEA stated;


� Seek to achieve a better balance among economic, energy andenvironmental objectives. Implement the recommendations made in the1994 IEA In-Depth Review on transportation; full cost pricing, smallervehicles dissemination and the development of public transportationsystems.


As mentioned under the Energy Efficiency Labelling programme, marketplaceinspections and product inspections take place to monitor the correctimplementation of the programme.

Furtherinformation

Mr. Jeon Sangh-HwonFirst SecretaryKorean Delegation to the OECD2/4 rue Louis DavidF - 75782 Paris CedexTel: 33 1 44 05 21 91Fax: 33 1 47 55 86 70E-Mail: [email protected]


LUXEMBOURG Updated August 2001

BACKGROUND

��

The general Energy Efficiency Law of 5 August 1993 has five targets: toguarantee a sufficient, secure and economic energy supply; to promoteenergy savings and the rational use of energy; to favour the use of renewableenergy sources, co-generation and the production of primary and secondaryenergy; to alleviate the negative impact of the production and consumption ofenergy on the environment and to co-ordinate all these activities in theframework of the European Union. The Energy Efficiency Law establishes the legal framework necessary toadopt a wide range of complementary measures adaptable to the changingenergy context. It focuses mainly on energy efficiency.

��

The National Plan for Sustainable Development, finalised in 1998, lays out astrategy for sustainable development in the different economic areas ofLuxembourg. It sets objectives and proposes measures which are describedin detail below. The government considers these proposed measures asguidelines to meet the following objectives:

• To ensure security of energy supply.• To diversify energy supplies.• To develop highly efficient co-generation.• To improve energy efficiency in all consumption sectors.• To increase the use of renewable energy. The 1998 National Plan for Sustainable Development sets as an objective a20% reduction in energy intensity between 1993 and 2010. Main energyefficiency measures by sector are as follows:

General• To introduce an energy tax compatible with EU regulations.• To favour the use of the best available technology.• To increase information and dissemination efforts.• To favour investments for energy savings. The creation of a fund to

promote renewable energy and energy efficiency is under discussion.

Buildings• To improve the energy efficiency of new and existing buildings.• To reach a 30% reduction between 1990 and 2020 in the energy

consumed to heat a constant surface in buildings.

Industries• To improve voluntary agreements.

Transport• To set annual taxes on vehicles according to their fuel consumption and

emissions to incite the purchase of less polluting vehicles.• To increase by 30% the share of public transport use for medium

distances between 1997 and 2010.• To reduce the use of transport and to reduce travel distances.• To reduce the use of the most polluting transport means.• To link Luxembourg’s rail network to the high-speed rail network and to

improve international railway connections.

��

Following a government initiative, the Agence de l’Energie S.A. (EnergyAgency) was established in June 1991 as a company under private law whoseshareholders are the government (50%), the electricity companies Compagnie

Grand-Ducale de l'Electricité (CEGEDEL) (40%) and Société Electrique del'Our (SEO) (10%). The Energy Agency undertakes feasibility studies forenergy efficiency and renewable energy projects and advises municipalities. Ithas also managed the retrofitting of some micro hydropower plants withfunding from the EU Thermie programme. The Energy Agency is managing the building of a demonstration park inRemerschen, including an energy-efficient building, a 600 kW windmill and aphotovoltaic plant. The project is financed by the Ministry of Economic Affairs,CEGEDEL the German utility RWE and SEO. In the 2000 in-depth review of the energy policies of Luxembourg, the IEAstated: The Government of Luxembourg should: • Encourage the activities of the Agence de l’Energie, i.e. carrying out

studies on renewable sources and energy efficiency and advisingmunicipalities.

��

In 1999, the Ministry of Energy was changed to a Department of Energy withinthe Ministry of Economic Affairs. The Ministry of Environment is in charge ofpolicy to curb air pollution and CO2 emissions. Both ministries have authorityfor energy efficiency and renewable energy issues. The Grand Ducal regulation of 11 August 1996 established the ConseilNational de l’Energie (National Energy Council) as an advisory body to thegovernment on energy issues. It provides advice on questions put by theMinister of Energy and can, on its own initiative, give advice on energy policymatters which it considers useful. In the 2000 in-depth review of the energy policies of Luxembourg, the IEAstated: The Government of Luxembourg should: • Continue to work towards close and effective co-operation among all the

ministries involved in energy policy.

�� !��"� ��

Luxembourg ratified the UN Framework Convention on Climate Change by aLaw of 4 March 1994 that took effect on 7 August 1994. It submitted its first national communication entitled Rapport National duLuxembourg en vue de la 1ère Conférence des Parties à la Convention –cadre des Nations Unies sur les changements climatiques (Luxembourgnational report for the 1st Conference of the Parties to the FrameworkConvention on climate Change), Ministère de l’Environnement, in March 1995.No new national communication has been issued. In November 1990, the government decided to stabilise anthropogenicemissions of CO2 at 1990 levels by the year 2000 and to achieve a 20%reduction of these emissions by 2005. According to the Kyoto protocol, the EU as a whole agreed to reduce theemissions of a basket of six gases by 8% from 1990 levels by the period2008-2012. In June 1998, the European Union Council of EnvironmentMinisters reached a Burden-Sharing Agreement1 on emission reductioncommitments, to re-allocate internally the 8% reduction agreed at Kyoto. The


reduction commitments are expressed as a percentage of 1990 levels for the2008-2012 period. Under the Burden-Sharing Agreement, Luxembourg iscommitted to reducing its emissions by 28%, the highest level of reduction inthe EU. In May 2000, the Ministry of Environment issued a National Strategy toReduce GHG Emissions. The report stresses the need to ensure sustainabledevelopment and to set up a medium term plan. The report recommends fivecategories of actions:

• Improve energy efficiency in energy generation.• Increase energy savings.• Set an eco-tax progressively.• Curb the increase in road transport• Rely on flexible mechanisms allowed by the Kyoto protocol.

The plan lists 29 measures, some of which have already been taken or havebeen envisaged in the 1998 National Plan. In the 2000 in-depth review of the energy policies of Luxembourg, the IEAstated:

The Government of Luxembourg should:

• Develop and implement a comprehensive climate change mitigation planwith concrete measures in order to start getting current GHG levels ontrack toward meeting Kyoto commitments.



#�� !��!�

The Grand Ducal regulation of 22 November 1995 on mandatory insulationstandards for new buildings came into force on 1 January 1996. Itsimplementation is monitored by certified architects or engineers(Wärneschutznachweis) attesting that the insulation standards have beentaken into consideration; in case of non-compliance, penalties are imposedand can mean cancellation of work.

$�� !��

The Grand Ducal regulation of 11 August 1996 organises energy audits inresidential and commercial buildings carried out by engineers, advisers orspecialised bodies agreed by the Minister of Energy, according to a Ministerialregulation dated 13 December 1996. The State subsidises up to 50% of the cost of the audit with a limit ofLfr 150 0002 per building or enterprise when the owner has completed thework proposed by the expert in charge of the audit. The former Minister of Energy developed these energy audits on the basis ofvoluntary agreements concluded with the various professional sectorsconcerned: industry (FEDIL), banks (ABBL), insurance (Groupement desAssurances), hospitals (Entente des Hopitaux), trade (Confédération duCommerce) and hotels (HORESCA).

2 On average in 2000, Lfr 1 = US$ 0.023

In residential buildings, the possibility of improving energy efficiency by thissystem is high since 75% of flats are owned and not rented. Owners have adirect interest in investing in energy efficiency in buildings as they get thebenefit of energy savings. During the period 1990 to 2000, the overall energy efficiency gains in theparticipating industries amounted to 14%. FEDIL concluded that the voluntaryagreement was an appropriated means to raise energy efficiency awarenessin industry. The voluntary agreement will probably continue to 2006 andmonitoring will be reinforced by individual energy audits.

�� ! ��!��!�

In the framework of the three Directives 95/12/CE, 95/13/CE and 94/2/CE ofthe European Union, Luxembourg has adopted several Grand Ducalregulations to comply with energy efficiency labelling of electric householdappliances: • Grand Ducal regulation of 19 June 1996 on energy efficiency labelling for

washing machines.• Grand Ducal regulation of 19 June 1996 on energy efficiency labelling for

tumble-dryers.• Grand Ducal regulation of 28 June 1996 on energy efficiency labelling for

refrigerators, freezers and their combination.• The Grand Ducal regulation of 11 August 1996 implements the EU

directive which sets minimum efficiency requirements for hot water boilers.• Grand Ducal regulation of 17 August 1998 on energy efficiency labelling

for combined domestic washing-dryers machines (1998, A-72, p.1430)• Grand Ducal regulation of 17 August 1998 on energy efficiency standards

for domestic refrigerators, freezers and combined devices (1998, A-72,p.1439)

• Grand Ducal regulation of 17 August 1998 amending the Grand Ducalregulation of 19 June 1996 on energy efficiency labelling for washingmachines (1998, A-72, p.1445)

• Grand Ducal regulation of 17 August 1998 on energy efficiency labelling ofdomestic dishwashers (1998, A-72, p.1445)

#��% &��

The Compagnie Grand Ducale de l’Electricité (CEGEDEL), owned by the state(41%) and private companies, which supplies the public network withelectricity, is actively involved in information/motivation on energy efficiencyfor electricity consumers. Its action in this field includes information leafletssent out with the electricity bills, mass media campaigns, information/motivation lectures in schools, exhibitions on energy efficiency at fairs and inshopping centres, etc.


�� &��

The aim of the �rogramme d’actions d’�conomies d’�nergie dans les'ommunes (PEEC) set up by the Grand Ducal regulation of 11 August 1996is to launch initiatives and measures adopted by the municipalities to promotethe rational use of energy and renewable sources of energy. The EnergyAgency which is in charge of developing this programme assumes thefollowing tasks: • To enter into consultation with the municipalities to help them to benefit

from PEEC at the stage of planning projects.• To motivate the municipalities in their energy strategy in the framework of

the PEEC.

• To elaborate pre-feasibility studies.• To inform them about the financial support, licensing, tariffs, etc. available. In 1997, in the framework of PEEC, three projects were eligible for a totalsubsidy of Lfr 1.4 million after examination by a special Commissionestablished by the Grand Ducal regulation. This concerns an information/motivation campaign in nine municipalities on the rational use of energy andrenewable sources of energy, the installation of solar panel collectors in aswimming pool and the installation of a wood-burning central heating systemin a primary school. In 1998, a total subsidy of Lfr 10.3 was granted to fivemunicipalities.

INDUSTRY


$��

The voluntary agreement signed in March 1996 by the former Minister ofEnergy and FEDIL (Fédération des Industriels Luxembourgeois) includes atarget for an average 10% improvement in energy efficiency by 35 of itsmembers between 1990 and 2000. No individual targets were set. Companies have been free to choose the bestmeans to improve their efficiency. FEDIL has monitored the progress of eachenterprise and provided an annual composite report to the Ministry ofEconomic Affairs. FEDIL issued a complete report in 2000, includingrecommendations for further progress. Two other voluntary agreements were signed with the “Entente des hopitaux”and with the financial sector for an average of 20% energy efficiencyimprovement by their members in both sectors between 1991 and 2001. Such negotiated agreements have the advantage of achieving real energysavings through the improvement of energy efficiency as mandatory energyaudits do not necessarily produce real energy efficiency improvements. In the 2000 in-depth review of the energy policies of Luxembourg, the IEAstated: The Government of Luxembourg should: • Encourage the Fédération des Industriels Luxembourgeois (FEDIL) to

continue the voluntary agreement with industry and to extend theagreement to other economic sectors and improve the monitoring system.

'(� Combined heat and power (CHP) is supported by the government; aministerial regulation of 6 December 1994 allocated a grant to non-industrialco-generators of Lfr 6 000 per kW installed. The maximum grant is Lfr 6million per installation. The benefits of the programme were restricted to thefirst 5 000 kW installed, a limit which was reached in 1997. Total grantsamounted to about Lfr 38 million at the end of 1997.

The Grand Ducal regulation of 1994 sets the buy back tariff for electricity fromnon-industrial co-generation and renewable sources. CEGEDEL (but notSOTEL) has a purchase obligation. The buy back tariff for co-generators witha capacity of 1 to 150 kW (cat. 1) averages Lfr 2.95 per kWh; from 151 to1 500 kW (cat. 2), the tariff averages Lfr 2.3 per kWh for day supplies and Lfr1.2 per kWh for night supplies. There is an annual subsidy of Lfr 4 500 per kW

installed if electricity is supplied during peak load. Electricity plants usingrenewable sources receive the same subsidies as co-generators.

The company LUXENERGIE was set up in July 1990 to promote CHP on theKirchberg plateau. On 31 December 1997, 16 CHP unit were operational inthe domestic sector with a total installed capacity of about 10 MW. On 31December 2000, 40 CHP units (cat. 2) were in operation with a total installedcapacity of 46.2 MW and 6 CHP units (cat. 1) were in operation with a totalinstalled capacity of 158.5 kW.

The National Plan for Sustainable Development of 1998 sets the target toincrease the share of co-generation in electricity consumption from 7% in1997 to 15% in 2010.

The Grand Ducal regulation of 11 August 1996, which set up the PEEC,promotes CHP units in municipal buildings through the grants mentionedabove on the condition that they operate more than 2 000 hours per year withan annual efficiency of more than 80%.

In the 2000 in-depth review of the energy policies of Luxembourg, the IEAstated:

The Government of Luxembourg should:

• Consider phasing out subsidies to co-generation, as this is a maturetechnology.

��!�� The Framework Law of 27 July 1993 on economic development and

diversification, modified by the law of 21 February 1997, introduced specificrules for subsidies at a maximum rate of 25% for investments for investmentsby businesses aimed at environment protection and the rational use of energy.

��

The Law of 24 December 1996 modified and completed the law of4 December 1967 and introduced special depreciation allowances forcompany investments in new technologies for improving energy efficiency, theuse of renewable sources of energy and the recovery of waste energy inindustrial processes. To date, few enterprises have asked to benefit from thislaw although this special depreciation allowance is far from being negligible.

TRANSPORT


�� )��

The Ministry of Transport supports public transport, which is already welldeveloped in the City of Luxembourg, by low fares (which cover less than 15%of the costs), higher frequency of buses and trains and the creation of carparks outside town centres connected with city buses.

'��! *��%*��! )��

Because of the strategic position of Luxembourg as an important crossroadsfor the international transport of goods, the government made the commitmentto develop combined rail/road transportation. Particular focus is given to theaccess and management of the rail terminal at Bettembourg to improve long-distance transport of goods from Europe to the Belgian and Dutch ports.


+�� $�"��

The 1998 National Plan considers an increase in taxes on cars to internalisebetter the environmental cost of transport.

,�"�� &��

A wide range of measures such as the use of bio-fuels, electric vehicles, andthe introduction of car-pooling, etc., is being considered.


In the 2000 in-depth review of the energy policies of Luxembourg, the IEAstated: The Government of Luxembourg should: • Assess the cost-benefits of support for energy efficiency measures. In

particular, the government should put in place a framework to measurethe outcome of the programme to improve energy efficiency in existingbuildings.

Further information For further information, please contact:

Mr. Carlo HastertMinistère de l'Economie19 Boulevard RoyalL - 2917 LuxembourgTel: +352 (478) 43 21Fax: +352 (478) 43 11E-mail: [email protected]

1

NETHERLANDS Updated January 2003

BACKGROUND

��

In December 1995, the Netherlands Government published the Third WhitePaper on Energy Policy, (Parliamentary Document II 1995/1996, 24 525,nos. 1 and 2) proposing a variety of reforms in the energy sector. The aimwas to achieve a sustainable energy economy within competitive energymarkets. In particular, it strives to improve energy efficiency by one third by2020; and shift policy instruments from the supply side to the demand side. The White Paper also deals with the increase of renewable energy in totalprimary energy supply, the increasing liberalisation and internationalisation ofenergy markets.

� ��

On 7 April 1998, the Minister of Economic Affairs presented the Memorandumon Energy Conservation (Energiebesparingsnota, EBN) to Parliament. ThisMemorandum explored the possibility of increasing the emphasis placed onenergy efficiency and outlined proposals to meet the new efficiency targetfixed in response to the Third Conference of the Parties COP-3 (Kyoto,December 1997, see below). In May 1999, the government presented the Energy Conservation ActionProgramme 1999-2000. This programme was a more concrete elaboration ofthe EBN. It set out the contributions expected from the different sectors of theeconomy and the various target groups in the 1999-2000 period. It alsodescribed the government instruments that would be deployed in this period. The government allocated a budget of Gld 690 million1 to the EnergyConservation Action Programme in 1999. This was to increase to around Gld910 million in 2001. In the same year, fiscal incentives for energy efficiencywould total Gld 300 million for companies and Gld 200 million for households.This is twice what the government spent on energy efficiency in 1998.Ultimately, about one quarter of the budget would be spent for subsidies andthe remainder for tax incentives. These monies did not include funding of theCO2 reduction plan.

� ��

The Netherlands deposited the Act of Ratification of the FrameworkConvention on Climate Change in December 1993. However, Dutch climate change policy had been established before theConvention. In 1989 and 1990, targets and measures were announced by thegovernment in the National Environmental Policy Plan (NEPP). Subsequentpolicy documents such as the Second National Environment Policy Plan(NEPP-II), December 1993, and the Second Memorandum on EnergyConservation, 17 December 1993, confirmed the Netherlands’ greenhousegas targets and intensified policies and measures to reach these targets,particularly energy efficiency policies and measures. In October 1997, the Dutch government sent a so-called Kyoto Letter toParliament describing the position of the Netherlands in preparation of theThird Conference of the Parties of Kyoto (December 1997), including optionsfor further reductions for implementation in the Third National EnvironmentPolicy Plan (NEPP-III). The Netherlands’ Second National Communication on Climate ChangePolicies was released in April 1997. As a number of major policy eventsoccurred at both the national and international level, it was decided to publish

1 On average in 2001 Gld 1 = $0.406.

IEA��

2

an Update of the Second Netherlands’ National Communication on ClimateChange Policies in May 1998 (Ministry of Housing, Spatial Planning and theEnvironment et al., The Hague). This update stated that in the period 1990-1996, the CO2 equivalent of the six gases rose by 6.9% (temperature-corrected figure). This was to a largely due to the 7.6% increase in CO2

emissions, which stemmed mainly from the transport and power generationsectors. In 1996, CO2 contributed 75% to total CO2 equivalent emissions.Between 1990 and 1997, CO2 alone rose by 11%. At COP-3 (Kyoto, December 1997) the European Union accepted the target ofan 8% reduction in greenhouse gas emissions by 2008-12. Following theEuropean Environment Council of 17 June 1998 which adopted the EUBurden-Sharing Agreement2, and also the Kyoto Protocol, the Netherlands isobliged to reduce CO2 and non-CO2 greenhouse gases by 6% in the firstbudget period 2008 to 2012. Prior to the adoption of the Kyoto Protocol in1997, the Netherlands only had a CO2 target. Due to strong CO2 emissionsgrowth between 1990 and 1997, the country adopted a six gases approach. Atpresent, greenhouse gas emissions are up 15% compared to 1990.

The 6% reduction target requires Dutch CO2 emissions to be 50 million tonnesper year below what they would be in the 2008 to 2012 budget period ifpolicies were to remain unchanged. This figure is derived from theGovernment’s White Paper on Climate Policy, issued in June 1999.

The White Paper on Climate Policy, in its global competition scenario,forecasts emissions of 259 million tons CO2 equivalent in 2010. The scenariowas subsequently updated to include new policies that had been adopted,with 256 million tonnes of CO2 as the basic assumption of the market outcomeif no further government action is taken. In terms of forecasting CO2

emissions, this scenario is relatively pessimistic, but the Dutch governmentchose it deliberately, to be on the safe side.

The White Paper on Climate Policy also contains emissions growth forecastsfor each sector. It states that by 2010, unless extra policy measures areadopted, emissions in the industrial sector will grow by 33%, in the energysector by 24%, in the transport sector by 15%, and in the residential sector by9%. The Fourth National Environmental Policy Plan published by the Dutchgovernment in June 2001 shows drastic targets for emission reductions for theyear 2030: CO2, 40%-60%; NOX and SO2, 80%-90%; VOs and ammonia atleast 75% and fine dust 85%. These targets are meant to start the transitiontowards a sustainable, carbon-poor energy system. Most of these reductionsshould come from improved energy efficiency, renewables and clean fossilfuels. Nuclear energy, structural changes in the economy and changes inconsumption patterns can also make a contribution. The Plan claims thattargets like these are achievable and costs are reasonable: 1 to 2.5% of GDP.The additional cost of the Fourth Plan is estimated at �� 000 million. TheThird National Environment Policy Plan (NEPP-III) remains in force.

� ��

Much of the responsibility for energy efficiency policy in recent years has lainwith the Ministry of Economic Affairs, which had primary responsibility for taxincentives, long-term agreements, the regulatory energy tax and publicinformation and awareness campaigns. Other ministries had an important role,especially the Ministry of Housing, Spatial Planning and the Environment.

The role of the Ministry of Economic Affairs is increasingly to play an initiatingand co-ordinating role. The government’s intention, mentioned in the Energy


3

Conservation Action Programme, is a clear allocation of responsibilities to thedifferent ministries directly involved. This implies that the Ministry of EconomicAffairs is to be primarily responsible for energy efficiency improvements in theindustrial and commercial sectors. The Ministry of Housing, Spatial Planningand Environment takes responsibility for energy efficiency in the residentialand public sector. The Ministry for Transport, Public Works and WaterManagement and the Ministry for Agriculture, Nature Management andFisheries and the Ministry of Finance are involved in numerous fiscalmeasures to stimulate energy conservation and renewables. A re-shuffling ofresponsibilities in Spring 2000 greatly furthered these objectives.

�� For the implementation of the CO2 reduction plan, an additional Gld 1 billionper annum were set aside. The initial amount in 1996 was Gld 720 million;another Gld 250 million were added later. The plan includes two subsidyschemes. One is the Ministry of Economic Affairs’ Decree on CO2 ReductionPlan Subsidies. This includes a number of sub-programmes: industrialresidual heat, heat pumps, advanced heat and power, process integration,energy-intensive industry, drying/baking/melting/membranes, construction andwood. The other scheme is the Ministry of the Environment’s investmentcontribution scheme for non-industrial residual heat infrastructure. Resourcesare also available for transport projects with a strong energy conservationelement.

The measures proposed in the Memorandum on Energy Conservation (EBN)imply very substantial investment by energy consumers: some Gld 3 to 4billion per year over several years. The government is expected to supplysome Gld 600 million of the cost, generated by the revenue from a corporatetax on public energy utilities and higher taxes on energy use.

� ��

The government levies a number of taxes on energy. In addition to producingrevenue, these taxes have an environmental purpose. Apart from VAT, thereare:

• Excise taxes on mineral oils (1998 revenue: Gld 10.8 billion).• The environmental tax on fuels (1998 revenue: Gld 1.4 billion).• The uranium tax.• The regulatory energy tax (1998 revenue: Gld 1.9 billion)3.

The regulatory energy tax came into effect on 1 January 1996. The purpose ofthis tax is to provide financial incentives for energy conservation and thereduction of CO2 emissions. It is also part of an environmental tax reform toshift the tax burden away from direct taxes, e.g. on labour, towards indirecttaxes, especially on environmentally harmful goods and services. Theregulatory energy tax does not contribute to the general budget. Revenues arerecycled to taxpayers in the form of relief from other taxes.

The regulatory energy tax was phased in and only reached its full effect in1998. However, in that same year, the Dutch government decided to doubleenergy taxes (regulatory energy tax and environmental tax on fuels) over thefollowing three years from Gld 3.4 billion of revenue per year to Gld 6.8 billionin 2001. In practice, the increase applies almost solely to the regulatoryenergy tax (estimated revenue in 2001: Gld 5.4 billion) and not to theenvironmental tax on fuels (revenue in 2001: Gld 1.5 billion). The tax burdenof this increase is to be shared proportionally between households andindustries: 68% for households and 32% for industries.

About 85% of the revenue from the increase will be used to lower direct taxespaid by households and industries. The remaining 15% will be used to

3 In comparison, the total tax revenue of the Dutch government in 1998 was Gld 180 billion.

4

promote energy efficiency. For industries, Gld 300 million will be used mainlyfor tax credits for investments in energy-saving equipment. Households canapply for support to investment in energy-efficient appliances such asrefrigerators and washing machines, and investments in insulation such asdouble glazing and roof insulation (Energy Premium Scheme). They can getfree advice on which investments in their homes are most effective in reducingenergy consumption. Gld 200 million per year is available for this scheme,including the advice.

In the 2000 in-depth review of the energy policies of the Netherlands, the IEAstated:

The Government of the Netherlands should:

• Continue the current approach to tax reform, especially the re-distributionof revenues to taxpayers if further tax increases prove necessary toachieve both economic and environmental objectives.

NOVEM On behalf of the Ministry of Economic Affairs, the Netherlands Organisationfor Energy and Environment (NOVEM) promotes measures aimed at energyconservation, energy management and energy-efficient construction andrenovation, both in residential and other constructions, and in non-residentialbuildings. As an intermediary organisation, NOVEM bridges the gap betweentheoretical knowledge and practical application. As the environment in which NOVEM operates is changing rapidly, theprocess of reorganisation is necessary. The conclusion so far is that its legalstatus of a company with limited liability should be changed to an independentpart of the Ministry of Economic Affairs as an Agency. It might be that allNOVEM employees become civil servants. In view of the types of activitiesthat NOVEM will carry out in the near future, this development will have quitean impact. Activities and/or contracts that are open for the private market willno longer be offered by NOVEM.



� ��

Energy Performance Standards for new buildings and non-residentialbuildings came into effect on 15 December 1995, as part of the Housing Actsupported by a programme implemented by NOVEM. The measures, amongothers, promote non-conventional energy sources (solar and residual energy,in particular) and are intended to achieve savings of between 15% and 20% inenergy consumption. At present, the requirements of the Energy PerformanceStandard (EPN) for new residential properties is 1.2 which means thatbuildings must be designed in such a way that no more than 1 200 m3 ofnatural gas will be required each year for heating, hot water and cooking in astandard-size dwelling. The EPN requirement was tightened to 1.0 as of1 January 2000.

� ��

Energy Performance Advice for existing residential properties is underpreparation. This advice will show which measures can best be taken, theenergy savings that will result and the costs. The EPA and the resultsachieved will be evaluated in 2003. Progress will be monitored to this end andwill also provide information on the energy situation in existing buildings in theNetherlands. Further steps to fulfil the efficiency potential in existing buildingswill then be determined on the basis of the results.

5

�� !"��

The Energy Savings Appliances Act provides the basis for general regulationsfor energy efficiency and labelling of appliances. Based on EU initiatives thefollowing measures can be mentioned. Energy labels for refrigerators/freezers, washing machines and tumble dryers are in force. For lamps anddishwashers energy labelling was to become obligatory on 1 September 1999and 1 January 2001 respectively. Concerning voluntary labels on officeequipment, negotiations with Energy Star by the European Commission arecontinuing.

��

Minimum efficiency standards for hot water boilers are still in force. Forrefrigerators and freezers, minimum efficiency standards came into force on4 September 1999. For standby energy consumption of television sets andVCRs, a voluntary agreement has been approved by the EuropeanCommission. Concerning energy consumption of washing machines avoluntary agreement is under consideration at the European Union.

� �� #��

At the moment, there is no national legislation for individual metering. Theenergy distribution companies support individual metering through financialincentives.

�� "�� $��

In mid-1996, in co-operation with the Ministry of Housing, Spatial Planning andthe Environment, a programme of model projects for sustainable and energyefficient construction of dwellings and buildings began.

!� �%�� &!� �'

The Netherlands has a tradition of developing voluntary agreements betweenvarious economic sectors and the ministries responsible to secure theacceptance of measures by all participants. The agreements usually take theform of a Covenant or a Long-Term Agreement (LTA). (For more informationon LTAs, see below under Industry.) In the commercial, education and health care sectors there are now six LTAs(with a target of 25-30% energy savings), covering some 30% of total energyconsumption. With the exception of one LTA (KLM Royal Dutch Airlines andSchiphol Airport), no monitoring results for the 1989-1995 period are available.The greenhouse horticulture LTA (with a target of 65% energy efficiency in theperiod 1990-2010) covers some 80% of total energy consumption in theagricultural sector. Monitoring data shows that energy efficiency improved by42% between 1980 and 1997. In 1998, two new LTAs were established in the agricultural sector, Bulbs andMushrooms. The targets are 22% and 20% respectively in the period 1995-2005. New in these LTAs are the sustainable energy targets (4% and 5%). Acovenant with the associations of social housing organisations was alsoagreed in 1996. The government intends to stimulate energy conservation in existing dwellingsand office buildings through LTAs with rental agencies in the social housingsector and with relevant organisations for renting and maintaining officebuildings.

(�� "�� )��

Energy distribution companies (gas and electricity) are grouped together asEnergieNed. This organisation executes the Environmental Action Plans(MAP). MAP started in 1991 and was revised several times resulting inMAP I, MAP II and MAP 2000, the most recent revision. In MAP 2000, there was a target of 17 million tonnes of CO2 reduction in 2000.In the period 1991-1997, 73% of this target was realised (12.5 million tonnes).

6

The main focus is on addressing the energy use of small-scale end-usersthrough advisory services and subsidy schemes for energy conservation. MAPis financed by a MAP-levy of a maximum of 2% of the energy tariff. Thespecific target groups are households, public and office buildings and industry.On the production side, there are three main areas: heat market (CHP andheat distribution), new technologies and renewable energy.

Fiscal/ Financial Measures

Grants have been available since 1 March 1996 for the renovation of existinghouses. The Green Investment Scheme (low interest loans for environmentallydesirable projects) had a budget of Gld 12.5 million in 1996 and Gld 15 millionin 1997; the Vamil Scheme (free depreciation on environmental investments)had a budget of Gld 30 million in both 1996 and in 1997. The VROM (Ministry of Health and Land Planning) budgets contain insulationsubsidy schemes for housing. The temporary incentive Subsidy Scheme forSustainable Construction has budgeted Gld 125 million for the period 1996-1998. About 70% of this budget is expected to be spent on energy savingmeasures.

� ��

The first of three annual steps towards the increase in the existing RegulatoryEnergy Tax was taken in 1999, as provided in the 1999 Tax Plan. Some ofthe additional revenues from this increase will be used to finance the EnergyPremium Scheme. This scheme provides a grant for buyers of energy-efficientappliances. For the time being, this mainly involves the so-called "A-label", orcomparable appliances. Consumers who buy energy-efficient appliances andtake energy conservation measures in their homes receive support under thisscheme. The energy companies, which collect the regulatory energy taxthrough energy bills, are to implement the programme. A total of Gld 200million per year has been allocated for the scheme as from 1999.

INDUSTRY


!� �%�� &!� �'

Long-term agreements have become the key instrument in energyconservation policy for industry. LTAs are primarily agreements between thegovernment (Ministry of Economic Affairs) and representatives from economicsectors. Once it is effective, it puts energy efficiency into focus in manyindividual companies. The following steps precede the signature of an LTA: Step 1: NOVEM, the government agency concerned, approaches a selected

industrial sector (or an individual company) for a Long-TermAgreement.

Step 2: The sector records its willingness to undertake energy conservation ina declaration of intent with the Minister of Economic Affairs.

Step 3: The sector’s energy conservation potential is inventoried, under theguidance of experts.

Step 4: The results of the inventory are translated by Novem and the sectorconcerned into a multi-year plan which forms part of the Long-TermAgreement.

Step 5: The Long-Term Agreement is signed by the sectoral association, theindividual firms, the Minister of Economic Affairs and Novem and often

7

the Association of the Provinces of the Netherlands. The average target of LTAs is a 20% increase in energy efficiency by the year2000 from 1989 levels. The government agrees not to introduce otherregulations on energy efficiency in industry, and the industry voluntarily agreesto reduce its energy intensity. The first LTAs were signed in 1992 and as of mid-1998 the status was asfollows: • 30 LTAS with industry associations.• About 1 200 industrial companies participate in LTAS.• Over 90% coverage of industrial primary energy consumption.• 11 LTAS with groups of users in services sectors. The Minister of Economic Affairs agrees to provide support to the programmeincluding: • Financial instruments aimed at industry: tax abatement can be granted if

investments in Novemicient (or clean) technologies are realised. Thisscheme, however, applies to all companies, whether they are signatoriesto an LTA or not.

• Financial assistance within the framework of the LTA, including varioussubsidy schemes.

• Increase of the above financial assistance if the programme is morepromising than expected.

• Support in the form of a detailed audit of the industries’ facilities.• Co-ordination of regulatory measures aimed at energy efficiency in

industry, including requirements to obtain permit and energy taxes. Part of the agreement involves a yearly monitoring system based on anannual report of individual members of the sector. The aggregated reports aresubmitted to NOVEM as operating agent and quantified in an energyefficiency index for the sector. After some years the parties will evaluate theresults achieved and review the effectiveness of the agreement. After intensive monitoring, the achievements were made visible; in 1997, theenergy efficiency of Dutch industry improved by 14.5% with respect to thereference year 1989. This meets the expectations of the LTA programme. In2000, annual savings of about Gld 1 500 million were anticipated for Dutchindustry. Industry sectors demonstrated a positive perception of the LTAapproach. In an evaluation, they expressed their support to the approach andso far no sector has dropped out of an agreement. Many of the LTAs expired in 2000. In the coming years, a total of 17 areexpected to be renewed and five new ones will be contracted. The new LTAswill include some new themes: • A more individual approach.• In 2001 there was to be a standardised monitoring system at an improved

quality level.• Reasonable measures will be taken, with an internal rate of return of at

least 15%. This corresponds to a recovery period of five years or less forinvestments.

• They will focus mainly on the larger energy consumers.

New voluntary agreements have been reached, targeted at medium-sizedindustries – the large energy-intensive enterprises take part in the benchmarkcovenant. Partners include individual companies, approximately 20 industrial

8

associations, associations of municipalities and three Ministries: EconomicAffairs, Environment and Agriculture. These LTAs run until 2012.

The rate of increase in energy efficiency of large energy-intensive enterprisesmight be lower in the next years because the energy conservation potentialseems to be lower.

!��# ��

It is difficult to cover the whole industrial sector with LTAs. Hence, a differentapproach, the Light Manufacturing Industry Strategy is applied to theremaining part, about 10% of the total and mainly comprised of small andmedium-sized firms. For this segment, the overall target is a 19% energyconservation improvement in 2000 compared to 1989. NOVEM has developedan action plan for these industries. The first approach will be to offer energy conservation instruments via industryassociations. Possible examples are an energy registration system, anenergy management system and an overview of suitable conservationtechnologies. Various financial incentives and energy services are provided within theframework of MAP 2000 by the energy distribution sector, aimed at energymanagement and conservation for small companies without long-termagreements. The energy distribution sector (MAP 2000) takes care of information andmonitoring; energy advice and energy scans; leasing and pre-financing ofenergy management techniques for heat recovery.

��"� �� *�� &�*'

The Third White Paper on Energy Policy of 1995/1996 set out an extremelyambitious objective for CHP: by 2010, 15 000 MW of CHP capacity were tobe installed. This objective was repeated in the 1998 Energy ConservationWhite Paper (EBN) and forms part of the global competition scenario and thusthe Dutch basket of measures for reaching the Kyoto target.

This capacity increase, which represents more than four times the installedCHP capacity in 1990, was to be stimulated through a multitude of incentivesand support measures, as described below:

The 1989 Electricity Act contained a variety of incentives for CHP. Theseexpired when the Act expired in July 1998. The incentive measures included:

• An obligation on the centralised system to buy surplus electricity fromCHP plants at avoided cost. Avoided cost was set equal to the full cost ofnew central generating facilities. This requirement was in force until 1995.

• Government subsidies of up to 17.5% of capital investment.• Favourable natural gas pricing for small-scale CHP (until 2002).• An exemption from paying for reserve capacity and ancillary services until

1997.

These support measures caused vigorous investment in decentralised CHPfacilities throughout the 1990s, often by energy distributors entering into jointventures with private companies. The number of new CHP plants was suchthat Sep (Samenwerkende Elektriciteits-Productiebedrijven, co-operatingelectricity production companies, the former Dutch electricity generatingboard) had to limit output from existing, economic base-load plants toaccommodate over-capacity from the expensive new CHP plants. This led tounder-utilised capacity and higher unit cost. Prices, which would normally fallin a market with over-capacity, instead rose to recover Sep’s higher unit costs.Higher Sep prices in turn encouraged decentralised suppliers to develop moreCHP.

9

The Second Memorandum on Energy Conservation (SMEC) adopted in 1993set the target for CHP at 8 000 MW and 30% of generation by 2000. Thisobjective has been reached as the present capacity of CHP is 8 000 MW.However, severe competition with relatively low electricity prices, combinedwith high gas prices caused a slow-down in the development of CHP. TheMinister of Economic Affairs announced measures to support CHP. Atemporary tax refund for co-generation power was introduced in theRegulatory Energy Tax. For the years 2001 and 2002, the refund was 0.57Eurocent for each kWh supplied to the grid. To be entitled to the refund, theplant must have a minimum efficiency of 60%. A maximum of �� refunded per installation. This has resulted in an almost unchanged operationof the co-generation plants.



• Carefully weigh the costs and benefits of CHP expansion. Make the costsas transparent as the benefits.

+��

NV Nederlandse Gasunie, the company responsible for the domestic supply ofnatural gas, is carrying out an Environmental Plan for Industry aiming atimproved energy conservation in industry.

�� &�'

Cleaner Production is a joint initiative of the state government (the Ministriesof Economic Affairs and of Housing, Physical Planning and the Environment)and the provinces (the Interprovincial Consultation or IPO). The CleanerProduction programme started in 1996 and will end in 2003. It is intended toencourage small and medium-sized businesses to become moreenvironmentally (including energy) aware. Cleaner Production reinforces and supports the activities of consultants, tradeand industrial organisations (the intermediaries). The Cleaner Productionprogramme includes not only assistance for intermediaries to offer them betteraccess to small and medium-sized businesses but also directly supportscompanies. Through the Tender Scheme Publicity and Short Scans (SP/V&D),intermediaries are encouraged to start projects aimed at small and medium-sized businesses. The budget for this scheme is Gld 1.7 million a year (1998and thereafter). The maximum subsidy is 66.6%, or Gld 0.2 million perproject. A project has to focus on at least two themes. It is then up to theintermediary to choose from several environmental care themes or to add thetheme energy conservation to the proposed project. Through the Energy Conservation and Environmental Consultancy SubsidyScheme (SP/EMA), which forms part of the Cleaner Production programme(SP), companies may receive a subsidy for engaging consultants to audit andadvise on their operations and products with regard to energy conservationand environmental care. The EMA budget will be Gld 4.6 million per year(1999 and thereafter). The maximum subsidy is 50% of costs or Gld 7 000-15 000.

$� �� The Energy Efficiency Benchmarking Covenant is a NEPP III development.This paper states that “The energy-intensive companies offer to be (orbecome) among the best in the world in terms of energy efficiency, in returnfor which the government will impose no additional specific measures aimedat energy conservation or reduction of CO2 emissions on the companies

10

taking part.” This means that they must be as energy-efficient as the mostenergy-efficient comparable facilities that exist in the year 2012. However,they need not go beyond their best competitor’s energy efficiency record; it willbe sufficient to equal the best competitor’s level. All corporate facilitieslocated in the Netherlands, with an annual energy consumption of at least0.5 PJ may take part in a Covenant. The Benchmarking Covenant is a newenergy efficiency measure forming part of the basic package of CO2

measures.

��"��

The Tender Scheme for Industrial Energy Conservation (TIEB) was evaluatedin 1998. As from 1998, there will be a tender scheme to stimulatedemonstration and market introduction projects for industrial energyconservation. The budget will be Gld 10 million a year. The maximumamounts of the subsidy are 30% for a demonstration project and 20% formarket introduction or Gld 1 million.

$��

To stimulate the development and market acceptance of new “breakthrough”technologies for energy efficiency, a multi-annual programme is beingformulated. This initiative is based on a demand-orientated strategy. Someexisting R&D facilities have also been included in this strategy. Theprogramme is planned to start in early 1999. The funding programmes for breakthrough technologies are the SPIRIT(breakthrough technologies for industrial energy conservation) and the BTS(joint projects between companies and research institutes) programmes.These are multi-annual programmes to stimulate the development and marketacceptance of new technologies.


+��

The new electricity and gas liberalisation laws both contain provisions for theestablishment of a “green certificates” trading scheme. Under such a scheme,all ultimate gas and electricity consumers would acquire a certain number of“green certificates”, depending on their total consumption. Although amandatory scheme was under discussion, the current government prefers avoluntary certificates system. These certificates could be used to financeenergy-efficient technologies and renewables projects. Emissions would bemade tradable either when the scheme begins or shortly afterwards. Themarket for green certificates began operating in 2001. Details of the proposal, which has been under discussion for more than fiveyears, are being developed. The system will require an organisation that actsas a “green energy” bank to issue certificates to producers, registertransactions, and collect the certificates again from consumers. A possible model for the green certificates trading scheme is the “green label”system now operated by the energy distribution companies. The systemsupports their mutual goal regarding a renewable energy target. It is a closedsystem only involving the energy distribution companies. The green labels aretradable.

Another example is a plan under way in the Ministry of Housing, SpatialPlanning and the Environment regarding a trading scheme for NOx emissionsin the energy sector. The scheme intends to reduce these emissions by 55%in 2005 compared to 1995 levels. A further 25% reduction is aimed for by2010. Facilities that emit NOx will be able to sell their emissions reductionsurpluses to others who cannot meet the required reductions. Trading is tooccur on an annual basis. An NOx Exchange Board will be formed and enterinto contract with the parties concerned.

11



• Speed up the development and introduction of the voluntary greencertificates trading scheme. Such schemes require much attention todetail and consultation with participants. More concrete rules must beproposed soon if the deadline for start-up in 2001 is to be met.

TRANSPORT Energy conservation in the transport sector is increasingly being undertaken in

collaboration with the Ministry of Transport and Public Works, and the Ministryof Housing, Regional Development and the Environment. In both passengerand freight transportation, the government seeks to reduce the use of energythrough spatial planning. As for passenger transport, energy conservation is also aimed atimplementing fiscal measures and a fuel economy information scheme toinfluence consumer choice. In 2002 (end of government period) and 2005 (according to the KyotoProtocol), the Dutch government can decide whether other energy efficiencymeasures have to be implemented regarding the development of GHGemissions and international policies.


In 1996 three transportation policy documents Freight Transport in Balance,Working Together on Accessibility, and Memorandum on Vehicle Technologyand Fuels were produced. Various measures and programmes are carried out with the aim of reducingthe number of vehicle-km travelled with special attention being paid to theimprovement of public transport.

,��

A legislative measure was implemented in 1991 incorporating a mandatorycheck of engine adjustment as part of the annual vehicle inspections.

-�� $��

The government intends to influence driving behaviour through more stringentenforcement of speed limits, increased tyre pressure, and in-car instrumentssuch as cruise control and econo-meters. Increased tyre pressure reducesfuel consumption by reducing friction between the car and the road surfaceand is expected to contribute 0.3 million tonnes of CO2 savings. At present,tyre pressure is too low in about half of all cars. Driving behaviour of truckdrivers is targeted with in-company training and education courses.

�"��

Measures are being taken to improve the cost of public transport to make itmore attractive than private passenger transport.

(�� A comprehensive investment programme to improve railroad connections iscurrently being implemented (Rail 21). The introduction of connectionsbetween the major cities in the Netherlands and the European high-speedtrain system is under consideration.

��

The Ministries of Economic Affairs, of Transport and Public Works, and ofHousing, Regional Development and the Environment have set up a jointventure with the three major employers’ organisations involved in freighttransport: the TRANSACTION joint project is investigating possibilities ofconcluding Long-Term Agreements for improvement of freight transport. Theimprovements being studied aim at reducing the number of road kilometreswithout lowering the total volume of transport and at bringing about a

12

reduction of pollution and energy consumption. It is expected that the firstLTA for improvement of freight transport will be concluded in 1999.


The Netherlands government considers it essential to monitor and evaluatecarefully its measures and programmes on energy efficiency on a regularbasis. They need to be adapted continuously to the changing situation at boththe national and international level. In the Energy Conservation Action Programme, there is special focus onenergy monitoring. The Dutch Cabinet attaches considerable importance tothe systematic collection and processing of data relating to energyconservation. This can show whether the Action Programme is on track andwhether its ambition will be realised. Monitoring will take place on threelevels: national (macro), the end-users or sectors (meso) and on the level ofmeasures or instruments (micro). In the 2000 in-depth review of the energy policies of the Netherlands, the IEAstated: The Government of the Netherlands should: • Continue to monitor energy market and emissions trends closely and

continue to respond to them in a flexible way.

Furtherinformation

For further information, please contact: Mirjam LeijnseMinistry of Economic AffairsDirectorate General for EnergyEnergy Conservation and Renewable EnergyPostbus 20101NL - 2500 EC’s-Gravenhagetel. +31 (70) 379 74 26fax +31 (70) 379 62 10email: [email protected]

1

NEWZEALAND

Updated June 2002

INTRODUCTION

��

The government established the Energy Efficiency and Conservation Authority(EECA) in October 1992 as an independent agency charged with determiningand implementing practical measures to achieve greater energy efficiency inNew Zealand. It was governed by a Board that reported directly to theMinister of Energy1.

EECA’s functions, as defined by its Terms of Reference, are as follows:

• To develop, implement and promote strategies for energy conservation.• To advise the government and the New Zealand energy industry on

matters relating to the development, implementation and promotion ofthose conservation strategies.

• To monitor known energy sources, their use, and the investigation ofpotential sources and applications, together with the economic, social andenvironmental impacts, in both the short and longer term.

The government launched its long-term Energy Efficiency Strategy in 1994with additional funding of NZ$ 8.5 million2 over three years. It focusedattention on a range of practical measures aimed at increasing efficiency inselected energy end-uses across all sectors of the economy. Initial fundingfor the Strategy ended on 1 July 1997, although many activities started duringthis early phase have subsequently been integrated into EECA’s ongoing workprogramme.

With the expiry of funding for the Energy Efficiency Strategy, governmentfunding for EECA fell from 1997 to 1999. This downward trend has sincebeen reversed. As part of the 2000/2001 budget, the government hasboosted EECA’s budget by extra funding of NZ$ 3 million per year from2000/01. Initially, the extra funding supported:

• Additional grants to upgrade low-income housing with energy efficiencydevices.

• The development of minimum energy performance standards andlabelling for energy-using appliances.

• The development of a national strategy for energy use.

The government allocated a further NZ$ 3 million per year to fund energyefficiency and renewable energy programmes, mainly through EECA but alsothrough the Ministry for the Environment. In the first year NZ$ 400 000 -- ofthe additional NZ$3 million -- was used to fund consultation andcommunication on climate change.

The government budgetary allocation to EECA for energy efficiency andrenewable energy activities in 2001/2002 is NZ$ 9.665 million and NZ$ 12.815million in 2002/03.

In 1998/99 EECA streamlined its activities into the following four areas ofactivity:

• Energy-Wise Business – to provide companies with tailored informationservices, publications, fora, seminars, field support and annual awards foroutstanding energy efficiency performance.

1 The new EECA was created pursuant to the Energy Efficiency and Conservation Act 2000, with differentfunctions, but still responsible via a Board to the Minister of Energy.2 On average in 1999, NZ$ 1 = US$ 0.533, in 2000, NZ$ 1 = US$ 0.451 and in 2001 NZ1 = US$ 0.420.

2

• Energy-Wise Homes -- to administer the Energy Saver Fund that providesfor the installation of household energy efficiency measures andencourage improvement in the energy efficiency of whiteware productsand buildings.

• Energy-Wise Information -- to keep a range of target audiences fullyinformed with timely information on energy efficiency and new renewableenergy developments through publications such as "Energy-Wise News"and “EECA Update”; the EECA website (www.eeca.govt.nz); e-mailnewsletters; monitoring and analysis publications; technical publicationsand seminars.

• Energy-Wise Government -- to service the energy efficiency needs of arange of national and local government organisations and client groups(e.g. through the Crown Loan Scheme to fund energy efficiency projects inthe public sector; Government Leadership Scheme; the Energy-WiseCouncils Partnership -- which targets the local government sector, andgiving advice to government processes including the climate changepolicy debate).

��

The Energy Efficiency and Conservation Act passed by the Parliament on11 May 2000 entered into force on 1 July 2000.

The Act provides the legislative basis for promoting energy efficiency andrenewable energy and includes:

• The establishment of the Energy Efficiency and Conservation Authority(EECA) as a stand-alone Crown entity from 1 July 2000. It has a statutoryrole to encourage, promote and support energy efficiency, energyconservation and the use of renewable energy.

In the 2001 in-depth review of energy policies of New Zealand, the IEA stated:

The Government of New Zealand should:

• Take particular note of the requirements of the Energy Efficiency andConservation Act 2000 to establish only targets that are measurable,reasonable and practicable; take into consideration the findings of theIEA’s study on energy efficiency in New Zealand; ensure adequate meansto enforce compliance with the strategy.

• A requirement for the responsible Minister to develop a National EnergyEfficiency and Conservation Strategy (the Strategy) by 1 October 2001(see below).

In the 2001 in-depth review of energy policies of New Zealand, the IEA stated:


• Ensure that the National Energy Efficiency and Conservation Strategy isbased on cost-effectiveness and is integrated into existing and proposedpolicies on competitive energy markets.

• Give priority in the National Energy Efficiency and Conservation Strategyto improving efficiency of energy use in transport, domestic space heating,water heating and electrical appliances. Energy use in manufacturingshould be addressed only after data deficiencies are corrected and theunderlying causes of relatively low energy efficiency are betterunderstood.

• The Minister of Energy is now also responsible for promoting publicawareness of the importance of energy efficiency and conservation andthe use of renewable energy, and practices and technologies that further

3

these matters; monitoring and reviewing the state of energy efficiency,energy conservation, and renewable energy use.

• A regulations-making power, for example, for minimum energyperformance standards and energy efficiency labelling, and powers tomonitor and review the state of energy efficiency, energy conservationand renewable energy use and to promote public awareness of theimportance of energy efficiency and conservation and the use ofrenewable energy, and practices and technologies that further thesematters.

The Ministry for the Environment has responsibility to provide primary policyadvice to government on energy efficiency and related issues while EECA hasa complementary policy advice role informed by its own operationalknowledge and expertise.

��

A draft National Energy Efficiency and Conservation Strategy was preparedand released on 1 April 2001 for a large public consultation. The NationalEnergy Efficiency and Conservation Strategy -- Towards a sustainable energyfuture (the Strategy) was officially released on 27 September 2001. The termof the Strategy is five years, but it may be replaced before that time if sodecided by the Minister of Energy.

The Strategy establishes objectives, targets and policies on energy efficiency,energy conservation and the use of renewable sources of energy. One of itsbenefits is to enable the government to quantify how these technologies andmeasures will help New Zealand to meet its obligations under the KyotoProtocol. Development of the Strategy was led by EECA, in conjunction withthe Ministry of the Environment.

The Strategy has two high-level targets, one relating to energy efficiency andthe other to the level of energy supply from renewable energy sources; theenergy efficiency target is at least a 20% improvement in economy-wideenergy efficiency by 2012, the final year of the first commitment period of theKyoto Protocol. This energy efficiency target establishes a benchmark but isnot a mandatory requirement.

Progress towards the target will be communicated by a national energyefficiency index. This index will be built up from a comprehensive programmeof sectoral and sub-sectoral monitoring which will include the development ofa number of key indicators for each sector. Some of the necessary monitoringinformation already exists, but further expansion is required. EECA hasdeveloped a framework to identify data gaps and determine key monitoringindicators.

On 30 April 2002 the government announced that its preferred target forrenewable energy is an additional 30 PJ of consumer energy from renewablesources (relative to year 2000 levels) by 2012. The government’s preferredmechanisms to achieve this target are expanded renewable energyprogrammes under the Strategy and a contestable projects mechanism.Public consultation on the preferred target and mechanisms runs until mid-June 2002.

��

New Zealand ratified the UN Framework Convention on Climate Change (UNFCCC) in September 1993 and submitted its national communication entitledClimate Change: The New Zealand Response. New Zealand’s First NationalCommunication under the Framework Convention on Climate Change, inSeptember 1994. This first communication integrated energy efficiency policyas the main instrument to reach the reduction emission target.

The second national communication entitled Climate Change. The NewZealand Response II, dated June 1997, provided a progress report on the

4

measures New Zealand had taken to meet its commitment under the UNFCCC since the end of 1994.

New Zealand signed the Kyoto Protocol in May 1998. On 8 May 2000, thePrime Minister announced that the government aims to ratify the KyotoProtocol by mid-2002. The government is committed to passing the legislationneeded to enable New Zealand to ratify the Protocol by this date. NewZealand’s target under the Protocol is to hold emissions of six greenhousegases3, on average, at 1990 levels between 2008 and 2012. To achieve thisgoal, New Zealand intends either reducing emissions and/or purchasingpermits to offset any emissions that exceed 1990 levels.

The Resource Management Act 1991 (RMA) provides one means for localand regional government response to climate change through grantingresource consents and developing plans and policies. The government doesnot consider the use of this Act appropriate for meeting internationalobligations and the Act is currently under review.

��

The government has initiated a broad-based policy development programmeto examine how best to provide the framework to ratify the Kyoto protocol.This programme involves a wide range of government departments, includingEnvironment, Economic Development, Agriculture and Forestry, Transport,Research Science and Technology, Maori Development and the Treasury.The options being examined include price mechanisms, such as emissionstrading and carbon charges, and non-price measures, such as improvedenergy efficiency.

The energy efficiency measures will be explained in more detail below.

RESIDENTIALSECTOR ANDRELATEDACTIVITIES

��

In 2000, the New Zealand government passed regulations enhancing energyefficiency provisions under the Building Code. This increased insulationrequirements in the cooler parts of the country, set maximum heat loss levelsfor hot water systems and set limits on building heat loss and lighting levels incommercial buildings.

Over the last year EECA and the Building Industry Authority have beenworking on a further enhancement of the energy efficiency provisions of theBuilding Code. The measures under consideration include minimum heat losslevels for windows and a refinement of the economic criteria used to setinsulation levels. EECA is aiming to have these matters ready forimplementation by 2003. EECA is also reviewing the effectiveness of theapplication of the 2000 enhancement to assess whether any furtherinformation or training activities are needed.

��

Regulations covering mandatory energy performance standards and labellingcame into force in 2002. Initial product classes are electrical. Additionalclasses of product are under investigation. The regulatory scheme is broadlycompatible with its Australian equivalent, and generally utilises the samestandards.

��

In 1995, the government created an Energy Saver Fund (the Fund or ESF) tobe administered by EECA. The Fund was designed to “kick-start” residentialenergy efficiency activities. Grants are allocated by competitive tender to help

3 The six Greenhouse gases are: CO2 (carbon dioxide), CH4 (methane), N2O (nitrous oxide), HFCs(hydrofluorocarbons), PFCs (perfluorocarbons), and SF6 (sulphur hexafluoride) .

5

finance practical measures designed to improve the efficiency of energy use inNew Zealand homes. One of the funding criteria is whether projects addressmarket barriers (other than cost) to energy efficiency improvements, such aslack of information, and whether the project would result in the moresustainable provision of energy efficiency services.

Funding for the programme was judged to be increasing faster than thedeveloping energy efficiency services market could absorb it, and funding hassubsequently been reduced. ESF grants totalling NZ$ 1.85 million wereallocated during 1996/97 and nearly NZ$ 4 million was allocated in 1997/98.The budget for 1998/99 was NZ$ 2.5 million. Additional funding of NZ 1.15million per year was approved for financial year 2000/2001 onwards forresidential sector initiatives including the ESF, Maori housing, pilot residentialschemes for state housing as well as other energy/community basedmeasures. This brought to NZ$ 2 million per year the total to be allocated tosuch measures. EECA also manages a NZ$ 1.1 million fund dedicated to aparticular Maori healthy housing scheme with a strong energy efficiency andemployment focus.

Over the first five years of operation, the Energy Saver Fund made grants toimprove energy efficiency in some 49 000 households, saving consumerssome NZ$ 50 million over the lifetime of the measures and around 300 000tonnes of carbon dioxide. The total cost per kWh of the energy savings madewas under four cents -- very much less than the typical retail price ofelectricity. The cost to government to achieve these savings is estimated byEECA to be under two cents per kWh. Possible changes to the futuretargeting and operation of the programmes may be made as the NationalEnergy Efficiency and Conservation Strategy is implemented.

In 2000/01 the government allocated NZ$1.1 million to EECA to administer aMaori Healthy Housing and Employment Pilot part of its Maori HousingStrategy. This pilot worked with three Maori service providers and involvedtraining and employment of unemployed Maori persons to install ‘healthyhousing’ energy efficiency retrofits in low income houses with high healthneeds. The project successfully delivered whole house retrofits to 788households, benefiting 2 959 residents. Twenty-one persons were trainedand 16 employed for at least six months. The retrofits cost on averageNZ$ 1 255 per house, and resulted in an estimated 20 million kWh of energysavings over the lifetime of the measures, equating to 12 600 tonnes of CO2

reductions. Total dollar savings to the residents was NZ$ 2.2m at a cost togovernment of 4.9c per kWh.

In 2000/01 and onward EECA redeveloped the Energy Saver Fund bycreating several more segmented and targeted grant schemes. These are stillbeing refined with a further revised scheme planned for 2002/02.

PUBLIC SECTOR

��

The Government Leadership Programme encourages improvements in energyefficiency within public sector agencies and institutions, demonstrating thegovernment's commitments to effective energy management and loweringemissions of carbon dioxide.

The programme was established in 1993 with the following key elements: theinclusion of energy efficiency objectives in chief executives' performancecontracts (now replaced with Memoranda of Understanding with individualgovernment bodies); funding of capital investments to improve energyefficiency, provision of training and advice by EECA in conjunction with otheragencies, and encouraging energy cost accountability and annual monitoringof energy performance outcomes.

6

As part of this programme, EECA and its predecessor organisation have lentNZ$ 11 million since 1989 to public institutions in central and local governmentto invest in energy efficiency projects, funded by the Crown Energy EfficiencyLoan Scheme. A further NZ$ 1 million will be spent during fiscal year 2000/01in the wider public sector to encourage the application of energy efficiencyprojects. Annual energy savings resulting from these investments areestimated at NZ$ 4 million and reductions in CO2 amount to some 22 000tonnes per year.

In November 2000, the government announced that it would extend andstrengthen its energy efficiency leadership commitments: the target is toinclude more than the present 34 government agencies participating and takein hospitals, schools, defence, etc. The voluntary scheme will be expanded toinclude the wider state sector, with emphasis on agencies spending over NZ$100 000 a year on energy. An energy saving goal of 15% by 2005 over 2000has been set, equivalent to energy savings of NZ$ 14 million and carbondioxide savings of about 75 000-100 000 tonnes a year. The proposal wouldrequire investment of NZ$ 30-40 million. As at June 2002 45 signatories hadjoined the strengthened programme. The programme is seen as the basis forseeking similar commitments from the local government and private sectors.

��!"��

Local governments have been targeted through the Energy-Wise Councilsprogramme. Priority has been given to information dissemination(newsletters, seminars, fora), and better monitoring, reporting, benchmarkingand ranking among member councils. Special efficiency projects in the areasof street-lighting, water and sewage pumping are also being given priority.

COMMERCIALAND INDUSTRIALSECTORS


��

The Energy-Wise Companies Campaign was launched in August 1994 andserves to promote commitment to energy efficiency at the top managementlevel within companies. An effective partnership has been establishedbetween the government and industrial and commercial sectors, which directsmanagement attention to the identification and implementation of cost-effective energy-efficient practices and technologies. The main features of thecampaign are:

• A public commitment to energy management by company chief executivesand managing directors through endorsement of a common charter of keyprinciples.

• Endorsement of the campaign by the Minister for Energy and the Ministerfor the Environment.

• Support from, and participation by, energy suppliers.• Support from major business, consumer and environmental organisations.• Practical information, advisory, and secretariat support from the EECA.• Annual awards to companies making the most creative and significant

improvements in energy efficiency.

Over 600 of the country’s largest companies are now actively committed to thecampaign. They are implementing energy management practices anddrawing support, as needed, from EECA’s best-practice advisers andtechnical literature including case studies of good energy managementpractice. Annual returns from client companies indicate that energy savings ofNZ$ 23 million were achieved over the last year and, of these savings, NZ$ 4million was directly attributed to EECA's involvement.

7

EECA is working through the Energy Management Association to establishaccreditation for auditors and to run seminars on new technologies. EECAmaintains a directory on energy service and product suppliers as well as adatabase of consultants.

#�� As part of a broader information dissemination strategy, some 90 seminars (to2 400 attendees) were presented over three years; and each of six annualissues of EECA’s flagship publication "Energy Wise News" continues to bewell received by approximately 12 000 professionals in the field. Over half therespondents to a reader survey indicated that they apply energy saving advicefrom "Energy Wise News".

$�� %�

��

In July 1994, as part of its CO2 Policy Package, the government announced aprogramme of Voluntary Agreements (VAs). The government encouraged abroad range of business sector groups and companies to enter into voluntaryagreements to reduce their emissions of carbon dioxide. Voluntaryagreements required companies or sector groups to specify the amounts ofCO2 that they would avoid emitting as a result of improvements or alterationsin current practices over the period 1990-2000.

The agreements were not legally binding and there was no penalty for under-achieving. There was an expectation that they would be renegotiated ifannual reporting showed a major variation from what was expected to beachieved.

Twenty-four VAs to reduce CO2 emissions were signed between September1995 and March 1998, covering the majority of New Zealand’s largest CO2

emitters and 47% of New Zealand’s total 1990 CO2 output. The Ministry ofEconomic Development (formerly Ministry of Commerce) was assigned therole of implementing and monitoring the NGAs. EECA developed themethodology for the agreements in consultation with industry participants.They were audited and monitored independently, and the results reportedannually. These agreements terminated on or before 30 June 2001.

Most companies focused on increased energy efficiency of end-use andgeneration, particularly co-generation, to reduce their emissions.

The performance of NGA signatories in terms of emissions growth has beensignificantly better than the rest of the economy, which is affected by thestrong growth in transport emissions. An EECA study of February 1997suggested that, while emissions across the whole economy were projected toincrease by 29% from 1990 to 2000, emissions from the 19 industrial NGAsthen in place (excluding the then state-owned electricity company ECNZ) wereprojected to grow by 9% in the same period. This was despite a 25.5%projected increase in aggregate output (production) for the same period.

By the end of the VA programme the signatories had reported emissionsreductions of over 1.5 million tCO2 per year, against an output-indexed or"frozen efficiency" baseline.

It is planned to introduce a new programme of Negotiated GreenhouseAgreements (NGAs) which will be legally binding agreements with the"competitiveness-at-risk" emitters and sectors. The agreements are expectedto negotiate more challenging commitments and improve monitoring andtransparency in return for relief from emission charges in the 2008-2012period.

8

TRANSPORT


Vehicle FleetFuel Modelling

Preliminary work for selecting effective measures has shown that expectedimprovements in the technical performance of the vehicle fleet over time, andthe use of road space demand management measures, could lead toconsiderable reduction in carbon dioxide emissions from the land transportsector.

&��&�� In December 1998 the government released a discussion document whichproposed wide-ranging reforms for the management of the country’s roads.The impact of proposed fuel and road pricing could bring benefits for energyefficiency and the environment by encouraging the use of other transportmodes and reduced demand for transport generally.

&��

EECA is gearing up its information services and facilitation activities toinformation on vehicle fuel efficiency, promoting greater adoption of"rideshare" carpooling software; fostering energy efficient transport planningand urban form at the regional and local level. The emphasis is on creating amore energy efficient transport infrastructure; assisting decision-makers tounderstand and support energy efficient options and better integrating energy,transport and environmental objectives.


��!��

For eco-efficient vehicles, the major short-term proposal of the Strategy is toinvestigate measures to improve vehicle fuel efficiency. A report wasproduced in late 2001 examining the options for applying vehicle fuelefficiency standards and labelling as an option to encourage the purchase ofmore efficient vehicles. Government subsequently decided to continue workon the development of proposals for a practical labelling regime – along withproposals for monitorinhg the fuel efficiency performance of the nationalvehicle fleet. Ultimately, transforming the energy systems of vehicles isfundamental to energy sustainability. While New Zealand has little impact onthe pace of such technology changes, the Strategy approach is to be pro-active in adopting new innovations. In the 2001 in-depth review of energy policies of New Zealand, the IEA stated:


• Determine the nominal (test) fuel economy of cars purchased new, and ofcars purchased used, to see how the two groups compare; developpolicies to encourage purchase of more efficient cars from either group.

$��

It is planned to implement a Vehicle Fleet Emissions Control Strategy whichincludes techniques to assess the emissions impact of traffic management, arequirement for all imported vehicles to meet emissions standards of thecountry of manufacture, and a review of petroleum product specifications toensure available products match vehicles technologies.

'��

It is proposed to implement a Transport Strategy, possibly including transportenvironmental objectives and performance targets, some of which may relateto reducing greenhouse gas emissions.

9


During 1997 an independent review of EECA’s activities was commissioned,including a review of EECA's administration of the Energy Saver Fund. Thereview found that core EECA activities such as information programmes,commercial and industrial partnerships and the Energy Saver Fund are highlyregarded by intended audiences, but some smaller programmes hadquestionable benefits. The results of the review contributed to the reconfiguredEECA that is in a stronger position to contribute to a sustainable energy systemand sustainable development in New Zealand.

Because EECA’s programmes are minimally interventionist and operate byinforming and facilitating competitive markets, it has proven difficult tomeasure their full effect. However, the results of four programmes,representing about 40% of the total resource EECA has applied, can bequantified in robust terms. EECA estimated that up to the year 2000 theenergy savings from these programmes amounted to NZ$ 71 million inpresent value terms using a 10% discount rate. This represents a return ofmore than two dollars for every dollar of total government funding for energyefficiency since EECA's establishment. The total benefits from all EECA’sactivities are likely to be considerably more than this, especially as there wasno attempt to put a value on greenhouse gas abatement and otherenvironmental benefits, health benefits, etc.

In addition, EECA also monitors energy end-use and efficiency patterns andtrends through data collection, use of indicators and sectoral analyses.Results are published in a quarterly report and also provide valuable insightsuseful in the design of new or amended energy efficiency programmes.

As mentioned above, it is planned to monitor and assess carefully theprogress towards achieving the energy efficiency target set up in the NationalEnergy Efficiency and Conservation Strategy.

In the 2000 in-depth review of the energy policies of New Zealand, the IEAstated:


• Support data collection on energy end-use by funding and regulation.• As far as possible, quantify the greenhouse gas emission benefits and

associated costs of the components of the National Energy Efficiency andConservation Strategy.

Furtherinformation


Caroline ParlaneSenior Advisor, External RelationsMinistry of Economic DevelopmentPO Box 1473, WellingtonTel. 64 4 460 1372fax 64 4 473 9930E-mail: [email protected]

1

NORWAY Updated March 2003

BACKGROUND

1991EnergyAct

An Energy Act came into force on 1 January 1991. It was designed torestructure Norway's electricity supply industry by introducing a cleardistinction between power production and sale, which is organised through amarket, and the grid, which is considered a natural monopoly. The Act alsoallows customers at all levels to select their suppliers.

The 1991 Energy Act also changed the role of the utilities with respect toenergy efficiency activities and introduced specific requirements for localenergy utilities to provide customers with information and advice on efficientuse of energy.

1993 WhitePaperon EnergyEfficiencyPolicy

In 1993, the Norwegian government submitted a White Paper to the Storting(Norwegian Parliament), entitled Energy Efficiency and New RenewableEnergy Sources. This Paper proposed a redirection of energy efficiencymeasures towards information, education and motivation campaigns, and agrant scheme for the introduction of energy efficient technology, and toeliminate grant schemes for energy efficiency investments in various sectors.Studies showed that the grant schemes for energy efficiency investments hadlimited effect due to a high percentage of “free-riders”.

Environmentand EnergyEfficiency

Norway ratified the Framework Convention on Climate Change in July 1993and signed the Kyoto Protocol in April 1998. It submitted its first NationalCommunication under the Framework Convention on Climate Change on21 September 1994. For the third Conference of the Parties (COP-3) of theUNFCCC held in Kyoto (Japan) in December 1997, Norway submitted itsSecond National Communication in April 1997. The Norwegian commitment inthe Protocol is to limit the increase in greenhouse gas emissions to 1%between 1990 and the first commitment period (2008-2012).

The government’s White Paper on the Norwegian Implementation of the KyotoProtocol and the Parliamentary Bill on Green Taxes passed the Storting inJune 1998. This document, together with the earlier White Paper onEnvironmental Policies for Sustainable Development, places high priority onenvironmental policies. This is reflected, inter alia, in both enhanced efforts inthe field of energy efficiency to increase energy conservation and in new,concrete policies to increase energy production from renewable energysources.

The Parliament decided to:

• Request the government to appoint a broad-based commission of experts(the Quota Commission) to elaborate on a national trading scheme forgreenhouse gas emissions.

• Introduce a tax on final waste disposal, in order to increase energyrecovery and to reduce emissions of methane from landfills (see below).

• Exempt the building of wind turbines, biofuels, heat pumps, district heatingand micro and mini hydropower plants from the investment tax.

• Support electricity from windmills (reimbursement of half the tax onpower).

In December 1999, the Quota Commission presented its report. One of therecommendations in the report was that, to fulfil the Norwegian commitmentunder the Kyoto Protocol, an extensive national quota system should beintroduced with regulation by quotas from 2008. It was recommend that the


2

system include all six greenhouse gases. The quota system would be able toaccommodate almost 90% of Norwegian greenhouse gas emissions. To gainuseful experience, regulations for reporting and control routines wererecommended to be in put place well before 2008. The Commissionrecommends that in an international system, where there are no limitations oncountries’ use of the Kyoto mechanisms, all concerned should be allowed tomake direct use of the Kyoto mechanisms. In its June 2001 climate policy(see below) the government accepted most of the Commission'srecommendations.

On 30 May 2002, the Parliament (Storting) ratified the Kyoto Protocol.

1999 WhitePaper onEnergyPolicy

In a White Paper on Energy Policy submitted to the Parliament in March 1999,the government stated that it intended to pursue an energy policy that wouldsupport an ambitious environmental policy. Norway must prepare for a futurein which energy, and electricity in particular, will be in shorter supply andbecome a more valuable commodity. The necessary shifts in energyproduction and use must take place in a way that has an acceptable impact onpublic welfare. The government's objectives for limiting energy use, andbringing about a shift in energy production and use are to:

• Limit energy use considerably more than would be the case ifdevelopments were allowed to continue unchecked.

• Increase annual use of central heating based on new renewable energysources, heat pumps and waste heat by 4 TWh by 2010.

• Construct wind generators with a production capacity of 3 TWh/year by2010.

• Increase the land-based use of natural gas.

To achieve these objectives, a package of energy measures will be needed,including a gradual increase of the electricity tax combined with grants forinvestments within a framework of up to NKr 5 billion over a ten-year period.The government also intends to expand the role that the municipalities andcounty municipalities play in energy policy.

The statements on limiting energy use and a shift in energy use and newenergy production were confirmed when the Parliament discussed the WhitePaper on Energy Policy in March 2000. The financial package was alsoconfirmed. The only change is that natural gas projects can also be supportedby the NKr 5 billion grants.

2001 and 2002White Papers onClimate ChangePolicy

On June 2001, the government presented a White Paper to the Storting on thenational climate policy (St.meld. nr. 54 (2000-2001)). It describes the actionthat will be taken to deal with the obligations set by the Kyoto Protocol for theperiod 2008-2012. Carbon dioxide taxes, agreements with industry, emissiontrading, and technology development are the key measures with which thegovernment proposed to meet Norway's environmental commitments.

The White Paper of June 2001 and a supplementary White Paper on ClimateChange Policy of March 2002 were both approved by the Parliament in June2002.

Up to 2008, the government will pursue a number of climate–relatedmeasures. These will include continuing to levy the CO2 tax and introducing aquota-based domestic emissions trading system for the period 2005-2007 forindustries that are not currently subject to the CO2 tax. As a result, almost allsectors will be regulated by climate policy instruments. This will help to meetthe requirement to make "demonstrable progress" by 2005, as set out by theKyoto Protocol.

3

A broad-based domestic emissions trading system covering about 80% of theemissions will be introduced for the Kyoto-period 2008-2012.The system willbe designed to be compatible with the international emission trading systemunder the Kyoto Protocol, and is based on the recommendations of thecommission of experts appointed to devise an emission trading system. Thegovernment will also ensure that its policy is backed up by a coherent set ofinstruments and measures with a long-term perspective as a basis foraccepting new and tougher commitments after 2012.


The funds allocated to energy efficiency measures were particularly high in1990-93 when temporary grants were provided for efficiency improvements inthe residential, commercial, industrial and service sectors. In 1990, the grantscheme amounted to a total of NKr 263.1 million1 and in 1992 to NKr 456.8million.

Based on the findings in the work prior to the 1993 Report to the Parliament,the different grant schemes were terminated. The government budgetdeclined to NKr 60 million in 1995, but increased every year thereafter. In1999, the state funds for energy efficiency measures (including a supportscheme for the introduction of new energy technology and bio energy)increased to NKr 248.5 million. The state funds were NKr 340 million2 in 2000and NKr 347.2 million in 2001. In particular, projects concerning districtheating and wind energy have been given priority over the last few years.

DecentralisedOrganisation

From 1994 to 2001 the responsibility for energy efficiency policies was dividedbetween the Norwegian Water Resources and Energy Directorate (NVE) andthe electricity companies through voluntary action. NVE largely delegated theresponsibility of executing the energy efficiency programmes to differentoperating agents. Activities are primarily focused on buildings, industry,information and education and the introduction of energy efficient technology.

RegionalEnergyEfficiencyCentres

In the mid-1990s, the electricity companies encouraged the setting up ofRegional Energy Efficiency Centres. By 1999, Regional Energy EfficiencyCentres had been established in each of the 19 counties in Norway. Utilitiescould collect a supplementary charge of up NKr 0.003 per kWh ontransmission tariffs at the lowest grid level to finance energy efficiencyactivities carried out through these centres.

Prior to the White Paper on Energy Policy submitted to the Parliament inMarch 1999, a national energy committee reported to the government that theresponsibility for energy efficiency measures in Norway was fragmented. Intheir view, these activities should be more purposefully organised. On 1January 2002 a new agency, Enova, was established to take over the work inthe area of energy efficiency.

Enova On 27 March 2001, the Storting approved the creation of Enova SF, a publicenterprise that has responsibilities concerning energy efficiency and newrenewables. Enova, located in the city of Trondheim, has been operationalsince 1 January 2002. Its aim is to secure a more cost-effective use of publicfunding, so as to achieve greater reductions in energy use and moregeneration of new renewables. Enova is an operative enterprise, but it has tomake use of several local and regional partners. This re-organisation has tobe seen in the light of the fast growing national use of energy over recentyears, electricity in particular, and the environmental context (national andinternational) that exists for new energy generation.

1 On average in 1992, NKr 1 = US$ 0.161.2 On average in 2000, NKr 1 = US$ 0.113 and in 2001.NKr 1 = US$0.111.

4

Enova will stimulate market forces and have the freedom to find the necessarymeasures to reach the energy objectives approved by the Storting in Spring2000 (see above). The money to achieve the objectives comes from a fee onthe electricity distribution tariffs and from ordinary grants over the statebudget. The Storting has indicated an amount of approximately NKr 5 billion(approximately € 680 million) over a ten-tear period. The income is directed toa separate energy trust established on 1 January 2002. Enova is in charge ofthis trust, which secures a long-term financial frame over the years to come.The activities of Enova will be evaluated after a four-year period.Measurements and verification of energy savings will be a high priority forEnova.

In the 2001 in-depth review of the energy policies of Norway, the IEA stated:

The Government of Norway should:

• In establishing the new agency for promoting energy efficiency and newrenewables,

set clear objectives for the agency, along with clear time scales forachieving its objectives; require the agency to develop a range ofmeasures for improving energy efficiency, chosen according to theircost-effectiveness, with a particular focus on electricity consumption.



BuildingCodes

New building codes came into force on 1 July 1997. The 25% reduction ofenergy use in new buildings will be accomplished mainly by more stringentinsulation requirements in walls, windows, floors and roofs. The U-values(W/m2K) for heated areas (>20ºC) are:

New code Walls Roof Floor Windows DoorsOld code 0.22 0.15 0.15 1.6 1.6

0.3 0.2 0.2 2.4 2.0

These values can only be used if the total window, glass-roof and glass-wallareas do not exceed 20% of the building’s net floor space. However, it ispossible to compensate large window areas with more insulation in the otherbuilding elements.

Standards andLabelling forHouseholdAppliances

Energy labelling for refrigerators, freezers and their combinations, washingmachines and tumble dryers has been introduced following the EuropeanUnion Directives on this matter. Standards and labelling of lamps came intoforce in January 2001.

EnergyEfficiencyNetworkfor Buildings

The Energy Efficiency Network for Buildings (EENB) was established in 1996.Through formalised co-operation, participants such as private owners ofcommercial buildings, house building co-operatives, local authorities andbuilding administrators exchanged information and experience on energyefficiency projects completed in various buildings. The networks are alsoused as a forum for developing strategies for energy administration inbuildings. Participants are obliged to submit information on their use ofenergy in buildings. This information is fed into a national statistics databaseon energy use in buildings. Yearly reports have been available since 1998.

5



• Undertake public awareness programmes to complement energy taxation.

ElectricityBilling

In 1995 a pilot project with four energy utilities participating in three regionswas completed which aimed at developing a more simplified and informativeelectricity bill for household consumers. The goal was to give customers abetter understanding of both energy efficiency and a liberalised electricitymarket. Customers participating in the pilot project receive frequent electricitybills based on actual electricity consumption. The bills included a graphical,temperature related figure which enabled the customers to compare their useof energy over time. Information regarding energy efficiency measures, thepossibility of changing suppliers and information on tariffs was included in thebill. A similar project carried out by the Nordic Council showed an energysaving potential of 5-10%.

From 1 June 1999 all utilities are required to send their customers a simplifiedelectricity bill. Electricity bills are now sent to every customer quarterly, oreven more frequently, and are based on actual consumption instead of anestimated consumption for each period. The aim of this measure is to increasecustomers' awareness of their electricity consumption.

FinancialMeasuresthrough otherInstitutions

The Norwegian Government Environmental Fund is a loan schemeadministered by the Norwegian Industrial and Regional Development Fund.The scheme was established to provide funding for projects that help toreduce emissions of greenhouse gases and other environmentally harmfulgases, and provide funding for energy efficiency investments.

“Øko-bygg” is a development programme that was started in 1998. It providesinformation, advice and grants to promote the use of eco-efficient technology,including more efficient and flexible energy use in the construction industry.The programme will end in 2002.

The Norwegian State Housing Bank offers various loan and grant schemes forresidential energy efficiency measures. From 2002 the housing bank alsooffers NKr 140 000 in extra loans and NKr 10 000 in grants to homebuilderswho invest in water heating systems based on bioenergy, solar or that useheat pumps.

INDUSTRY


IndustrialEnergyEfficiencyAnalysisModel

In 1999, the government tested a new concept to increase energy efficiency inindustry. The main focus has been efficiency in core industrial processes. Theprogramme is designed to detect the energy influence of using different rawmaterials singly or in combination. The philosophy behind the programme is toincrease energy efficiency, reduce the cost of raw materials (feedstock),increase output in production and increase competitiveness in the industry.Pilot projects have been carried out in companies that produce:

• Non-ECSC ferro-alloys and pulp.• Paper and paperboard.

These projects have shown that certain materials have a significant impact onspecific energy consumption, stability and output of the process. Average

6

energy reduction of electricity was between 5 and 10%, sometimes with littleor no capital investment. One of the pilot companies could save 50 GWh/yearand thereby save NKr 30 million annually with no investments made. Theprogramme will be continued, with the power intensive industry as the maintarget.

Industrial EnergyEfficiencyNetwork

In 1989 an Industrial Energy Efficiency Network was established. The networkcurrently has a membership of 650 companies from 13 industries. Throughtheir membership in the network, the companies are offered various forms ofassistance. There are two phases: in the first, the company has to establishan energy monitoring system. In this phase the government supports thecompany with training for key personnel and covers part of the consultantfees. In the second phase, the company undergoes an energy audit.Benchmarking is also a central network activity.

CompanySpecificIntroduction

To assist companies that manufacture and deliver energy-efficient products, agrant is available from the authorities. The programme is focused on marketactivities, with an emphasis on energy efficiency in the building industry.Dissemination of information on energy-efficient solutions that becomeavailable via various national and international networks is also important.

VoluntaryAgreements

As a component of its climate change action plan, the government hopes todevelop voluntary agreements with industry for improved energy efficiencyand emissions reductions.

To date, only one agreement has been concluded, with the aluminium industryin 1997. The industry has agreed to reduce its greenhouse gas emissions by55% by 2005, compared to its 1990 emissions. In 2000, a reduction inemissions of 52% per tonne was achieved, exceeding the target in that year of50%. Voluntary agreements with industry have proven to be difficult tonegotiate, possibly due to the discussion on quotas for domestic emissionstrading system.



• Consider the continuation of existing programmes directed at improvingenergy efficiency in the industry and domestic sectors.

TRANSPORT


PurchaseTax

The purchase tax on cars was initially fixed according to the value and weightof different models. Although no precise estimates of its effects are available,the weight component may be an incentive to purchase lighter, more energy-efficient cars. In addition, since 1996 the tax has been differentiated toreplace its value-base element with an energy performance component.



• Undertake an assessment of the effectiveness of the vehicle taxationregime to determine if it is contributing to improvement in the vehicle fleetas a whole; develop ways of improving overall fleet efficiency.

7

Taxation onFuels andRegistrationTax

The government considers cost-efficiency to be essential in regulating theenvironmental impact of transport. This also applies to energy efficiency.Economic matters, therefore, have an important role as an instrument inenvironmental policies in Norway. The duties on petrol and diesel, as well asthe registration tax on vehicles, are high. External effects at a national levelare an important basis for the setting of vehicle taxes.

ConsumerInformation

GRIP, a foundation under the Ministry of Environment, gives consumerinformation on fuel economy and emission from cars, buses and lorries. Workhas started on implementing the EU Directive (1999/94/EC) relating toavailability of consumer information on fuel economy and CO2 emissions inrespect of the marketing of new passenger cars. Norway has alsoimplemented EURO I and II, which are European Union norms on emissionsfrom vehicles. EURO III came into force 1 October 2000.


RoadPricing

Norway has many toll rings in order to finance road infrastructure. The Ministryof Transport and Communications is for the time being undertaking thenecessary steps to ensure a legal basis for the introduction of road pricing.The purpose of a road pricing system will be to internalise external costscreated by road traffic in order to reduce congestion and improve localenvironment. The Ministry also considers parking policy to be an essentialmeasure for reducing congestion and thereby environmental problems.

CO2 TAX


The CO2 taxes introduced in 1991 are at present the main instruments aimedat limiting CO2 emissions in Norway. The tax rates are high compared tosimilar tax rates that have been introduced or proposed in other countries.

The carbon dioxide tax covers approximately 64% of Norway's carbon dioxideemissions and 48% of total greenhouse gas emissions. The tax rates varyaccording to the different emission sources. In 2002 the tax rates are asfollows: The highest tax rate (NKr 315/tonne CO2) is levied on petrol; the taxrate on oil and gas production in the North Sea is respectively NKr 277 andNKr 308/tonne CO2. Reduced taxation ratios on mineral oil are applied to thepulp and paper industry, the fishmeal industry, domestic shipping of goodsand continental shelf supply fleet. The main emissions that are exempted fromthe CO2 tax are those from industrial processes. Taxation on coal and coke forenergy purposes amounts to NKr 0.49 per kg.

To encourage energy recovery and reduce methane emissions from landfills,a tax on final disposal was introduced in 1999. The tax rate is reduced whenwaste is used as a source of energy. The tax rates are: landfills NKr 320 pertonne, incinerators NKr 80 per tonne plus an additional charge of up toNKr 240 per tonne depending on the degree of energy recovery.

The Storting has recommended that the government adopt the 1996 GreenTax Commission's proposal to exempt the buildings of heat pumps, districtheating systems, micro and mini hydropower plants, wind turbines and bio-fuelplants from the 7% investment tax.

The carbon dioxide tax and other "green" taxes are treated as generalrevenue and earmarked for any specific purpose. Revenue from the carbondioxide tax was expected to reach NKr 7 000 million in 2001.

8

Statistics Norway has evaluated the effect of the carbon dioxide tax. Theevaluation suggests that a carbon dioxide tax on private transport increasingfuel price by 6% to 7% will reduce the use of fuel by 2% to 3% each year.Most of the effect is achieved by reducing the transport volume by 1.5% to1.9%. Although the analyses indicate that the tax has had an effect, thecalculations are uncertain. The long-run effects on fuel efficiency have notbeen studied.



• Evaluate the efficiency and effectiveness of existing policies andmeasures, in particular the carbon dioxide tax.


Different types of energy efficiency activities are being evaluatedconsecutively. Different evaluations carried out in 1998 and 1999 have showna need for a restructuring of work on energy efficiency and also of that on newrenewables. This need for restructuring is connected to the new quantitativeobjectives set by the government and the Parliament.

From January 2002 the new government body Enova is able to choose themost cost-effective measures to reach different government objectives.However Enova will not deal with transport issues. The Ministry of Petroleumand Energy will receive reports indicating the results Enova is achievingannually.

Furtherinformation


Anita EideSenior Advisor, Energy and Policy AnalysisEnova SFAbelsgate 5N-7030 TrondheimTel +47 73 19 04 39Fax: +47 73 19 04 31email: [email protected]

PORTUGAL Updated January 2003

BACKGROUND The Portuguese Energy Programme adopted by Parliament in July 1994 had

the following goals: improve energy efficiency, diversify energy sources(mainly the introduction of natural gas) and promote indigenous renewables.The measures to reach these objectives have been financed mainly throughthe SIURE programme (Incentive System for the Rational Use of Energy –see below). Between 1994 and 1999, total public funding was about Esc 140 billion1 (ECU704 million), of which 44% came from EU FEDER funding. Public funding forthe introduction of natural gas accounted for 69% of the total, promotion ofrenewable sources accounted for 22.6%, energy savings 7.5% and technicalassistance2 less than 1%. The Portuguese government decided to continuethe programmes, giving more emphasis to energy savings and progressivelyreducing funding for the introduction of natural gas which is done within thescope of the PLANO OPERACIONAL da ECONOMIA (POE) in the SIME andMAPE schemes that are briefly described below. The Directorate General for Energy (DGE) within the Ministry of Economy is incharge of energy issues. Its main responsibilities include:

• Proposing legislation to regulate the energy sector and supervising itsimplementation.

• Granting licences and authorisations to energy-based plants andinfrastructure and establishing their technical standards.

• Developing and implementing energy-related programmes (e.g. energyefficiency programmes).

• Encouraging the dissemination of information on energy policy and energystatistics.

• Carrying out studies on energy issues for the government.

On 15 January 2001, the Ministry of Economy published a new policyprogramme, the Energy Efficiency and Endogenous Energies Programmecalled E4 aimed at promoting energy efficiency and the use of endogenousenergy resources. The financing for the implementation of new projects, 10 609 million, is covered by the POE and the Global Incentive Programme

of the Ministry of Economy, aimed at modernising the Portuguese economy.This programme is set for the period January 2000 to December 2006. It is co-financed by the European Union to an amount of �� 290 million.

The Centro para a Conservação de Energia (CCE), a private institute ownedby Portuguese energy companies and public bodies with a staff of about 40,was restructured in 2000 giving place to the Agência Nacional para a Energia(ADENE) (Decree-Law 223/2000) that will also integrate the PortugueseCenter for Biomass (CBE). The main tasks of this new body are to preparestudies on energy efficiency and renewables and on standards for electricalappliances and to disseminate information. The Agency deals with alleconomic agents and energy consumers, acting as the instrument for betterenergy consumption management and use of endogenous energy resources.

1 On average in 2000 Portuguese escudos (Esc) 1 000 = US$4.577. and in 2001 US$ 4.466.2 The technical assistance programme aims mainly at funding administrative costs, e.g. management of the

programmes, preliminary studies, information to the administration, advertising campaigns and assessment.

IEA��

2

In the 2000 in-depth review of the energy policies of Portugal, the IEA stated:

The Government of Portugal should:

• Set up new programmes for energy efficiency in the different sectors,taking into account the results of the assessments of the previousprogrammes to focus on the most cost-effective measures. Ensure thatthese programmes are effectively funded.

��

Portugal ratified the UN Framework Convention on Climate Change on21 December 1993 and submitted its first national report to the UN FCCCentitled Portuguese report in accordance with Article 12th of the UnitedNations Framework Convention on Climate Change on 25 January 1995. Portugal’s second national communication entitled Segundo relatório dePortugal was released in November 1997. In this second report to the FCCC,CO2 emissions were forecast to increase 69% between 1990 and 2010,reaching 74.9 Mt in 2010. Energy-related CO2 emissions would increase 68%to 62.5 Mt.

Portugal undertook a study to improve the estimates of GHG emissions. Thereport was published in mid-2000.

At COP-3 (Kyoto, December 1997) the European Union accepted the target ofan 8% reduction in greenhouse gas emissions by 2008-2012. In theEuropean Environment Council of 17 June 1998, which adopted the EUBurden Sharing Agreement3, Portugal was allowed to increase its emissionsby 27% for the 2008-2012 period over the 1990 levels. On 26 December 2001, Portugal decided to ratify the Kyoto Protocol; thisratification should be official only when all the European Union Member Statesdecide to send their instruments of ratification to the Secretary of the UnitedNations, taking account of the EU Burden Sharing Agreement. The government is preparing a National Plan for Climate Change (PNAC). Aworking version of the plan was published in March 2002 and the governmentexpects it to have been finalised during 2002. The working version quantifiesthe emissions reduction required to achieve the Kyoto target under the mostprobable socio-economic development and aims at opening public discussionon the measures and their implementation. It also defines some immediatemeasures and their potential for reducing emissions and their cost. One of theconclusions presented in this version is that Portugal will rely heavily ondomestic measures to meet the emissions reduction target. The Plan iscurrently under public consultation and it has been criticised for not providinga detailed analysis of the emissions reduction potential, and the cost, of manyprospective measures. The government plans to introduce sectoral emissionsreduction targets, new measures and monitoring programmes in the finalversion of the Plan. To reduce GHG emissions, Portugal has been relying on energy efficiencyregulations in the industrial and household sectors, voluntary agreements withsome industrial sectors, development of public transport and tax credits onphoto-voltaic equipment.


3



• Release, as soon as practicable, its report evaluating GHG emissiontrends so that a comprehensive assessment can be made of how muchPortugal must reduce its emissions to meet its climate changecommitments under the Kyoto Protocol..

• Revive its efforts to develop and implement a comprehensive climatechange mitigation plan in order to start getting current GHG levels on trackto meeting Kyoto commitments.



��

Regulations on the Characteristics of the Thermal Behaviour of Buildings(RCCTE) were published in Decree-Law number 40/90 of 6 February 1990and came into force on 1 January 1991. These regulations are not strict interms of energy conservation, both because Portugal’s climate gives littlescope for energy savings that are economic in this sector and because thefocus is still on improving comfort in new buildings, with energy efficiency asecondary rather than primary objective.

This regulation was the first step to improve thermal comfort in buildings,quantifying the needs of the building in terms of energy and consumption andtaking into account the rational use energy. A revision of this regulation is inpreparation to strengthen the energy parameters.



• Ensure that building codes are periodically revised to take into accounttechnical improvements. Ensure that these codes are effectivelyimplemented and that their implementation is effectively monitored at locallevel.

�� The Regulation on the Energy Systems for Air Conditioning of Buildings(RSECE) was published in Decree-Law No. 118/98 of 1998. This regulationestablishes the rules to be complied with in calculating the size of energysystems for air conditioning to achieve higher energy efficiency ratios.

��

Efficiency labelling has been in force since 1994, by the Decree-Law No.41/94 of 11 February 1994. This Framework Decree-Law encouragesproducers to manufacture and consumers to purchase more energy-efficientappliances.

Order Nos. 1139/94 of 22 December 1994, 116/96 of 13 April 1996, 279/97 of28 April 1997 and 117/96 of 15 April 1996 applied to refrigerators, washingmachines, dryers and washer-dryers, respectively. Manufacturers support thecosts of the test procedures and labelling systems.

The EU Directive on energy efficiency standards for refrigerators and freezerswas adopted in 1994.

4

A “Minimum Efficiency for Heating Boilers” has been in force since 1996 andsets minimum efficiency requirements for hot water boilers.



• Ensure maximum compliance with EU directives on labelling. Ensure thatthe Regulation on the Energy Systems for Air Conditioning of Buildings isperiodically revised to adapt to new technologies. Contribute to theelaboration of EU regulations on labelling and efficiency standards forcooling appliances.

��

The 1963 Decree-Law No. 45115 requires all steam boiler plants with a totalheating surface greater than 100 m

2 to have periodic energy efficiency tests to

adjust air and fuel to give optimum combustion performance and to haveenergy-efficient boiler plants. The Decree-Law was revised in 1990 to improvethe measurement of stack gases of the boiler plants according to theparameters of temperature, pressure, humidity, flow as well as theircomposition (CO, CO2, O2, N2) and the control of the pollution parameters. Atthis stage of implementation, the results of these tests are not available.

�� In 1998 DGE promoted several energy efficiency activities; the Centro para aConservao de Energia was in charge of some rational use of energy projects,for example: Energy Auditing in the Hotel Sector, Energy Auditing in Textiles,Ceramics, Dairies and Wood and Cork Sector and two training courses on therational use of energy in industry.

Based on these audits, new values for the target specific consumption forceramics and textiles were published. Work is going on to reach new valuesfor the glass sector.

��

��

Portugal is preparing specific legislation for a voluntary classification of newbuildings according to their energy performance. A study began in 1999 todefine the type of certification to be attributed to buildings and to establishstandards for tests and methodologies to assess energy efficiency inbuildings.

PUBLIC SECTOR In designing energy efficiency policies in 1994, the government decided to putgreater emphasis on municipalities. Through the Directorate General forEnergy, it designed an Action Plan (Plano de Acção nos Municipios (PAM)) tofoster the creation of local energy entities and the implementation of energypolicy measures at the local level, using financial support available under theEnergy Programme. This action is going on under the new incentive programme. Projects aimed atreducing reduce the consumption by public lighting and water supply systemsare being developed.

INDUSTRY


�� Management Regulations for Energy Consumption (RGCE) were establishedunder Decree-Law No. 58/82 of 26 February 1982 and regulated under the

5

Ministerial Order No. 359/82 of 7 April 1982. The primary objective of theseregulations is to instil in energy-intensive companies the concept of energy asa cost factor. The regulations establish goals for companies to reduceprogressively their specific energy consumption. In addition, the regulationsrequire companies to audit their energy use twice a decade, to prepare andcarry out annual plans for rationalising their energy consumption and toachieve the energy savings. All energy consuming facilities meeting one ormore of the following conditions are covered:

• Energy consumption of more than 1 000 toe in the last 12 months.• Equipment with total nominal power rating of more than 0.3 toe per hour.• Any one item of equipment with nominal energy consumption of more than

0.3 toe per hour.

The regulation obliges companies to control the results of the energy savingsmeasures and assures the successful execution of the rationalisation plans.The objective was to reduce the specific consumption of energy by at least 5%over the five-year period.

By the end of 2000, 549 installations (whose annual consumption representedabout 4 million tep) had performed energy audits and drawn up plans forenergy efficiency which were then submitted to DGE. The consumption ofthese installations represents more than 50% of the total energy consumptionin the industrial sector.

The main industrial sub-sectors covered by the RGCE regulation are Foodand Drinks, Textiles, Wood and Cork, Pulp and Paper, Chemistry andCement, Ceramics and Glass.

The rational use of energy measures carried out were mainly energymanagement systems, co-generation projects, thermal insulation, heatrecovery systems and installation of more efficient equipment.

Information for small and medium-sized enterprises is mainly provided throughseminars, conferences and a Web site.

The Directorate General for Energy has been monitoring the implementationof RGCE in industrial installations where energy consumption is higher than1 000 toe per year; the monitoring in done on the basis of a five-year plan.

As the transport sector experienced strong growth in energy consumption, itwas decided in 1988 that RGCE should be extended to transport. Althoughthe response of the sector to this type of measure has been reported as veryweak.



• Carefully assess the results of the energy audits in industry to improve theeffectiveness of energy efficiency measures in this sector.

• Increase information to energy consumers on energy efficiency measures.Focus on measures to improve energy efficiency in small industries, suchas providing information and expertise.

�� SIURE (Incentive System for the Rational Use of Energy) was the nationalassistance system for energy projects. Its basic objective was to encourageenergy efficiency and promote the development of new sources or forms ofenergy in all economic sectors (except the domestic sector), by providinggrants to companies carrying out related projects.

6

Decree-Law No. 188/88 of 27 May 1988 updated by Decree-Law No. 35/95established the incentive system. SIURE provided grants for energy auditing in the tertiary and transportationsectors, energy research and feasibility studies, investments in energyefficiency, co-generation projects, diversification of primary energy sourcesand energy demonstration projects. SIURE helped to reduce high energydependence on oil products and improve energy efficiency. It made possible

245 ktoe energy savings per Esc 54x106 investment over the period 1994/98.For this period the amount of incentives awarded to the projects was around

Esc 10x106 and includes grants and loans at zero interest rate.

The grants and loans for the energy efficiency projects in the industrial andtertiary sectors represented about 82% of the total, with an energy savingspotential of 227 ktoe per year, for about Esc 49 million of investment.

The energy diversification projects and energy efficiency in transportrepresented about Esc 5.2 million, with 18.3 ktoe of energy savings andEsc 1.8 million granted. The financial support comes from the EuropeanUnion and the Portuguese State Budget.

SIURE was evaluated every year by the Energy Programme Manager. Thesystem ended in 2000 and has been replaced by MAPE.

!�"�!�� PEDIP II (Strategic Programme for the Development of Portuguese Industry)ran from 1994 to the end of 1999 and succeeded the previous PEDIP (1988 to1992). The latter was initiated in the context of Portugal’s accession to theEuropean Union and received EU funding to modernise Portugal’s industryand improve its environmental performance.

PEDIP was complemented by activities addressed to the targeted sectors:

• Energy audits and studies on more efficient use of energy and advertisingcampaigns.

• Measures to demonstrate the technical viability of the implementation ofthe monitoring and targeting system of PEDIP.

• Energy managers training to improve the skills in energy management ofhuman resources.

The PEDIP II programme ended in 2000 and has been replaced by SIME.

��#"�!�"�! SINDEPEDIP support schemes consisted of grants or interest-free loans inamounts and percentages depending on the type of operation and the volumeof investments. These schemes were:

• Support to studies and audits to help the management strategy ofindustrial companies in the implementation of actions particularly in theareas of environmental protection and energy management.

• Support to integrated investment projects in the various functionalcompany areas which may include environmental investments,encouraging the use of cleaner production technologies as well asinvestments in the area of energy rationalisation.

• Support for the promotion of dynamic competitiveness factors on the basisof investment projects including actions for the protection of theenvironment and improved working conditions, by providing help for thepurchase of equipment and the implementation of suitable technologies.

• Support for business demonstration activities through involvement inareas having an effect on the competitiveness of companies, such as therational use of energy and protection of the environment.

7

To be eligible for SINDEPEDIP loans and grants, enterprises needed tocomply with Decree Law 58/824. Enterprises that received the funds had toreport every six months on progress made, particularly on the evolution ofspecific energy consumption.

SINDEPEDIP ended in 2000 and has been replaced by SIME.

��!� MAPE, which is the successor to SIURE, is the national assistance system forenergy projects. Its basic objective is to encourage energy efficiency andpromote the development of new sources or forms of energy in all economicsectors (except the domestic sector), by providing grants to companiescarrying out related projects. MAPE provides grants for investments in energy efficiency, co-generationprojects, diversification of primary energy sources including the conversion tonatural gas and renewable energy. MAPE helps to reduce high energydependence on oil products and improve energy efficiency. The supportincludes grants and loans at zero interest rate.

�� SIME support schemes, which replace PEDIP II and SINDEPEDIP, consist ofgrants or interest-free loans in amounts and percentages depending on thetypes of operation and the volume of investments.

The operations that can be funded are integrated operations aiming toimprove the competitivity of the companies. Those operations can includeinvestments in support to integrated investment projects in the variousfunctional company areas, which may include environmental investments,encouraging the use of cleaner production technologies as well asinvestments in the area of energy rationalisation.

�� $�� !�%��

Decree Law 189/88 of 1988 has provided for must-take obligations by the gridcompany REN (Rede Electrica Nacional) and favourable buy back tariffs setaccording to the price paid by end-use customers. Decree 186/95 of 1995 setminimum efficiency values and the minimum heat utilisation necessary for co-generators to qualify. The buy-back tariff for co-generators is as follows:

• The buy-back tariff for co-generators below 10 MW is calculated accordingto the price paid by end-use customers in the medium and high voltagetariff range. A minimum of 55% efficiency is required to qualify.

• For co-generators above 10 MW, the buy-back tariff is based on avoidedcosts calculated as the cost of building a new CCGT plant. Paymentsincrease when the heat rate value and the availability of the plantincrease.

• Co-generators pay for connection to the grid.• Decree 538 of 1999 allows sales to affiliate companies as well as to

companies buying heat. This regulation will be valid for ten years.

As a result of these measures and in particular of the buy-back tariff, co-generation capacity increased from about 600 MWe in 1990 to about900 MWe in 1998. Generation amounted to about 5 TWh in 1998, including3.1 TWh in auto-consumption.

The standards defining the conditions for the exploitation of the co-generationplants and respective tariffs have recently been revised.

4 Some other PEDIP programmes had environmental aspects. In these cases compliance with these regulationswas also required.

8

TRANSPORT


RGCT The RGCT is being implemented in the public and private transportenterprises where energy consumption is higher than 500 toe per year. TheRGCT requires these companies to carry out energy auditing and to publish aplan for the rationalisation of their energy use every three years. TheDirectorate General for Energy (DGE) monitors the audit results and theplans when the companies apply for financial support.

&��

Control of vehicle energy efficiency using new technologies and mandatoryperiodic inspections aimed at reducing the environmental impact of thetransport sector have been implemented.

�� %�� The government announced in 1998 a three-year investment plan costingEsc 600 million aimed at the electrification of all international railway lines andthe development of a new high-speed link between Lisbon and Porto. The Directorate for Energy monitors the auditing and this triennialrationalisation plan.

!�� '�� The use of natural gas in vehicles began in the public transport systems ofBraga and Porto in 2000 and in Lisbon in 2001. The extra cost involved inpurchasing buses that use natural gas is partially financed through the OPEProgramme.



• Continue to increase investment in railways and to develop modern publictransport in the major towns.

�� '��

In the Lisbon metropolitan area, which accounts for roughly 20% of thePortuguese population, there has been a surge in public investment in masstransport. The underground system doubled its length in 1999, with improvedlinks to the railway and bus network. In Porto, a metropolitan railway systemis scheduled to start operating by 2001.

��

Until 1998, SIURE funds allocated for energy diversification and energysavings in transport amounted to Esc 5.2 million. Funds were mostly grantedfor information systems to improve the mobility of captive fleets. The use of automation, the creation of lanes and corridors for public transport,reversible direction zones, etc., aim to facilitate traffic flows particularly inurban areas.


When funds are granted by the Directorate General for Energy (DGE), energyefficiency programmes are evaluated during the programme and afterwardsby DGE and the National Institute for Engineering and Industrial Technology(INETI) on the basis of energy and CO2 emissions saved.

9

For information For further information, please contact: Mr. José Antonio Penaforte CostaDireccao-Geral de EnergiaDirection of Services for Rational Utilisation of EnergyAv. 5 de Outubro, 87, P – 1000 Lisboatel. +351 (21) 792 2700fax +351 (21) 793 95 40email [email protected]

1

SPAIN Updated July 2003

BACKGROUND

According to Royal Decree 557/2000, 28 April 2000, energy policy is the responsibility of the Ministry for the Economy, and implemented through the office of the Secretary of State for the Economy, Energy and Small Businesses, which, based on RD 689/2000, 12 May 2000, in turn acts through the Directorate General for Energy Policy and Mines. From 26 July 2002 and by Royal Decree 777/2002, the Institute for Diversification and Saving of Energy (Instituto para la Diversificación y Ahorro de la Energía, IDAE) reports to the Ministry for the Economy through the State Secretary of Energy, Industry Development and of Small and Medium Enterprises. IDAE and the Directorate General for Energy Policy and Mines work in co-ordination on the implementation of policies and actions to promote the rational use of energy and diversification of energy sources. As a national agency, IDAE seeks to strengthen links with the other agencies with competencies in industry and energy in order to integrate and co-ordinate actions at regional and local level. In Spain there are currently 20 regional and local agencies whose aim is to promote actions in the fields of energy efficiency and diversification of sources.


After the Kyoto commitment of December 1997, the European Union Council of Ministers agreed on 17 June 1998 on the Burden-Sharing Agreement1 towards achieving the 8% European Union commitment to reduce emissions. In this context, Spain is obliged to ensure that its CHG emissions do not exceed the 1990 level (306 Mt of CO2 equivalent) by more than 15% for the 2008-2012 period.

National Climate Council

Royal Decree 177/1998 of 16 February 1998 founded the National Climate Council (CNC) an associated body of the Government Department, belonging to the Ministry of the Environment. It would establish a set of national plans and programmes to adopt the necessary measures at a sector level to confront climate change and at the same time fulfil the international commitments signed by the government, basically the Kyoto Protocol and the United Nations Framework Convention on Climate Change. The different functions of the National Climate Council include: • The elaboration and presentation for approval by Parliament of the Kyoto

Protocol National Strategy and subsequent modifications. • Follow-up of plans and programmes included in the Strategy. • Technical and scientific advice for Spanish delegations in inter-

government organisms. • Co-ordination of the writing of national reports on climate change. • Proposal of necessary measures to the government to fulfil undertakings

made in international agreements and protocols.

Spanish Climate Change Prevention Office

Royal Decree 376/2001 of April 2001 established the Spanish Climate Change Prevention Office (Oficina Española del Cambio Climático, CCPO). It will be under the Ministry of the Environment, the General Directorate for Environment Quality and Assessment. The composition and structure of the new organisation were defined by Ministerial Order of July 2001. The tasks of CCPO are, inter alia, to act as secretariat for the National Climate



2

Council, to follow-up of UNCC and promote Spanish policies and measures to accomplish the commitment under the UNCCC and the Kyoto Protocol; and to collaborate with the autonomous regions in giving advice. The central government formulates the policies for mitigating climate change. However, the regional governments (see below) are allowed to adapt policies to their specific geographic area as long as they do not distort the intent of the national policies. The regional governments also play an important role in the implementation of policies in their region, such as licensing installations for producing energy from renewables and CHP, and promoting energy efficiency and transport planning. In the 2000/2001 in-depth review of the energy policies of Spain, the IEA stated: The Government of Spain should: • Encourage autonomous regions to formulate their policies towards CO2

emission reduction at local and regional levels in line with the national policies.

Spain's GHG emissions have grown with its economy. According to IEA statistics, Spain's energy related CO2 emissions have grown by 28.6% from 1990 to 1999. Meeting the Kyoto target requires the total GHG emissions to be reduced by 17 Mt from the 1998 level. The National Climate Council is currently preparing the Kyoto Protocol National Strategy. However, no clear timeframe for completion of the plan has been set. The question of target-setting, by sector, by region or a possible combination, is still under consideration. However, the reports Policies and measures for the Fight Against Climate Change: A first Advance and the Plan for the Promotion of Renewable Energy in Spain have been developed.

Plan for the Promotion of Renewable Energy

The Plan for the Promotion of Renewable Energy in Spain (Plan de Fomento de las Energías Renovables en Espana, PFER), which was prepared by IDAE (see below) on the basis of Law 54/1997 on the Electricity Sector (Ley 54/1997, del Sector Eléctrico) sets a target of 12% of Spain’s energy demand being met from renewable sources by 2010, in line with the EU target defined in the European Community's White Paper for Renewable Energy Sources, The Plan was approved by the Council of Ministers on 28 December 1999. In terms of primary energy, the Plan sets an output target of an additional 9 525 ktoe over its lifetime, of which 1 709 are to be from the utilisation of renewable sources of energy for thermal uses. The estimated CO2 emissions avoided by the Plan due to this increase in renewable sources is between 8.6% and 18.3% -- compared with CCNG or coal for electricity generation -- of the total CO2 emissions in 1990.

Energy Efficiency Strategy 2003-2012

The Delegated Commission of the Spanish Government for Economical Affairs has approved the elaboration of the Energy Efficiency Strategy 2003-2012, whose basic objective will be to improve the energy intensity ratio. To carry out the Energy Efficiency Strategy, six inter-ministerial working groups were created, corresponding to the areas of energy transformation, transport, building, tertiary and residential, industry and public services. In addition to these sectoral groups, another group on institutional co-ordination was created that will describe the horizontal objectives, the relations with the autonomous communities (Spanish regions) and the local institutions, as well as the development of the objectives with institutional character. IDAE guarantees the co-ordination of all these groups.

3

In the State of the Nation Debate in July 2002 a Resolution specifying the opportunity of elaborating a proposal about the same subject, with a temporary horizon of a decade, was approved. The appropriate answer to these requests recognises the necessity of having an effective strategy of action programmes with the objective of promoting efficiency and saving energy; it must include in its elaboration and performance the different administrations (central, regional and local) and the sector actors. A programme on monitoring and control will be designed to analyse the weaknesses of the programmes and correct them accordingly. In the 2000/2001 in-depth review of the energy policies of Spain, the IEA stated: The Government of Spain should: • Speed up the development of the national Kyoto implementation plan; the

plan should identify priority measures based on their potential contribution towards meeting the target in cost-effective ways

• Monitor emission reduction policies closely. • Encourage autonomous regions to formulate their policies for CO2

emissions reductions in line with national policies.


The Spanish State comprises 17 autonomous regions, each with a local parliament. The State has general jurisdiction over energy, while the regions have jurisdiction over issues exclusively within their territories. The task of promoting energy efficiency and the rational use of energy in Spain, together with the diversification of energy sources and promotion of renewable energy, is the responsibility of IDAE, in compliance with the functions enumerated in its articles of association (RD 802/86; RD 252/97 and RD 2100/98). In accordance with RD 696/2000, 12 May 2000, IDAE reports to the Ministry for Science and Technology through the office of the Secretary of State for Scientific and Technological Policy. Three bodies are in charge of four different public financing sources for the energy saving programmes: • The central government gives direct subsidies for innovative and

demonstration projects through the energy branch of the Profit Programme.

• Most of the autonomous regions also provide direct subsidies for projects through specific programmes.

• IDAE provides loans for projects and recovers its funding. IDAE is also in charge of managing the European Commission’s programmes in Spain such as SAVE (for energy efficiency) and ENERGY–FP (to promote innovative energy technologies).

In the 2000/2001 in-depth review of the energy policies of Spain, the IEA stated: The Government of Spain should: • Enhance co-ordination of energy-related policies among different

ministries and regional authorities in order to improve the coherence of energy policies. Consistency should be sought in the measures taken by the autonomous regions.

4

IDAE IDAE is a state agency appointed by and reporting to the Ministry of Science and Technology. It carries out the functions entrusted to it through diffusion actions, technical advice, and the implementation of innovative projects: • It puts forward planning proposals and presents studies which serve as

the basis for policies promoting energy efficiency and renewable energy. • It manages and monitors subsidies and incentives for energy

conservation, saving, diversification and development, such as encouraging the use of renewable energy, with funds both from the general state budgets and European Community sources (global ERDF-IDAE subsidy, cohesion funds, etc.). IDAE also supports the autonomous regions in the management of territorial subsidies.

• In order to co-ordinate IDAE policies, the government and the regions have set common objectives; to this end, IDAE has created the Consultative Committee for Efficiency and Energy Saving.

• IDAE advises enterprises, informs consumers and organises professional training and conferences.

• It provides financial and technical assistance for the installation of efficient energy equipment and recovers its expenditure through a commission collected on the energy savings realised (third-party financing). IDAE also provides capital as a shareholder in companies and enters into collaboration agreements to promote the development of new technologies.

In the 2000/2001 in-depth review of the energy policies of Spain, the IEA stated: The Government of Spain should: • Establish a new, coherent and comprehensive energy efficiency

programme to help slow growth in energy demand in all sectors; ensure that the measures are cost-effective and consistent with their objectives, and that the programme sets priorities, on both the supply and demand sides.



Thermal Insulation of Buildings

Today's standards for energy savings in buildings were established by Royal Decree 2429 of 1979, which sets mandatory minimum requirements (NBE-CT-79) for thermal insulation. New more strict mandatory standards, in compliance with the “SAVE Directive” will be introduced in 2002. The autonomous regions will be responsible for the enforcement of these standards. They will be based on an evaluation of the building project at the planning phase and on random check-ups of new buildings. Currently, IDAE is working on the development of instruments permitting Spain’s adaptation to the so-called "Save Directive" of the EU (93/76/EEC) regarding the Certification and Labelling of Buildings. Once the details of the certificate are set by IDAE and a new law to make the certificate mandatory is passed, the Directive will be enforced by the autonomous regions. The certificate will be issued for the use of passive solar energy, the correct use of thermal insulation materials, the use of low consumption electric lamps, the evaluation of CO2 emissions and the assessment of building materials according to regions. IDAE has developed two computer tools to support the energy certification process, namely Energy Rating of Homes (Calificación

5

Energética de Viviendas, CEV) and Energy Rating of Buildings (Calificación Energética de Edificios, CALENER). In the 2000/2001 review of the energy policies of Spain, the IEA stated: The Government of Spain should: • Regularly verify compliance with building codes, in both new and

retrofitted buildings.

Energy Efficiency Labelling

The transfer to Spanish legislation of the different European Union Directives referring to energy efficiency labelling began with Royal Decree 124/1994 of 28 January 1994, transferring European Union Directive 92/75/EC of 22 September 1992 (and the latter amendments) on energy efficiency labelling on domestic electrical appliances. Subsequently, a series of European Union Directives for specific domestic electrical appliances has been transferred, in particular: • Royal Decree 1326/1995 of 28 July, transferred from European Union

Directive 94/2/EC on the energy labelling of refrigerators and freezers. • Royal Decree 607/1996 of 12 April, transferred from European Union

Directive 95/12/EC on the energy labelling of washing machines. • Royal Decree 574/1996 of 28 March, transferred from European Union

Directive 96/60/EC on the energy labelling of tumble dryers. • Royal Decree 864/1998 of 8 May transferred from European Union

Directive 97/17/EC on the energy labelling of dishwashers. • Royal Decree 700/1998 of 24 April, transferred from European Union

Directive 93/32/EC on the energy labelling of washing machine/tumble dryers.

• Royal Decree 284/1999 of 22 February, transferred from European Union Directive 98/11/EC on the energy labelling of domestic lamps.

Public Housing

Under the Plan for Public Housing (Plan Vivienda de Protección Oficial 1998-2001) potential beneficiaries of “qualified” finance include pilot schemes to promote sustainable housing (i.e. housing compatible with both economic requirements and the need to preserve the environment) by applying building techniques that reduce the use of materials (primarily those whose use or manufacture causes pollution), give greater energy savings, and reduce water usage, including the design of homes that are suited to the bio-climatic conditions of the area in which they are located. Qualified financing is also available for refurbishment work meeting certain minimum requirements regarding installations for water, electricity and, where applicable, gas, HVAC, natural illumination and ventilation, thermal insulation, soundproofing, bathroom and kitchen installations and other general facilities. Additionally, the execution of work to enable energy savings to be realised in the home is also eligible for finance under the Plan for Public Housing.

Other Measures

Based on Royal Decree 1751/1998 of 31 July 1998 referring to the Regulation of Thermal Installations in Buildings (RITE), the guidelines of the SAVE Directive referring to the Valuing of Energy Consumption for Heating, Air Conditioning and Hot Water and of Periodic Boiler Inspections, have been incorporated into Spanish legislation. The approval in September 2000 of RD 1663/2000 -- implementing the Law on the Electricity Sector -- enabled the development of solar photovoltaic energy in the residential sector. This Royal Decree laid down the administrative and technical conditions for connecting solar-photovoltaic

6

installations with a nominal power of less than 100 kVA to the low-tension grid. The regulations applicable to the procedure whereby owners of installations apply for the connection point, and the technical conditions for connection, avoid possible discrimination by electricity distribution companies against access by small producers of electricity from renewable sources.


Travel throughout the Energies

Under the name of “Travel throughout the Energies” this educational exhibition with a wide-ranging interactive content, graphic support, stage setting, as well as a virtual host who answers to all the questions put by visitors in real time, has been presented by the Institute for the Diversification and Saving of Energy (IDAE). The objective of this exhibition is to present the multiple aspects relating to energy as the main element of development in the world and as an essential element in our daily life, analysing its uses and consequences, reflecting on its value and the necessity of adopting responsible consumption habits. In short, the idea to be conveyed is that every citizen can contribute to the rational use of energy and with lesser effect on the environment. This show started in October 2002 in Santander and will be presented in 13 Spanish regions. In Salamanca the inauguration of the exhibition was celebrated at the same time as the 2002 Award Ceremony of the European Commission’s Renewable Campaign in December 2002. In Madrid it was inaugurated on 5 February 2003.

PUBLIC SECTOR

Measures already Existing and/or being improved


The main agreements signed by IDAE during 2001 and up to February 2002 are as follows: • Framework co-operation agreement with RENFE (Spanish Railways), to

implement energy optimisation measures and also to use renewable sources of energy in buildings, installations and on land belonging to RENFE.

• Framework co-operation agreement with the Ministry of Education and Sports for technical assistance in the call for tender for the supply of electricity to various units of the Ministry considered as qualified consumers.

• Framework co-operation agreement with the Aerospace Technology Institute (Instituto de Técnica Aeroespacial) for the joint publication and distribution of a publication on solar-thermal collectors in Spain (Guía de Colectores Solares Térmicos en España) and to promote low-temperature solar-thermal energy.

• Co-operation agreement with the Ministry of the Presidency for the use of an electric vehicle, charging station and photovoltaic installation located on the roof of a car park, generating electricity with which to recharge the vehicle’s batteries.

• Framework co-operation agreement with Barcelona Council for the implementation of the Programa Barcelona 2004 and the implementation of the Barcelona Council Municipal Energy Plan.

• Framework co-operation agreement with Palma de Mallorca Council for

7

the joint development of a Municipal Energy Action Plan. • Framework co-operation agreement with Majadahonda (Madrid) Council

for the development of a Municipal Energy Action Plan. • Framework co-operation agreement with the Spanish Federation of

Municipalities and Provinces (Federación Española de Municipios y Provincias, FEMP) for the promotion and dissemination of energy-efficient technologies and renewable energy sources (RES) among Spanish municipalities.

• Specific agreement with Saragossa (Zaragoza) Council and Saragossa University for conducting feasibility studies regarding the application of renewable energy sources (RES) and energy saving criteria in the Valdespartera housing development.

• Co-operation agreement for the promotion of energy efficiency and renewable sources of energy (RES) in Soto del Real.

• Territorial agreement with the Solar Energy Studies Centre (Centro de Estudios de la Energía Solar, CENSOLAR) for the publication, distribution and publicising of the IDAE’s technical specifications for solar thermal systems and both stand-alone and grid-connected photovoltaic systems.

INDUSTRY



From 1994 to date, IDAE has signed voluntary agreements to improve energy efficiency in nine industrial sectors, which form part of ten industrial associations. These represent 56% of the total consumption in Spain's industrial sector. Sectors that have signed voluntary agreements are pulp and paper, structural ceramics, hollow glass, tanning, cement, food, chemicals, automobile accessories and textiles. The duration of these agreements varies from one to several years, depending on the sector concerned. These voluntary agreements result in activities and projects aimed at energy saving, installation of cogeneration systems and replacement of other fuels for natural gas and biomass. In energy terms, actions undertaken to date following such agreements represent a total energy saving of 641 ktep (equivalent to 4.5% of industrial consumption), replacement by natural gas of 341 ktep, installed power in cogeneration systems of 285 MW and biomass replacement of 38 ktep.


Since 1998, dissemination of information and technical assistance to facilitate access to the different support programmes in the industrial sector have been supported by a new IDAE-FEDER Programme For Small and Medium-Sized Businesses. It is a strategic move to promote the realisation of energy saving and renewable energy projects in small and medium-sized businesses through management and financing of turnkey projects in Objective 1 zones. Total resources for the programme up to 2001 were € 67.9 millions. To complement this programme, IDAE organises courses and seminars for specific sectors. In the past two years, these have included the following courses: • Day congress on cogeneration with gas. • Technological meeting on liquid ice. • Energy efficiency seminar in the beer and malt sector. • Technological meeting on heat pumps. • Day congress on the use of industrial waste as alternative fuel in the

8

cement industry. • Energy efficiency day congress for the agro-food industry. During the implementation of the IDAE-ERDF programme a total of 121 applications for potential projects were received and processed, leading to the definitive implementation of 50 installations, with a total value of € 37.7 million. IDAE provided 49.2% of the finance for these projects and 50.8% was provided by the European Union’s ERDF funds, in accordance with the co-financing conditions laid down in the ERDF-IDAE global subsidy. In terms of the energy technologies involved in the facilities installed, the investments were distributed as follows: • Final energy saving and substitution by natural gas: 39%. • CHP: 25%. • Mini-hydropower: 1.5%. • Wind power: 24.2%. • Biomass: 7.4%. • Solar power: 2.9%.


To support energy conservation in industry, and in addition to the IDAE-FEDER Programme, IDAE operates mainly as a third-party financier providing finance and technical assistance for the installation of energy efficient equipment and recovering its expenditure over three to seven years through the energy savings realised. The financing activity of IDAE during the year 2001 was associated with the development of 33 different projects, representing a total investment of € 25.4 million, with the following share among the main technology areas: • Final energy saving and substitution by natural gas: 20%. • Cogeneration: 6%. • Renewable: 74%.

Cogeneration Although the total installed cogeneration capacity was only 369 MWe at the end of 1990, it was 5 520 MWe at the end of 2001 generating about 11% of electricity. About 4 540 MW of new capacity was installed in 1991-2000, which is two to three times the initial target. Co-generation capacity financed through IDAE's third-party financing was 300 MWe, or 6.7% of the total installed in 1991-2000. In addition, support from IDAE, the so-called “special system”, has provided premiums to co-generators. However, high natural gas prices in 2000 and 2001 discouraged installation of new co-generation plants. According to the Plan for the Promotion of Renewable Energy in Spain mentioned above, co-generation has a potential to reach 17% of the electricity demand in 2011: that means a total installed capacity of 7 100 MW in 2011. Almost all co-generation facilities are run by auto-producers, typically industries. Therefore, the size of the installations is generally small; 16% of the plants have capacity under 1 MWe, 53% 1-5 MWe and 17% 5-10 MWe. The typical industries to invest in CHP production are ceramics and tiles, food processing, textile, chemical and pulp and paper industries. No large-scale public co-generation plants have been built yet. The co-generation plants are eligible for premiums if they qualify under the special generation system. Conditions are put on the electric efficiency but not on the fuel efficiency of the CHP plants. The requirements on electric efficiency depend on the size of the installation, the ratio of own energy consumption to the electricity output to the network, fuel and technology used. The premium also depends on the installed capacity. In 2001, the premium paid to small co-generators (<10 MWe) was 24 euro cents per MWh for a maximum of 70% of their total annual production. To larger co-generators

9

(between 10 and 25 MWe) it was on average 18 euro cents per MWh for maximum of 50% of their total annual production. The premium system will be revised in 2002. The co-generators have two possibilities to sell the surplus electricity, either through the pool or in direct contracts with the retailing or distribution companies. IDAE has closely monitored the progress of the CHP market and identified some constraints to the competitiveness of co-generation. First, it considers the fuel prices for co-generators, essentially the price on natural gas, to be too high compared to the price of fuels used in conventional power plants. Second, the efficiency requirements for co-generation should be stricter than they are today. Third, the buy-back tariff should take into account the environmental externalities and transmission network costs that are avoided in co-generation: electricity generated by co-generators is usually consumed close to the production site and so does not burden the transmission system. In the 2000/2001 in-depth review of the energy policies of Spain, the IEA stated: The Government of Spain should: • Review subsidies for co-generation with a view to phasing them out fully.

TRANSPORT


Replacement of old cars

For some years the government has maintained its PREVER Programme (formerly RENOVE) through the Ministry of Science and Technology. The programme's aim is to encourage the replacement of old cars to achieve environmental improvements and better road safety. In accordance with Royal Decree Law 6/97 of 9 April 1997, the programme applies to automobiles over ten years of age and light industrial vehicles over seven years. It reduces the car registration tax by up to € 721 when scrapping of the old vehicle (priority is given to leaded gasoline vehicles) is guaranteed.

Public Transport

Some examples of urban traffic management measures have been included in the traffic movement city plans of Granada, Vitoria, San Sebastian, Oviedo and Barcelona. Madrid, Salamanca and Bilbao, for example, already have buses fuelled by natural gas in their city transport fleets. In other cities such as Valladolid and Bilbao, similar plans are being studied. In 2001 IDAE promoted the following projects in this sector: • La Ciudad, sin mi coche (The City, without my car): the organisers of this

event in Spain were IDAE and the Ministry of the Environment. The most significant results, extrapolating from those of the 16 cities that took part, were an 18% reduction in traffic; an 18.7% increase in passengers using public transport; and a 4..3 million litres reduction in fuel consumption.

• Mejor sin coche (Better without a car): rational use of private cars and improvement in urban mobility in the city of Gijón (Asturias). Awareness raising project in which members of the public who took part obtained a series of personal advantages, such as discounts for public transport, sports centres and theatres, as well as taxis and shops taking part in the scheme.

• Smile project: its aim was to gather information on best practice in urban mobility so as to offer it to the public in the form of publications, presentations and international conferences.

10

• Intatme project: IDAE participated in this project led by the Madrid Transport Consortium (Consorcio de Transporte de Madrid) with the principal objective of studying new forms of mobility using collective means of transport.

In the 2000/2001 in-depth review of the energy policies of Spain, the IEA stated: The Government of Spain should: • Promote the use of alternative transport fuels for energy efficiency and

environmental benefits.

Fiscal Incentives

Reduced VAT on tickets for public transport can promote its use. Some public transport, namely all rail and bus transport and travel between the mainland and the Balearic Islands by air and sea, is subject to a reduced VAT rate of 7%. The full 16% VAT rate applies to all other domestic passenger transport by air and sea. The annual vehicle taxes, levied by the municipalities, were originally introduced solely for fiscal reasons but because they are progressive, based on weight and engine size, they can also be considered to enhance energy efficiency. Due to the level of the annual vehicle taxes, about Ptas 12 000 per year at the most, the impact on energy efficiency improvement may be modest.

Information/ Training

Training programmes currently operating for efficient driving have received support from the Spanish Confederation of Goods Transport, the Driving Schools’ Association and the Government Traffic Department. IDAE also edits several brochures on problems regarding fuel consumption in transport, and city travel.


IDAE carries out extensive monitoring of the actions developed nation-wide in the fields of energy efficiency and diversification of energy sources. In addition to the work that IDAE has historically carried out regarding the monitoring of energy efficiency indicators and producing inventories of combined heat and power (CHP) and renewable energy facilities, the implementation of the Plan for the Promotion of Renewable Energy in Spain 2000-2010 (Plan de Fomento de las Energías Renovables en España 2000-2010) has meant adapting the monitoring of renewable energy activities in Spain to the requirements stated in the Promotion Plan. In this new framework, since the autumn of 2000, IDAE has published a newsletter on energy efficiency and renewable sources of energy entitled Boletín de Eficiencia Energética y Energías Renovables, in which it summarises the progress made, main milestones passed, and overall trends regarding energy efficiency, CHP and RES at national level. In the 200/2001 in-depth review of the energy policies of Spain, the IEA stated: The Government of Spain should: • Monitor systematically the performance of measures taken.

11

Further information

For further information, please contact: Carlos García Barquero IDAE Paseo de la Castellana, 95 E – 28071 Madrid Tel: +34 (91) 456 49 00 Fax: +34 (91) 555 13 89 E-mail: [email protected]

1

SWEDEN Updated July 2003

BACKGROUND 1991 Energy Policy Bill

Energy policy was formulated by the Riksdag (Parliament) in the 1991 Energy Policy Bill with the purpose of creating the conditions for long-term sustainable political decisions on energy policy, whose goal was defined to be to secure the availability of electricity and other energy in the long and short term at prices that are competitive on the world market. It was observed in the decision that the time for the start of the nuclear power phase-out, and the pace at which the phase-out would proceed, were to be determined by the results of electricity conservation efforts, the availability of electricity from environmentally acceptable power production, and the ability to maintain internationally competitive prices. From a climate viewpoint, it was considered urgent to avoid burning fossil fuels whenever possible. According to the government Bill, this was to be achieved through active energy conservation and using renewable energy sources.

Government Bill on a Sustainable Energy Supply, March 1997

The guidelines established in the 1991 Energy Policy Bill were re-evaluated. A parliamentary Energy Commission was appointed in the spring of 1994 to examine the ongoing programmes for transformation of the energy system and analyse the need for changes and additional measures. On the basis of the work of this Energy Commission, in the spring of 1996 the government invited the parliamentary parties to participate in deliberations aimed at setting the foundations for sustainable long-term energy policy decisions. In February 1997 these deliberations resulted in an agreement in the Riksdag on guidelines for energy policy. The 1997 Bill on A Sustainable Energy Supply strongly emphasises energy efficiency. State-administered work was carried out to increase knowledge about and stimulate interest in economically and environmentally sound energy efficiency. A total of SKr 450 million1 has been assigned over a five-year period for the procurement of energy-efficient technology as well as for information, training, municipal energy advisory services and the testing, marking and certifying of energy-using equipment.

Guidelines for Energy Policy

The 1997 Guidelines for Energy Policy focus, inter alia, on the following developments: • The guidelines set down in the 1991 Energy Policy Bill remained

unchanged. • The energy policy decision required the closure of the two nuclear

reactors, the first before 1 July 1998 and the second before 1 July 2001. However, closure of the second reactor was conditional upon the loss of its electricity production being compensated by new electricity production from renewable sources and reduced use of electricity. On 16 June 1999 the Swedish Supreme Administrative Court pronounced its judgement concerning the first reactor at Barsebäck. Barsebäck 1 reactor was shut down in November 1999. In October 2000, the government issued a written communication (2000/01:15) announcing its opinion that the conditions for closing the second reactor had not yet been fulfilled. According to the government, decommissioning should, however, be

1. On average in 2000 SKr 1 = US$ 0.109 and in 2001 US$ 0.097.


2

possible by no latter than the end of 2003. In October 2001, the government again presented a written communication (2001/02:22) on the renewed assessment of the conditions for the closure of Barsebäck II. Again, the government found that the conditions for closure had yet to be fulfilled. A further assessment of the conditions will be made during 2003.

• The launching in January 1998 of a seven-year programme for an ecologically sustainable energy system. The programme includes work intended to reduce electricity use and also to provide new electricity production. The programme consists of two parts:

− The first part is a seven-year research, development and

demonstration programme aimed at promoting renewable energy sources and new energy technology. The programme provides for substantial investments in research, development and demonstration of new energy technology relating both to the supply of renewable energy and to greater profitability for improved energy efficiency.

− The second part of the energy policy programme is a five-year subsidiary programme to promote energy efficiency and electricity production from renewable energy sources such as bio-fuels, wind and small hydropower plants. The support to energy efficiency includes conversion of electrical heating to district heating, technology procurement, information, labelling and municipal energy advisory services. The use of electric boilers in district heating is to be reduced.

The total cost of the programme was SKr 9.2 billion, of which SKr 5 billion was for long-term research, development and demonstration programmes.

• The creation on 1 January 1998 of a new central energy authority, the Swedish National Energy Administration (STEM) (www.stem.se) responsible for implementing the greater part of the country’s energy policy programmes, and with responsibility for co-ordinating the various energy policy changeover and introductory measures. The responsibilities of NUTEK in the energy area have thus been transferred to STEM. The new English name of STEM is "Swedish Energy Agency".

• A committee was set up in January 2001 to develop future policies and actions (after 2003) for the rational use of energy in buildings and industry. A report was issued in October 2001.

2002 Energy Bill On 21 March 2002, the Swedish government presented its Energy Policy Bill

Co-operation for a Secure, Efficient and Environment-Friendly Energy Supply (2001/02:143). This report, approved by Parliament on 11 June 2002, re-affirmed the country's established energy policy objectives: • Create the conditions for efficient energy use and cost-efficient Swedish

energy supply with low adverse impact on health, the environment and the climate.

• Facilitate the transformation into an ecologically sustainable society, promoting sound economic and social development in Sweden.

• Contribute to the creation of stable conditions for a competitive business sector, and to the renewal and development of Swedish industry.

• Contribute to broadening co-operation within the Baltic region with regard to energy, the environment and the climate.

The Energy Policy Bill also contains three main proposals: • A new method to promote environmentally-friendly and renewable

electricity production through a quota-based trading programme for green electricity certificates.

• Measures designed to encourage more efficient energy consumption

3

though the rationalisation of existing policy measures and the dissemination of knowledge both nationally and regionally.

• Strengthening the competitiveness of combined heat and power (CHP) by exempting such plants from certain taxes on energy products. The issue is to be decided in connection with the budget decision for 2003.

Inter-ministerial Working Group

On 1 March 2001, the government appointed an Interministerial Working Group for Rational Energy Consumption to propose measures for the promotion of energy-efficient use of energy. The Group presented the report (Ds 2001:60) More Efficient Energy Consumption: Proposals for Market-Based Measures in October 2001. Among the government initiatives proposed in the report was the establishment of long-term voluntary agreements between government and energy-intensive companies (see below).

Government Energy Administration

The lead responsibility for developing energy policy rests with the Minister of Industry, Employment and Communications. STEM is the central government body responsible for most functions within the energy area. A number of administrations have a role in implementing the energy policy programmes. The Swedish Board of Housing, Building and Planning is responsible for building codes and related issues. The regional authorities are responsible on behalf of the Swedish Board of Housing, Building and Planning for the implementation of those parts of the sub-programmes which concern private households. The Swedish Consumer Agency is responsible for testing, labelling and certification of energy use in household equipment, etc. The transport authorities (Vägverket, Sjöfartsverket, Luftfartsverket, Banverket) have responsibility within their sectors to promote energy efficient use. A merger process, in effect since 1 January 2001, resulted in some restructuring related to energy efficiency and energy-related research: • The new Swedish Research Council for Environment, Agricultural

Sciences and Spatial Planning (FORMAS) (www.formas.se) has taken over the activities previously pursued by the Swedish Council for Building Research (BFR) responsible for energy-related building research and parts of the Swedish Environmental Protection Agency responsible for the supervision of environmental issues under the energy policy programme.

• The new Swedish Agency for Innovation Systems (VINNOVA) (www.vinnova.se) has taken over the activities previously pursued by the Swedish Transport and Communications Research Board (KFB) and by parts of the Swedish Business Development Agency (NUTEK).

• The new Swedish Research Council (www.vetenskapsradet.se) has taken over the activities previously pursued by the Swedish Natural Science Research Council (NFR) and the Swedish Research Council for Engineering Sciences (TFR) responsible for energy-relevant basic research.

• The Swedish Energy Agency (STEM) monitors implementation of the energy policy programme.

Given the emphasis put on co-operation in the Baltic region, the programme of co-operation with the Baltic region and Eastern Europe in the energy field administered by STEM includes, inter alia, a programme for more efficient use of energy, conversion from fossil fuels to other forms of energy and environmental improvements in plants producing electricity and heat. A budget of SKr 350 million has been allocated to this programme.

4

In the 2000 in-depth review of the energy policies of Sweden, the IEA stated: The Government of Sweden should: • Clarify existing qualitative goals for efficiency improvement programmes to

ensure an objective assessment can be made on their cost-effectiveness and, in particular, the contribution energy efficiency programmes may make to offsetting any further reductions in nuclear capacity.


Sweden has applied policies and measures for climate change since 1988, when the issue was discussed in the Riksdag for the first time. A more comprehensive programme was adopted by the Riksdag in May 1993 when the Bill regarding Strategies against Climate Change was adopted. The goal established by the Riksdag was that by 2000 emissions of carbon dioxide from fossil fuels should be stabilised at the 1990 level and decline thereafter, pursuant to the UN Framework Convention on Climate Change (UN FCCC). Furthermore, emissions of methane from disposal of wastes were to be reduced by 30% between 1990 and 2000. The main strategy to achieve the carbon dioxide goal is to limit the need for fossil fuels and replace them with renewable energy sources, along with better management and more efficient use of energy. After ratification of the UN FCCC, Sweden issued its national communication entitled Sweden’s National Report under the UN Framework Convention on Climate Change, which was adopted by the Swedish government on 15 September 1994. The second national communication entitled Sweden’s Second National Report under the UN Framework Convention on Climate Change was adopted by the Swedish government on 17 April 1997. This report was drawn up before the final adoption of the Bill on A Sustainable Energy Supply. The third National Communication (NC3) to the UN FCCC was adopted by the Swedish government in November 2001. (http://unfccc.int/Resource/Docs/natc/swenc3.pdf ) In December 1997, under the Kyoto Protocol, the European Union agreed to reduce greenhouse gas emissions by 8%. Under the EU Burden-Sharing Agreement2 of 17 June 1998, Sweden is allowed to increase its emissions of a basket of greenhouse gases to 4% above 1990 levels. The commitment period for the target is 2008-2012.

Government Bill on a Swedish Climate Change Strategy

On 30 November 2001 the government issued a Bill on a Climate Change Strategy (2001/02:55) formulating a climate strategy for the future. The government proposed that Swedish GHG emissions should be at least 4% lower in 2008-2012 than in 1990. This national target should be reached without using carbon sinks or flexible mechanisms. The strategy includes a diverse array of measures to achieve the reduction goals. The primary tool will be climate investment programmes undertaken by municipalities, which can apply for funds for investments to reduce emissions. Funding is projected to be SKr 200 million in 2002, SKr 300 million in 2003 and SKr 400 million in 2004. Additional measures include a system of green electricity certificates for production from renewable sources, a strategy for alternative fuels and greater dissemination to the public of information on climate change. Furthermore, a commission will be established to analyse the areas in which the efficiency of fossil fuels can be improved or where they can be replaced by other fuels. The national target should be monitored and milestones for this monitoring process should be the years 2004 and 2008. If the emissions development is worse than expected, additional measures may be introduced


5

or the target revised. Industry's competitiveness should also be taken into account.

Environmental Quality Objectives Bill

In May 2001, the government presented its Bill Environmental Quality Objectives (2000/01:130) and in November 2001 the Parliament agreed to the proposals. The decision enhances the structure of the 15 Environmental Quality Objectives voted by the Parliament in April 1999. Between three and eight sub-targets have been established for each objective. Concrete measures and strategies to reach the targets by 2010 have also been set out. Resources allocated to environmental protection will be increased by 70% between 2001 and 2004. The Swedish Energy Agency will be responsible for the energy related aspects of three of the 15 Environmental Quality Objectives, i.e. Reduced Climate Impact, Clean Air and Natural Acidification.



Building Code

Thermal insulation requirements in building codes were introduced in 1960 and revised in 1975, 1980, 1988 and 1998. In some of these revisions the changes were related to energy requirements. The revised building regulations of 1988 introduced a building performance standard instead of requiring insulation for certain building components. This performance standard only includes requirements for overall energy performance. The code only states what, in principle, should be achieved, and not how it should be done. The aim is to promote cost-effective solutions. This means that the building code does not include specific requirements for thermal insulation or windows.

Appliance Labelling

SKr 40 million has been assigned for information on, and trials, testing and marketing of energy-using products and systems over a five-year period starting in July 1997. The National Consumer Board is responsible for the programme. A national labelling programme for household appliances was introduced in 1993. Thereafter, Sweden introduced the EU labelling directive and applied it to refrigerators/freezers, washing machines, dryers and dishwashers. Voluntary energy efficiency labelling has been implemented for computer screens. Sales statistics on white goods show a large increase in sales of efficient refrigerators/freezers (EU label categories A and B had achieved a 70% market share by 1998). Probable causes are a combination of the impact of the EU label, national information campaigns and price changes. Sales of energy-efficient washing machines are also increasing, but more slowly. Regarding labelling, recent Swedish efforts have focussed on a Nordic labelling scheme for windows and a labelling scheme for ventilation and fan systems. Work on high quality indoor environment and energy-efficient ventilation has also taken place.

District Heating

It was in the 1940s that local authorities began to look at district heating (DH). Its use spread during the 1950s and 1960s as a result of the excellent opportunities presented by the extensive investments in new housing and other buildings being made during that period. The biggest growth in district heating occurred in the period 1975 to 1985.

6

Until the beginning of the 1980s, most DH systems were operated as local authority services. However, during the 1980s and 1990s, most were restructured as limited companies owned by local authorities. In 2001, there were about 220 companies supplying heat in Sweden, 68% of them owned by local authorities, 13% privately owned, 10% owned directly or indirectly by the State and 9% operated as local authority services. The nominal connected load in 1997 amounted to about 22 GW, supplied through about 9 600 km of mains. During the year, 42.2 TWh of heat was supplied, equivalent to 43.1 TWh after correction for statistically average climatic conditions. Fifty six per cent of the heat was supplied to residential users, almost 36% to the service sector and over 8% to industry. The Swedish National Energy Administration is responsible for the administration of financial support for conversions from electric heating to district heating that was approved by Parliament in the 1997 energy policy decision. In 1998 and 1999, total support of about SKr 300 million was granted, leading to the connection to district heating grids of 9 504 houses, 12 436 apartments, and another 174 premises. This is estimated to result in a reduction in electricity use of 230 GWh. The Bill Energy Markets in Transition-Better Regulations and Supervision (2001/02:56) emphasises the need to stimulate competition in the DH sector so as to increase productivity and encourage lower prices. The appointment of a Commission of Inquiry to study the issue is in a planning stage. Total installed CHP capacity today is about 3 484 MW where 57% is CHP production based on biofuel. There is still a considerable potential to use more biofuel for CHP in municipal district heating systems. CHP in industry is normally 10% co-generation from annually 40 TWh of heat (100% biofuel) from burning black liquor in the cellulose industry. A programme for investment grants for CHP based on biofuel in the period 1998 to 2002 resulted in an increased electricity production capacity in municipal DH plants of nearly 290 MW during 2001. The investment grants were basically € 325 per installed MW electricity production capacity based on biofuel, but not more than 25% of total investment cost. According to the government Energy Policy Bill, Collaboration for a Secure, Efficient and Environmentally Friendly Energy Supply (2001/02 143) presented by the government on 21 March 2001, these grants will be replaced by market based Green Certificate incentives: it proposed the adoption of a quota-based Green Certificate system to promote production of electricity from renewables to be implemented by January 2003. In the 2000 in-depth review of the energy policies of Sweden, the IEA stated: The Government of Sweden should: • Consider increasing taxes on household electricity consumption as an

alternative to promoting the expansion of district heating as a means of reducing electricity consumption.

• Harmonise taxation of heat and electricity production from combined heat and power plants.

Information Education Motivation

An important element of STEM's programme is the dissemination of information, both nationally and locally, concerning the opportunities for using energy-efficient technology, coupled with training and the provision of advisory services. A budget of SKr 60 million has been allocated for information

7

activities carried out by STEM and support for organisations, such as regional energy centres, for dissemination of information. A budget of SKr 250 million has been allocated for local authority energy advisory services. Municipalities can thus apply for funding for local energy advisory services from the central national government. The implementation of energy-efficiency measures and purchase of high performance products are promoted by two purchaser group networks. In addition to the already existing network representing a majority of real-estate owners in the residential sector, a new network consisting of the majority of real-estate owners of commercial buildings in Sweden has been established. These networks serve as excellent platforms for the development of new energy-efficient technologies, the dissemination of information and demonstration projects. Another excellent network is the dialogue project Building Living and Real Estate Administration for the Future (in short the Bygga-Bo dialogue) where major real-estate owners and real-estate administrative organisations and building contractors, together with the government, have agreed to join efforts towards sustainable development within the building sector. Furthermore, on the issue of Swedish experiences with sustainability, a book Building Sustainable Energy Systems, edited by Semida Silveira, has been published.

Research and Development

The programme for research, development and demonstration of new technologies includes grants for all those stages. An important goal of the programme is to reduce the cost of new efficient technology and to achieve a market introduction. Energy efficient products and systems in the residential, commercial and industrial sectors are one of the priority areas.

PUBLIC SECTOR

Eco Energy Programme

The Eco energy municipality programme started in March 2001. Seventy municipalities applied for participation and ten were selected for the first year of the programme. The responsibility of the municipalities is to decide on an energy policy, carry out measures to improve energy efficiency and introduce renewable energy sources. The municipalities will be offered seven different educational packages.

INDUSTRY


Standards and Regulatory Instruments

Voluntary standards have been established for lighting, fans, pumps, ventilation systems and other products used in production. Production standards have been established in the engineering, plastics, metals, saw-mill, rubber, and pulp and paper industries. Mandatory standards and regulatory measures, which have been widely used in industry for emission control, are now part of the programme for efficient energy use in industry.

Research and Development

Research and development efforts are concentrated in three R&D programmes – Climate 21, ELAN efficient use of electricity and Process integration. The Climate 21 programme for more efficient refrigerating machinery and heat pumps started in 1997. A central element of the programme is the dissemination of information on costs and energy efficiency, and the environmental impact of applications and systems to participating companies. The results of the various development projects should be directly applicable to the development of hardware, technologies and systems design at the very cutting edge of what is possible to achieve. Process

8

integration is an umbrella name for methods for the design and conversion of industrial processes in respect of capital and running costs, energy yields, production capacity and environmental emissions.

Voluntary Agreement EKO Energy

EKO Energy is a voluntary agreement programme within STEM directed at larger energy-intensive industrial companies. It started in 1994 and aims at: • Decreasing carbon dioxide emissions to the 1990 level according to the

1997 Kyoto agreement. The industry sector in Sweden has a considerable potential to contribute to this decrease.

• Contributing to the decision by the Swedish government to replace the Barsebäck nuclear electricity production by increased energy efficiency.

• Following the EC Council Directive 93/76/EEC to limit carbon dioxide emissions by improving energy efficiency.

• Pointing at energy use as one of the company’s most significant environmental impacts, to work within their environmental management programmes as EMAS (Eco Management and Audit Scheme) and/or ISO 14001, the international environment management scheme.

The voluntary agreement concluded between STEM and an energy-intensive company consists of the following elements: • STEM provides a comprehensive inventory and analysis of energy use in

the company production and premises, including a list of suggested measures to be taken. The suggested measures mainly concern the building (ventilation, heating, lighting) and surrounding equipment (compressed air).

• The company sets energy and environmental targets and establishes an action plan based on reasonably economically viable measures that the inventory and analysis suggest. The action plan has to be revised every year and submitted to STEM.

• STEM provides a comprehensive material flow analysis as well as introductory comparison of the company environmental awareness and environmental management compared to guidelines based on EMAS or ISO 14001 standards.

• The company establishes long-term energy and environmental policy in accordance with EMAS or ISO 14001.

• STEM provides an educational package on the process of energy-efficient industrial purchasing, ENEU 94.

• The company establishes ENEU 94 as a company standard method to purchase energy-efficient machines and tools. Energy-efficient purchasing is a long-term activity that initiates energy issues into everyday life within the company. ENEU 94 introduces investment calculations using life-cycle analysis and not pay-off analysis. This is a very important part of EKO Energy and also the most difficult part for the company to fulfil.

• STEM arranges goodwill activities such as spreading success stories to the press and/or appointing the most successful EKO energy company of the year in a ceremony covered by the media.

Should no action be taken, no sanctions exist against the company other than lost goodwill. More than 30 Swedish companies are involved in EKO energy activities. No company has yet found that it could afford not to follow the expert advice on energy efficiency measures. Energy efficiency has mainly been achieved in areas such as ventilation (27%), motors and drives (22%), lighting (2%), compressed air (7%), heating (8%) and process measurement areas (32%). In 1998 energy saving in the ten companies reporting energy savings were 0.098 TWh (12% of their total consumption) of which 0.036 TWh was

9

electricity. The savings per energy efficiency measure range from 4% to 28%. On 31 August 2000, the government appointed a special negotiator in the Ministry of Industry with the task of preparing background material and proposals for long-term agreements with energy-intensive industry. The aim is to promote energy efficiency in industry. A report was submitted to the government in October 2001 (Ds 2001:65), proposing guidelines for a programme of long-term agreements. According to the proposal, companies within the energy-intensive sector will be invited to reach an agreement of some form with the government for a period of five to ten years. The companies are to undertake to introduce energy management systems, with the help of which they identify and seek rationalisation measures and draw up plans of action, as well as follow up and revise these efforts. The extent to which economic incentives can be offered to companies that enter into such agreements is to be further examined. Further Commissions of Inquiry in certain areas, and continued contacts and discussions with representatives of industry, will be necessary to develop the proposal on principles into a full-scale proposal.


Technology procurement of energy-efficient products is a means of encouraging the development and marketing of energy-efficient products and systems. The methodology was developed by NUTEK, the National Board for Industrial and Technical Development. Technology procurement activities aim to improve the energy efficiency of products by using companies’ competitive abilities to make better products and thus to move the market toward more efficient products. The process brings together customers to make functional demands, e.g. a better refrigerator or energy-efficient high-frequency (HF) electronic ballasts. These potential purchasers indicate that they are prepared to place an order if specified conditions are fulfilled, and the suppliers then compete on the basis of design and price. NUTEK has initiated about 30 technology procurement projects and over 1 500 other projects. About 100 incentive agreements have been signed. During 1998-2002 the Technology Procurement Programme resulted in the introduction of more than 25 new technologies during the last 12 years targeting the residential and commercial sectors. New technology procurements are for resource efficient tap-water mixers, building automation systems, integrated systems for solar screening and linking of daylight, ventilation filters, and energy-efficient stoves. Additionally, guidelines on procurement have been developed in several areas, such as heating systems, cooling systems, ventilation, windows, lighting, appliances, standby losses, etc. aiming at enhancing the purchase of efficient equipment The technology procurement projects have resulted in a clear technology leap for refrigerators/freezers and have accelerated the mass production of low-energy appliances. The market for improved HF lighting systems has grown rapidly. The success of technology procurements for visual display units (VDUs) and heat pumps has also achieved savings and stimulated the market. However, the technology procurement for high-performance windows was a failure: the market introduction of high-performance windows coincided with a recession in the building industry and the additional cost of these windows meant they were not competitive with ordinary, cheaper windows. The Swedish National Energy Administration’s budget allocated SKr 100 million over a five-year period for the development and introduction of energy-efficient technology through technology procurement.

10

Corporate Commitment and Recognition

Corporate commitments have been launched by large chain stores with their own manufacturing facilities. They have agreed with their suppliers, customers and NUTEK and STEM that energy-efficient products are to be used or produced in virtually all stages of production and distribution. Under voluntary agreements signed by several large enterprises, energy-efficient methods are required for all semi-manufactured goods bought by the companies, as well as for all production processes used in the companies. Products used in the distribution and marketing of goods, such as lighting and ventilation, must also be energy-efficient. Finally, for products sold by the companies, an adequate and representative selection of energy-efficient technology is offered to their customers. Participating companies receive a small subsidy to defray some of the cost of adjusting their inventories and production methods to include energy-efficient products and processes.

TRANSPORT


1998 Transport Policy

In 1998, the Riksdag adopted a new transport policy based on Transport Policy for Sustainable Development, a revised strategy for the long-term infrastructure plans which entails a continuation of the previously decided investment in the expansion of the railway network. Electrically powered rail transport is energy-efficient and has a very small impact on the environment. This was one of the reasons why the government adopted a ten-year investment plan for railway infrastructure amounting to SKr 36 billion in 1998. This will enable Banverket to complete the work of adapting the railway for high-speed trains. Since freight traffic is currently struggling with capacity problems on several lines, SKr 10 billion is directly targeted at freight traffic programmes. In addition, there are many projects involving improvements for both passenger and freight traffic. For the road network, the strategy entails a reorientation from big investments in the national trunk roads to increased efforts to improve the existing road network as regards accessibility, environment and traffic safety. A plan for the period 1998-2007 has been prepared by regional and central authorities. A new authority, Rikstrafiken, has been created to promote the long-distance public transport system. It will encourage the use of public transport and support unprofitable public transport considered socially desirable.

Information The Consumer Agency and the Swedish National Road Administration provide consumers with information about the energy consumption of vehicles. The Swedish National Road Administration and STEM co-operate with driving teacher associations to accelerate knowledge about more energy-efficient driving behaviour. Information campaigns are also carried out to encourage companies to improve efficiency in their logistics and transport planning. Fuel consumption figures for new cars must be given by the producers according to Guidelines for Information about Fuel Consumption, Carbon Dioxide Emissions and Environmental Class for New Cars published by the Consumer Agency. Since 1977 the Consumer Agency has gathered and published these figures annually in a brochure which has to be available in every outlet selling new cars in Sweden. Car suppliers also have to provide information about fuel consumption in all advertisements for specific models of new cars. The brochure also contains advice on how to save money and fuel and on how to protect the environment. It is distributed free of charge by central and local consumer authorities and the information is also available on Internet.

11

Taxation In Sweden, taxation of road traffic is an important element of transport policy,

providing an instrument to influence the composition and turnover of the motor vehicle fleet, thus improving its average fuel efficiency. Since 1991, the tax on petrol includes a carbon dioxide tax estimated to have generated about 11% of the state’s revenues from road traffic-related taxes in 1996. VAT of 23.46% was imposed on petrol in 1990, and has since been raised to 25%. Up until October 1993, a tax was paid on diesel-powered trucks, cars and buses, based on distance driven (kilometre tax). This tax required border controls and was replaced by a diesel oil tax after Sweden joined the European Union. Sweden also levies sales tax, annual vehicle tax and user charges. Sales taxes are levied on light vehicles only. The annual vehicle tax is differentiated according to vehicle weight and fuel. Only heavy goods vehicles are charged so-called user charges (Eurovignette). Changes have been made to the taxation of company cars so that drivers pay for petrol either directly or indirectly. Further changes have been proposed by the government in a white paper. In April 2001, the government appointed a Commission of Inquiry with the mandate to revise the taxation of road traffic. The investigation focussed especially on issues related to environment, safety and competition while taking into consideration the influence of the tax system on transport efficiency. A special consideration was to investigate the possibility of introducing financial incentives to promote low emission vehicles. Rail transport is excluded from energy taxes, but there is a user fee system. Parliament reduced this fee in 1998 in order to increase the relative competitiveness of rail transport. Energy taxes do not apply to maritime and air transport. Shipping pays environmentally differentiated seaway charges, and aviation pays route charges according to the Eurocontrol procedure.


The various energy efficiency programmes are systematically evaluated each year and the results submitted to the government. One of the main tasks assigned to STEM is to monitor the implementation of the various measures and to report on the effects of the closing down of the reactors in Barsebäck. The short term energy programme (1998-2002) resulted in 2 TWh of new electricity production and electricity savings by January 2001. The estimated result -- calculated from sales statistics -- for the energy efficiency programme is approximately 0.48 TWh. The new technologies developed during 2000, financed by the technology procurement programme, include ventilation units with heat exchanger for single family buildings (20% efficiency improvement), cookers (30-40% efficiency improvement), refrigerator/freezers (33% improvement) and new copiers (60% improvement). As it is often difficult to quantify the gains in energy efficiency from the programmes, a need has been identified to develop new methods for their evaluation and assessment. An evaluation plan was set by the Ministry of Industry, Employment and Communications in 1999. This plan includes a range of performance indicators for the various activities within the programme. Evaluation by external evaluators is planned every second year, continuous monitoring is to be carried out by the Energy Administration and reported to the Ministry in its annual report. The Ministry sets the reporting requirements annually. It is also the task of the Energy Administration to monitor developments on the energy

12

markets and energy systems, and to analyse relationships between energy technology, the environment, climate and economic growth. The Swedish Energy Agency has recently elaborated a report on its energy efficiency activities over the four year period, 1998-2001. However, due to difficulties in baselines (which could have happened anyway) it has not been possible to assess the overall results except in very rough figures.

Further information

For further information, please contact: Egil Ofverholm Swedish Energy Agency Box 310 S - 631 04 Eskilstuna Tel: +46165442040 Fax +46165442099 E-mail: [email protected]

SWITZERLAND Updated November 2001

BACKGROUND The Decree on Energy Use (Energienutzungsbeschluss, ENB) of 14 December1990, the corresponding Decree on Efficient Energy Use of 1 May 1991 and theFederal Energy Law of January 1999, which replaces the Decree on EnergyUse, compose the essential legal basis for the current established measures ofenergy policy at the federal level.

Energy2000

The Energy 2000 Action Plan (Federal Council Decree of 6 November 1990)was in force from 1991 to 2000. Its goal was to stabilise the use of fossil fuels(and hence CO2 emissions) by 2000 and to reduce them thereafter. Its strategywas based mainly on energy efficiency but also on increasing the contribution ofnon-hydro renewables to electricity generation, raising hydroelectric generationand upgrading the capacity of existing nuclear power plants.

Energy 2000 was based on the following three principles:

• Voluntary measures for the efficient use of energy and for the use ofrenewable forms of energy. The implementation of these measures restswith seven “marketing departments”: Public Sector, Residential Buildings,Industry, Small Industries and Services, Hospitals, Motor Fuels andRenewables.

• State framework conditions for a supply of energy that is sufficient, safe andacceptable economically and environmentally, and also for a non-wasteful,efficient use of energy.

• Discussion of controversial themes (e.g. nuclear energy, measures forsaving energy) with interest groups and those affected.

Total federal government financing for the Energy 2000 Action Plan amountedto SF 558 million1 for the period 1991-2000, less than what was planned whenthe plan was launched (SF 170 million per year). Funding aimed mostly atpromoting voluntary actions. Around one-third of the funding was dedicated tothe promotion of renewables through information, advice, multi-level training,quality guarantees and subsidised installations.

In the 1999 in-depth review of the energy policies of Switzerland, the IEAstated:

The Swiss government should:

• Review the process of setting voluntary measures to identify whether andhow it could be improved and consider setting more binding measureswhere possible.

SwissEnergy The Energy 2000 Action Plan which was limited to ten years ended in 2000. Itwas replaced by the Swiss Energy Action Plan ("SwissEnergy") which waslaunched by the federal government on 30 January 2001 (Federal CouncilDecree of 16.01.2001). The annual budget for SwissEnergy amounts to SF 55million. Since the cantons and municipalities still have major responsibility for energypolicy, they have to implement Energy 2000 programmes, the SwissEnergyplan and the Federal Energy Law (see below) for them to become effective andapplicable. This, and the country’s broad, consensus-based approach, requiresconsultation among all those active in energy markets and policy. SwissEnergythus brings together representatives from all levels of government, federal,cantonal and local, as well as from utilities, supply companies, industry,consumer groups and environmental organisations.

1. On average in 2000 SF 1 = US$ 0.590.

In the 1999 in-depth review of the energy policies of Switzerland, the IEAstated:


• Establish a new Energy Action Plan Beyond 2000, based on acomprehensive assessment of the Energy 2000 Action Plan. The new planshould be adapted to the development of competition in the energy market.

• Strengthen public information on the cost effectiveness of policy measuresin the Plan. Cost effectiveness should be assessed, taking intoconsideration economic trends.

SwissEnergy summarises both energy policy objectives and the measures to betaken in co-operation with the cantons and the private sector. The key areas ofthe Plan are energy use in buildings and transport, the economics of energyproduction and use, and promotion of renewables and energy efficiency. Manyactivities initiated under Energy 2000 will be continued.

In SwissEnergy, the government sets a target to reduce consumption of fossilfuels by 10% and to limit the increase of electricity consumption to 5% between2000 and 2010. Heat production from renewables is planned to increase by3 TWh and electricity generation by 0.5 TWh during the same period.

FederalEnergyLaw

To replace the Decree on Energy Use of 1991, which expired at the end of1998, a new Federal Energy Law was adopted by the Parliament in July 1998and entered into force on 1 January 1999. The Energy Law envisagesmeasures to reduce energy consumption in the following areas:

• Regulations about stating the energy consumption of installations, vehiclesand equipment, and about reducing their consumption.

• Cantonal legislation in the building sector (heat insulation, individualmetering and billing of heating and hot water).

• Financial incentives for the efficient use of energy, renewable sources ofenergy and waste heat and promotion measures (information, advice,education, training, research, pilot installations, demonstration installations).

• Guidelines and regulations to ensure the economic and environmentallyfriendly supply of energy (responsibility of the energy industry for the supplyof energy, the use of waste heat in power stations which run on fossil fuels,regulations for independent power producers).

The new Energy Law made the following changes to the 1991 Decree: • It calls for more extensive co-operation with the private sector, reaffirms the

principle of subsidiarity (cantons are free to act as long as there is nofederal regulation) and gives priority to voluntary actions rather thanregulations.

• It gives more responsibilities to the cantons in the field of regulations, inparticular for buildings.

• It allows the Confederation to fund measures in favour of the efficient use ofenergy. The Energy Law requires an annual funding to the cantons on thecondition that they have set a programme in favour of energy efficiency andrenewables and when at least 50% of the cantonal funding is dedicated tohouseholds. Direct Confederal funding to projects should be an exception.Funding from the Confederation and the cantons cannot exceed 40% of theinvestment cost (exceptionally 60%).

Energy Agenciesin the Frameworkof SwissEnergy

The Energy Law and the Law on CO2 envisage the possibility of giving varioustasks to private organisations to implement the SwissEnergy programme. In thiscontext, four Agencies have been created:

• The Agence de l'énergie pour l'économie (AenEc), Energy Agency forEconomy.

• The Agence suisse des énergies renouvelables et de l'efficacitéénergétique (AEE), Swiss Agency for Renewable energy and Energyefficiency.

• The Agence de l'énergie pour les appareils électriques (EAE), EnergyAgency for electric appliances.

• The Agence suisse pour l'éfficacité énergétique (S.A.F.E.), Swiss Agencyfor Energy Efficiency: information site: www.topten.ch

The AenEC, established in 1999, is supported by the Union suisse des arts etmétiers, energy associations for large energy consuming branches, machineryindustry and the Swiss company of manufacturers. Its main activity is thepreparation and conclusion of Agreements. It implements a monitoring systemfor the benefit of the AenEC members involved in SwissEnergy or forindependent partners. The target is that, by the end of 2003, half of thecompanies must be informed about AenEc activities and about the Agreementprocess, and at least 40% of the industry and service consumption must becovered by Agreements. For the period 2001-2003, the total budget financed bythe economy amounts to SF 13 million.

The AEE established in 1998 is supported by the major Swiss associations inthe field of renewable energy and the building industry. Its main task is topromote the rational use of energy and to encourage renewable energy. Itreceives the mandate by SwissEnergy to organise and support the marketing ofrenewable energy, and the basic and updated training on renewables. The rateof self-financing of AEE must reach at least 50%.


Switzerland signed the United Nations Framework Convention on ClimateChange (UNFCCC) on 9 May 1992. In order to meet the commitment(Article 12 of the Convention), a first national communication (ConfédérationSuisse, 1994) was submitted on 21 September 1994. The Second National Communication of Switzerland 1997 — Greenhouse GasInventory 1995, dated April 1997, documents activities undertaken with a viewto meeting commitments under the Convention.

Law on CO2 The federal law on CO2 emissions (Law on CO2) came into force on 1 May2000. Under this law, total CO2 emissions should be reduced 10% by 2010compared to 1990. CO2 emissions from petrol and diesel must be cut by 8%and from other combustible fuels by 15%.

According to the Law, reduction of CO2 emissions must be reached throughmeasures related to energy , transport, environment and financial measures, aswell as through measures adopted by companies and private individuals on avoluntary basis.

The law stipulates two phases of implementation:

Phase I: Voluntary measures:The target of this phase is to avoid the implementation of a tax on CO2,following the measures already implemented and the adoption of voluntarymeasures. Indeed, SwissEnergy is being implemented as well as the EnergyLaw.

The most important component of Phase I is the official commitment byindividual companies and associations of companies to comply with themeasures, the framework of which is set up in a new Directive (see below)relating to industry, handicrafts and services. A further Directive in course of

preparation will concern the building sector. Compliance with the Directiveshould exempt the companies from a CO2 tax (as set out in Article 9 of the lawon CO2). This tax is a subsidiary tool only to be implemented when themeasures adopted are insufficient and if the reduction target could nototherwise be reached.

Phase II: Tax on CO2:This CO2 tax, which could be introduced in 2004, would be levied on solid andliquid fuels. According to the Law, its maximum amount will be SF 210 pertonne of CO2. The Federal Council decides on the introduction and the level ofthe tax on the basis of the CO2 reduction effectively achieved. The product ofthe tax is reimbursed to the economy and the population.

Directive The target of the new Directive is to provide the economic actors with a stableframework to implement measures adopted on a voluntary basis. It sets up twotypes of framework:

1. The Convention concerns all enterprises willing to contribute on a voluntarybasis to the reduction of their energy consumption and as such to reducetheir CO2 emissions. This corresponds to Phase I of the Law on CO2.

2. The Engagement Formel (Formal Agreement) concerns all thecommitments voluntarily adopted which must be fulfilled by companies inorder for them to be exempt from the tax on CO2. The Engagement setsout the calculation of the CO2 reduction target, and the monitoring andreporting of the measures implemented. Under the Law, only largecompanies or associations of at least five companies which together emitmore than 10 000 tonnes of CO2 per year are allowed to concludeEngagements Formels. These associations could be organised under theumbrella of the AenEc (see above). Small and medium-sized companieswishing to conclude Formal Agreements must set up an association of atleast 30 companies and formulate a common target.


The Swiss political system is a Confederation with a federal government,parliament and court. The territory consists of 26 cantons (states), each ofwhich has its own government, parliament and cantonal courts. Responsibilitiesare shared between the federal level and the cantons. Responsibility for energy matters has traditionally been with the cantons andmunicipalities. In a referendum held on 23 September 1990 the Swiss adopteda Constitutional Energy Article, in force since May 1991, authorising the federalgovernment to carry out a national energy policy in pursuit of specific goals,such as energy efficiency and an economic and environmentally benign energysupply. Subsidiarity plays an important role: the Constitution states that unless thelegislative power is explicitly attributed to the federal level, the cantons aresovereign, i.e. entitled to legislate in an area of policy. Co-operation (betweenthe different political levels and between the government and the economy) is ofconsiderable importance in Switzerland. In the 1999 in-depth review of the energy policies of Switzerland, the IEAstated: The Swiss government should: • Further enhance co-operation with the cantons on energy policy, especially

on the Energy 2000 Action Plan and on the introduction of competition inthe energy markets to ensure successful implementation of energy policymeasures.

Switzerland is a member of several international organisations (e.g. OECD, IEA,World Bank Group, and all United Nations specialised agencies). However, it isnot a member of the United Nations or of the European Union. Although Switzerland is not a member of the EU, most new Swiss laws orchanges in existing laws have voluntarily been made compatible with EU law.This is to facilitate possible future adhesion to the European Union and mayalso be explained by the strong economic ties with many European Unioncountries, despite the formal political absence of Switzerland in the EuropeanUnion.



Energy Efficiency Labelling

Household appliancesFor household appliances the implementation of the European Union energylabelling scheme with efficiency-indicators A – G will be made mandatory in2002. The categories involved are washing machines and tumbler dryers,dishwashers, refrigeration and household lamps. Energy labelling for otherappliances will be extended.

Consumer electronicsThe energy label was introduced at the beginning of 1994. Up to the end of2000, the label was part of the Energy 2000 programme. The same label is nowused in the framework of the new programme SwissEnergy. The definition ofthe criteria is co-ordinated in the Group for Energy Efficient Appliances (GEEA)which includes eight European countries.

Office equipmentThere is a trend to use more and more the Energy Star label, a joint USDepartment of Energy/US Environmental Protection Agency programme,instead of the energy label. The industry prefers the Energy Star label becausethe criteria are easier to fulfil.

Energy Efficiency standards

Household appliancesThe European Union energy efficiency standards are implemented forrefrigeration appliances. Higher efficiency standards for refrigeration and alsofor other categories of household appliances are planned for the next years.

In the 1999 in-depth review of the energy policies of Switzerland, the IEAstated: The Swiss government should: • Expand labelling for energy efficiency of domestic appliances and office

equipment.

Model Decree on Efficient Energy Use in Buildings

The model decree on efficient energy use in buildings contains certainrequirements concerning building shells and installation technologies used inthe construction sector. With respect to the shell, there are two options tochoose from: observing either a specific heating energy requirement (MJ/m2

per year) or individual U-values (W/m2K).

With respect to household technology, the decree contains certain requirementssuch as condensation gas boilers, maximum distribution temperatures,adjustment controls in each room, requirements for air-conditioning systems,etc. These sections are supplemented by the Clean Air Act, which calls forhomologation for heating boilers. Here, certain strict requirements have to beobserved with respect to exhaust and standby losses, and the Clean Air Actalso stipulates that periodic inspections must be carried out, in which exhaustlosses and air pollution levels have to be measured (carbon monoxide, soot,non-burned oil particles, nitrogen dioxide). Most of the cantons have already adopted and introduced this model decreebased on the standards of SIA 380/1, and the aim now is to work together withthe cantons to adapt it to the latest status of technology. The focus here is tobe on lowering the U-values and tightening up threshold parameters for heatingenergy requirements, as well as on the promotion of renewable energies. Forexample, one proposal that has been put forward is to demand that 20% ofheating energy requirements should be covered by the use of renewables. If adeveloper does not want this, then he should be required to save this amountby using more effective insulation. Another proposal involves drawing upelectricity consumption specifications for buildings in the services sector. With the Programme of the Cantons for the 2nd Half of Energy 2000, adopted inApril 1996 by the Conference of Cantonal Energy Directors, cantons agreed onstrengthening their efforts in eight areas, including retrofitting in existingbuildings (already implemented in four cantons) and introduction of theRecommendation SIA 380/4 related to the efficient use of electricity in publicbuildings (already implemented in 14 cantons).

Consumption-BasedHeating andHot WaterCost Allocation

At present, around 450 000 dwellings in Switzerland (out of a total of 1.2 millionthat could be converted) use consumption-based heating cost allocation. It ispossible to achieve savings in heating energy of around 14% on average, evenin times of low energy prices. In its Energy Law, the federal government has only stipulated an obligation ofconsumption-based heating cost allocation for new buildings. Cantons arerequired to draw up corresponding provisions. However, they are at liberty tointroduce an obligation of consumption-based heating cost allocation forexisting buildings, and some of them have in fact done so, or are in the processof doing so, even though house owners are against this.

Heating Systems

The project Operation of Building Infrastructure Systems of Energy 2000promotes the practical optimisation of the operation of heating systems byencouraging all involved parties, from manufacturers to service engineers andon to janitors, to use the existing energy saving potential of 10 to 15% throughcorrect operation and maintenance. More than 2 500 janitors have receivedinstructions. Energy 2000 check-ups for heating systems are available forprivate house owners.

Technical Information

The so-called impulse programmes RAVEL (Efficiency Use of Electricity),PACER (Promotion of Renewable Energies) and IP-Bau (Maintenance andRetrofitting of Buildings) came to an end in 1996. The greater part of the educational material and documentation is being takenover by professional organisations and, to some extent, by Energy 2000. It isintended to improve continuously the training of specialists in the field of energyin order to meet the constantly increasing practical demands. A new courselaunched in 1995/96 in the field of household technology addressespractitioners for the first time.

Management Partnership

In the field of residential buildings, Energy 2000 has signed 120 partnershipswith property management organisations. Workshops provide target groups, forexample building caretakers and managers, with case studies in planning andmanagement of building renovation, thus emphasising their economicadvantages.

Low-Energy Home

The project on ecological building methods is preparing the new standards oftomorrow. Fifty pilot homes demonstrate that up-to-date technologies allowbuildings at competitive prices with a maximum consumption of energy forspace and water heating of 220 MJ per m2 per year, i.e. less than one-quarterof the average consumption of a conventional modern house. Several bankshave offered to co-operate, making available “eco-credits” at reduced interestrates. The cantons launched an initiative for the promotion of MINERGIEstandards and labels. According to this concept, heat consumption would notbe higher than 160 MJ/m2 per year without jeopardising comfort andcompetitiveness. The European Passive-house-Standards is entering the Swiss market.

Financial/ Fiscal Measures

Since 1 January 1995, regulations on tax allowances for the costs ofinvestments in existing private buildings for the efficient use of energy and theuse of renewable sources have been revised, based on a Federal Ordinance.

Federal Investment Programme

On 30 April 1997, the Federal Parliament launched an Investment ProgrammeEnergy 2000 aimed at creating employment, stimulating the economy andpromoting sustainable development. The programme included SF 64 million tobe spent between 1997 and 1999 on subsidising private investments in energysavings and renewable energies in the building sector. Owners must investmore than SF 50 000 and subsidies amount to an average of 10% of the totalinvestment. The Investment Programme Energy 2000 has been replaced by 23 cantonalprogramme with the same focus and priorities (retrofit of dwellings). TheFederal Office of Energy supports the cantons with SF 9 million (2001).

PUBLIC SECTOR


Energho Energho is an association of large energy-consuming public institutions. Itincludes hospitals, cantonal and federal buildings. Its aim is to save 10% ofenergy in ten years and to increase energy efficiency in public buildings throughEnergy Performance Management, a voluntary commitment to save energy withan action programme and targets, training and exchange of experience.

Energy Cities

In most cantons, municipalities are in charge of implementing the cantonal ruleson buildings. In the framework of Energy 2000, the 47 municipalities labelled asEnergy Cities aim to serve as examples to reach the targets of SwissEnergy.One of the purpose of SwissEnergy is to increase the number of Energy Citiesfrom 47 to 110 by 2005 (corresponding to an increase from 1.2 to 2 million ofinhabitants. The Energy City label will be improved to cover the regions andexpanded to the European level. The possibility to conclude agreements onCO2 reduction at the municipal level will be considered.

Other Measures

Recommendations for the purchase and operation of electrical equipment havebeen addressed to employees of the federal administration to promote theefficient use of electricity in federal offices.

Current measures to retrofit public buildings aim to save 50% of heating energy.Evaluation of the results of these measures is being carried out over a two-yearperiod. Energy concepts exist for the federal railways, the postal services (PTT) and theFederal Office of Construction.

INDUSTRY


Energy Audits

Since 1988 limited energy audits (only rough analyses) have been in place forindustry. There are no financial or fiscal incentives to promote energy audits.

Voluntary Measures

The industry section of Energy 2000 focused its efforts on the “energy model”and the energy management course, which are more or less self-supporting.The industrial partners of this section are: cement, pulp and paper, plasticinjection moulding and various chambers of trade and industry. Around 120 large companies, for which the annual energy costs are overUS$ 100 000, representing 18% of the energy consumption of this sector, areinvolved in voluntary actions which include sharing information about energysavings. This section achieved between 15 and 30% of its objectives for 2000. One of the measures introduced by SwissEnergy is the development ofvoluntary agreements signed between the Federal Office of Energy and energyproducers and users which are applicable to the use of energy in vehicles,buildings and electric appliances (see above: Law on CO2). To strengthen the voluntary measures, SwissEnergy set up several Agences del'Energie (Energy Agencies) to intensify information dissemination on energyefficiency among the public and those working in the energy sector.(see above:Energy Agencies in the Framework of SwissEnergy).


Fuel Consumption Target

In December 1995, the federal government issued an Ordinance on theReduction of Specific Fuel Consumption for Passenger Cars. This Ordinancesets an objective for car importers of a 15% reduction in specific fuelconsumption of new cars between 1996 and 2001. The Ordinance alsoestablishes the technical and organisational procedures for monitoring progressin reaching the target. If car importers do not reach this target within theprescribed time, the government is entitled to adopt other measures such as aregulation on the fuel consumption of new cars.

Energy Saving Programmes

Within the national Energy 2000 Action Plan, several projects and programmesto increase energy efficiency in passenger and freight transport have beensponsored by the government, with an annual budget of around SF 6 million,co-financed by the private sector. These actions were started in the early1990s and continued through 2000. Examples of such programmes are: • Eco-Driving. Several actions and simulation techniques promote an eco-

efficient driving style, mainly for captive fleets. Individual measurementsshowed an energy saving potential of 10-15%.

• Car-Sharing Initiative. Drivers rent cars and pay the company according tohours of use and distance travelled. About 30 000 members of the Swissco-operative Mobility CarSharing have some 1 200 cars at their dispositionlocated throughout 700 sites. Thanks to modern reservation systems,members can conveniently reserve the car of their choice from home(telephone, Internet) 24 hours a day. Cars are shared by individuals and bybusiness users. A survey for the Swiss Department of Energy showed thatan average co-operative member drives less than 1 000 kilometres a year,which is about a quarter of the average distance covered by a family-ownedcar. The federal government considers that many people are interestedand that there is a large savings potential.

It is planned in the SwissEnergy programme to develop the combined transportsystem through a combination of improved individual transport and publictransport, as well as in daily transport and in leisure transport.

SwissEnergy has decided to increase the possibilities of combined traffic, suchas the development in railways stations of greater interaction between individualand public transport for daily or holiday transport.

Transport of Goods

New transalpine railway axes In September 1992, the Swiss electorate accepted a Federal Decree to buildtwo new Alpine tunnels through the mountains of Gottard (57 km) andLötschberg (36 km via the Simplon axis). The new tunnels aim at doubling railtransit capacity to 70 billion tonnes a year and to speed up transit betweennorthern and southern Europe. Total cost is expected to amount to more thanSF 15 billion. This would allow implementation of the measures requested in theApril 1994 referendum, which requests a shift of total transalpine truck traffic(from border to border) from road to rail within ten years. New taxation on heavy goods vehicles In February 1994 the Swiss electorate accepted a new article at theconstitutional level enabling the national government to introduce a newdistance and weight dependent charge on heavy goods vehicles (above3.5 tonnes total weight) to replace the existing flat rate tax. Based on thisarticle, a law was adopted introducing a new tax on such trucks. This tax isrelated to distance and weight and aims at internalising the full cost of freighttransport (infrastructure costs, noise accidents, damages to buildings andhealth). This was accepted by a referendum in September 1998. A maximumcharge will be set which will increase from SF 0.016 km-tonne in 2001 toSF 0.03 in 2005. In the second vote of 29 November 1998, the financingscheme for the four large railway investment programmes (new transalpineaxes, Railway 2000, connections to the European high-speed network, noiseprotection) was also adopted by the Swiss electorate. One-third of the taxrevenue will be given to the cantons; the remaining will be used by theConfederation for investments in rail infrastructure. In the 1999 in-depth review of the energy policies of Switzerland, the IEAstated: The Swiss government should: • Develop public transportation systems and increase their use. Strengthen

co-operation between administrations involved in energy policy and thoseinvolved in transport policy.


The federal government, as well as the cantons, places particular importanceon the need to monitor carefully and regularly and evaluate all the energyefficiency programmes and measure under their responsibility. The measuresthat have been taken are periodically evaluated to increase their effect and toencourage the learning process for all participants. The reports entitledProgramme Energie 2000, 9ème rapport annuel 1999, année sous revue, juillet1998--juin 1999, and Programme Energie 2000, Rapport final et 10ème rapportannuel, Juillet 1999-Décembre 2000 were published by the Federal Departmentof Environment, Transport, Energy and Communication. They provide adetailed examination of the progress made in implementing Energy 2000,assesses the degree of realisation of its different objectives and analyses theexpected results for each energy consuming sector both from the energyefficiency and environmental points of view. In the 1999 in-depth review of the energy policies of Switzerland, the IEAstated:


• Improve the review of the cantons’ energy policies. Promote co-operationamong cantons.

Furtherinformation

For further information, please contact: Nicole ZimmermannOffice fédéral de l'énergie OFENCH – 3003 BernTel: +41 (31) 322 56 04Fax: +41 (31) 323 25 00E-mail: [email protected]

1

TURKEY Updated August 2002 BACKGROUND Every five years the State Planning Organisation (SPO), with the assistance of

expert organisations from all sectors, including the energy sector, prepares aDevelopment Plan. The most recent Development Plan is the Eighth Five-Year Development Plan for the period 2001-2005. After approval by the Boardof Ministers the Plan was published in the Turkish Official Gazette in 2000. Energy policy objectives, largely unchanged from previous plans, are asfollows: � To ensure sufficient, reliable and economic energy supplies in order to

support economic and social development.� To maintain security of energy supply.� To encourage sufficient investments to meet growing energy demand.

Within the Eighth Five Year Development Plan, the specific measure(No. 1823) on energy efficiency reads as “with a view to control and reducethe greenhouse gas emissions originating from transport, energy, industry andsettlements, arrangements shall be made towards increasing energyefficiency and ensuring energy saving”. Energy efficiency is considered to be the cheapest energy source. Accordingto estimates of the National Energy Conservation Centre (NECC), establishedin 1992 as part of the Electric Power Resources Survey and DevelopmentAdministration (EÝE) within the Ministry of Energy and Natural Resources(MENR), potential gains through increased energy efficiency are substantial. Several government entities are directly or indirectly involved in energyconservation issues and activities. Besides the EÝE/NECC, these include theState Planning Organisation, the Ministry of Industry and Commerce, theMinistry of Reconstruction and Resettlements, the Scientific and TechnicalResearch Council, the Ministry of Public Education and the Turkish StandardsInstitute. The EÝE/NECC’s energy conservation activities concentrate on end-use sectors .

Energy and Environment

The overall objectives of energy-related environmental policies in Turkey areto ensure sufficient, reliable and economic energy supplies to supportsustainable economical and social development while protecting andimproving the environment. Energy and environment issues are addressed both in the NationalEnvironmental Action Plan (1998) and in the National Agenda 21 (2001),which are the most recent environmental policy documents. Policies regardingenergy efficiency and clean energy technologies are articulated among others. The country’s environmental policy considers that energy policy should takeinto account environmental problems and that a balance should be foundbetween increases in energy demand necessitated by economic developmentand environmental concerns. Although Turkey was a Member of the OECD in 1992 when the UNFCCC wasadopted (and as such was included among the countries of the Convention’sAnnexes I and II), it is still not fully industrialised. On the basis of thisargument, Turkey refrained until recently from being a party to the UNFCCC,and requested to be deleted from the Annexes of the Convention. It was beendecided in COP7 in Marrakech in 2001 to remove Turkey from the Annex II listand recognise its special circumstances as an Annex I Party. UNFCCC isexpected to be ratified soon in the Turkish Grand Assembly.

2

This fairly new position of Turkey will bring her some advantages, includingthe introduction of foreign investments for energy efficiency and cleantechnology projects through joint implementation, as well as emission trading.

Although Turkey has agreed in principle for a long time that it will attempt tolimit emissions, it has so far not developed a mandatory greenhouse gasabatement strategy. For this reason, there are no specific greenhouse policiessuch as carbon taxation or emissions trading schemes. Nevertheless, thereare policies, actions and other measures known to be already under way,even if most of them are undertaken for local and economic reasons. In the 2000/2001 in-depth review of the energy policies of Turkey, the IEAstated: � To reflect its respect for the spirit of the United Nations Framework

Convention on Climate Change (UNFCCC), Turkey should continuestriving to limit the growth of greenhouse gas emissions, and wherepossible take additional measures. In particular, the government shoulddevelop an implementation strategy that allows it to assume a greenhousegas emissions target no later than the second commitment period of theKyoto Protocol.

General energy and electricity planning studies are being carried out using theModel for Analysis on Energy Demand (MAED) and the Wienn AutomaticSystem Planning Package (WASP) Models. To determine the environmentalimpacts of these studies, a joint project supported by the World Bank withArgonne National Laboratory/US Department of Energy aims at designing anew energy and environment model for Turkey. Studies on this project are stillon-going and are expected to be finalised soon. Within this framework,different kind of scenarios will be set up to mitigate the emissions arising fromenergy. In the 2000/2001 in-depth review of the energy policies of Turkey, the IEAstated: The Government of Turkey should: � Increase the resources for the Ministry of the Environment and strengthen

collaboration with the Ministry of Health on air quality issues.� Continue harmonising standards and regulations for environmental quality

with those of the EU and other international bodies.


The Ministry of Energy and Natural Resources (MENR) is the mainorganisation which is responsible for formulation and implementation ofgeneral energy policies. The State Planning Organisation (DPT) also takesenergy efficiency policies into account in drafting the national plans. The General Directorate of Electrical Power Resources Survey andDevelopment Administration (EÝE), one of the major organisations under theauspices of MENR, has been involved in implementing energy conservationprogrammes and in assisting MENR to develop the related policy. A newdepartment, Energy Resources Survey Department (DERS), within EÝE wasestablished by the approval of the Ministry of Energy and Natural Resources(MENR) on March 31, 1981, to conduct studies on energy efficiency and newand renewable energy resources. DERS was entrusted by MENR inDecember 1992 with the responsibility to act as National Energy ConservationCenter (NECC) to enhance the activities on improving energy efficiency in allend-use sectors and promoting the use of solar and wind energies.

3

On the other hand, the Energy Conservation Co-ordination Board (ECCB)consisting of representatives of related ministries, governmental organisation,private sectors, universities and associations, which was established by thePrime Minister's Office on 9 April 1981, commenced its activities to promotepublic awareness of energy conservation following the second oil crisis. TheEnergy Conservation Co-ordination Board (ECCB) carries out activities suchas organising the annual Energy Conservation Week and contests forstudents to increase public awareness. The Board has functioned under thesupervision of the General Directorate of Energy Affairs of MENR since thebeginning of the 1980s. Last year supervision of ECCB was transferred toEÝE/NECC by MENR. The public sector budget for improving end-use efficiency is small and dealsmainly with NECC’s expenditures on studies, energy audits, publications andprofessional training. NECC also benefits from international loans andexpertise. ECCB is in charge of public campaigns on energy savings. In the 2000/2001 in-depth review of the energy policies of Turkey, the IEAstated: The Government of Turkey should:

� Consider enacting appropriate energy conservation laws and establish ortighten efficiency standards for industrial boilers and electric motors.Increase the resources of energy efficiency organisations.


Measures already in place and/or being improved

Heat Insulation Standards

In the residential/commercial sector, more than 80% of the energy consumedis for heating. According to an EÝE study carried out in 1997 based onquestionnaires, energy use per unit of building area could be reduced bynearly half by applying to all buildings the new Heat Insulation Standards onbuilding envelopes, issued in 1999 and effective in June 2000. (See below.) In 1985, Turkey adopted mandatory standards for heat insulation in newbuildings. However, heat losses in new buildings have been estimated at over200 kWh/m2, a high level compared to average losses in Europe. Revision of the Standard for Heat Insulation in Buildings was finalised in April1998 and issued by the Turkish Standards Institute. This new insulationstandard and supporting regulation introduced in June 2000 makes itmandatory to reduce heating requirements by 100-150 kWh/m2 a year,according to the four degree-day regions of the country. The existing buildingstock is increasing at an average rate of 5% annually. It is expected that a50% improvement in energy efficiency in new buildings will be achieved. For existing buildings, a code was developed by EÝE/NECC with theparticipation of various governmental organisations and private sectorcompanies and submitted to MENR in July 2001. It is now underconsideration in the Ministry.

Boilers and Stoves

Boilers and stoves using wood, coal or fuel oil need a certificate based on atest of heat efficiency. The heat efficiency certificates are issued jointly by theMinistry of Industry and Trade and the Turkish Standards Institute. Productsnot having this certificate cannot be marketed.

4

Information EÝE/NECC has been conducting various kinds of promotional studies. In thiscontext, approximately 60 publications were published (Industrial EnergyManagement Course Book (four parts), Series of Technical Tips, TechnicalManuals are a few that can be mentioned). The technical manual is the mostpopular publication; it was also used in the universities as a source book forenergy management lectures. These publications have been distributed toindividuals and industrial establishments at their request at a reasonable cost.,Videos and posters were also prepared and distributed nation-wide byEÝE/NECC free of charge. Moreover, various national and internationalseminars, conferences, and workshops have been organised, mainly co-ordinated by EÝE/NECC. One of the recent main energy conservationawareness activities of EÝE/NECC is energy conservation project contests inindustry run over the last two years. Successful Energy Conservation ProjectAwards have been presented to the winners by the President and the Minister.Last year the theme of the Project Award was “The successful case inCogeneration”. Awards were presented by Ministers on 23 May 2002. Every year for the past 20 years, energy conservation week activities havebeen organised by ECCB, MENR and EÝE/NECC. These activities covervarious contests among schools, and seminars and conferences related toenergy conservation in different sectors. At the 2002 Energy Saving Week, inJanuary, the Board organised television programmes on energy efficiency.

ECCB meets every month and prepares plans for activities with the aim ofincreasing public awareness of energy conservation. In 2002, the Turkishradio and television organisation will prepare six TV spots on energy efficiencysubjects with the financial support of some private sector associations,members of the Board. Contests on painting, essay and projects on energyconservation for primary and high schools have also been organised over thelast ten years with the co-operation of the Ministry of National Education. Theawards for the winners were distributed at the Energy Conservation Week bythe Ministers of National Education and Energy and Natural Resources. In 2001 a seminar programme was initiated by EÝE/NECC for primary andhigh schools. Every year, seminars on energy conservation and efficiency inheat and electricity consumption have been organised in several schoolsSeminars are also run at public institutions at their requests.

The publications and posters on energy conservation in the buildings sectorprepared by EÝE/NECC are distributed at the conferences, meetings andseminars. In addition, an Internet link has been established to facilitate the flow ofinformation between the energy managers of the plants and EÝE/NECC.


Energy Survey During 1998 and 2000, in Cupertino, a study was carried out by the StateStatistical Institute (SSI) on the analysis of energy consumption in residentialbuildings in all geographical regions of Turkey. In this project, a representativesampling method was used and energy consumption analysed in terms of fueland electricity, the insulation status, heating systems and the structuralproperties of the residential buildings. SSI evaluated the statistical datacollected and the report was submitted to EÝE in 2001. On the basis of a survey of 11.5 million residential buildings in Turkey, 10% ofthe buildings are provided with roof insulation while 9% with double-glazing.Therefore, for the purpose of improving energy efficiency in buildings utmostpriority has been assigned to legislative measures.

5

Energy Labelling/ Standards

Under the co-ordination and supervision of EÝE/NECC, and with theparticipation of representatives of the related manufacturers and publicorganisations, working groups have been set up on energy efficiency ofhousehold appliances, air conditioners and lightning. The related analyticwork reveals that new regulations are needed to increase energy efficiency forthe afore-mentioned equipment. In this context, studies to prepare energyefficiency labelling standards and regulations for electrical appliances havealready been initiated by the Turkish Standards Institute and the Ministry ofIndustry and Trade within the framework of the Harmonisation Programme forEU legislation. Regulation on energy efficiency labelling for refrigerators wasissued on 24 March 2002. The other labelling regulations related to washingmachines, dryers, dish washers and lamps have been prepared and shouldsoon be published by the Ministry of Trade and Industry.

The energy efficiency regulation for outdoor (street) lighting is under review. In the 2000/2001 in-depth review of the energy policies of Turkey, the IEAstated: The Government of Turkey should: � Enhance Turkey's participation in international co-operation programmes

on energy efficiency, in particular on efficiency standards and labels forhousehold appliances and motor vehicles.

Subsidies In the 2000/2001 in-depth review of the energy policies of Turkey, the IEA

stated: The Government of Turkey should: - Consider establishing fiscal and economic incentives for conservation

measures in all sectors.

INDUSTRY Measures already in place and/or being improved

In a 1996 study, EÝE/NECC assessed the potential for energy conservation inindustry at 4.2 million toe (nearly 24% of industrial energy use that year) andan approximate cash value of $1 billion/year. The total investment required toachieve this conservation potential would be close to $2.3 billion. The paybackperiod for these investments would range from a minimum of one year to amaximum of three years. The measures required to bring these savings aboutwould include the adoption of various forms of waste heat recovery, increaseduse of co-generation of electricity and heat/steam, and the use of moreefficient boilers.

Energy Bus Programme

Since 1990, EÝE/NECC’s Energy Audit Teams have been conducting energyaudits (the Energy Bus Programme) in various plants of the Turkish industrialsector with vehicles equipped with the appropriate measuring equipment. Thesurveys, of approximately one week duration, have usually been carried outby teams of three engineers in the factories. The main objectives of theenergy audits focused on creating energy conservation awareness in industry-- assisting the establishment of energy management units and identifyingenergy efficiency projects in their plants, making surveys and compiling datato identify the energy saving potentials of sectors and industry as a whole.

The Energy Bus Programme, carried out at the pre-audit level, consists offollowing stages:

� Receiving application from the factory.

6

� Pre-visit to the plant.� Confirmation of the study.� Data collection and measurement.� Data analysis and energy conservation projects identification.� Pre-audit report submission

Up to date energy audits were conducted at approximately 70 plants both byNECC team and foreign consultant firms. Fifteen plants were visited in thefood, textile and iron-steel sectors in the 2001-2002 period. Moreover, TUBİTAK (the Scientific and Technical Research Council ofTurkey) has conducted detail energy audits in different sectors. In recentyears, TUBİTAK carried out approximately ten energy audits in energyintensive industry such as the cement and iron and steel sectors with the co-operation of Istanbul Technical University.

Training Bus Programme

Under the NECC Training Bus Programme initiated in 1993, approximately700 engineers had already been trained by the end of 2000 in energyefficiency subjects such as insulation, boiler house combustion, electrical andsteam systems. Seminar notes and technical manuals were prepared.

Energy Management

To increase energy efficiency in industry, MENR issued a Decree inNovember 1995, providing for non-mandatory measures concerning industrialplants, i.e. private and public enterprises, including mining which consumesmore than 2 ktoe of energy per year, with the aim of establishing an energymanagement organisation within the plant: � The largest consuming plants should nominate an Energy Control

Committee; smaller plants should nominate an Energy Manager.� The managers of these plants should complete energy audits within three

years. The results of the audits should be submitted to NECC.� These plants should take the measures, adapted in co-operation with

NECC, to improve energy efficiency during operations and to take intoaccount this objective when the plants are expanded or modernised.

� The plants should monitor the results of the measures and report annuallyto NECC on the evolution of energy savings for the plant’s three mainproducts.

� NECC will either organise professional training or give authorisation toorganisations for training at these plants.

Thus, NECC organised Energy Management courses in 1997 and authorisedthree organisations in İzmir, Istanbul and Eskişehir to extend these coursesnation-wide. To date, nearly 457 engineers from different industrial sectorshave been trained as energy managers in the courses organised by EÝEand/or other authorised organisations. Furthermore, Energy Management hasbeen included in the curricula of the engineering faculties of some universities.

According to the regulation, approximately 500 out of a total of 600 plantshave appointed energy managers. To date, energy management courseshave been organised in the iron and steel, arc furnaces, paper, cement,textile, fertilizer, food, ceramic and non-ferrous metal sectors by both NECCand the three authorised organisations. A total of 457 energy managers havecompleted these courses. Energy managers have started to monitor specificenergy consumption in their plants. A project was started in August 2000 in co-operation with NECC and JICA toestablish a new training centre with a model plant for energy conservation.The construction and installation of the training centre and model plant hasbeen completed and NECC’s personnel trained to operate the model plant.The training centre started its activities in October 2001. It is planned that

7

most energy managers will be trained over a five-year period through thisproject. It is expected that the programme will increase energy efficiency by10% throughout Turkish industry by 2010. The Energy Conservation Training Center was established as an integral partof EÝE/NECC within the scope of the Energy Conservation Project, carriedout jointly by JICA and EÝE/NECC since August 2000. It provides trainingprogrammes, not only Turkish industry but also to neighbouring countries. Thefirst international energy managers course was held in Cupertino with UN-ESCAP on 4-14 June 2002 for participants from central and west Asiancountries.

In the 2000/2001 in-depth review of the energy policies of Turkey, the IEAstated: The Government of Turkey should: � Expand energy auditing programmes for industry, commercial enterprises

and homes, information campaigns and training of energy managers.� Promote the formation of energy service companies to invest in such

opportunities.

DSM

Some publications on electrical energy savings have been prepared and aregulation on day and night electric tariffs in residential sector issued.


At present, 113 auto-producers, mostly co-generation plants in industry,generate an annual power output of 18 billion kWh which constitutes 14% oftotal electricity production with an installed capacity of 3 350 MW. Applicationsfor auto-producer plants with a total installed capacity of 8 750 MW have beenreceived by MENR. The “Electricity Market Law” (Law No. 4628) came into effect on 3 March 2001for the purpose of unbundling, generation, transmission and distributionactivities and to ensure progress towards a liberalised electricity market withinthe framework of fair, transparent and non-discriminatory market conditions.Through the latest reforms, the power sector will soon undergo much moreprofound reform than ever before, leading to the introduction of competitionand increasing private involvement. Within the framework of the Law, auto-producers are being considered and encouraged.

Database Survey

In 1995, EÝE gave technical assistance to the State Statistical Institute (SSI)during the establishment of the Institute's energy statistics division. With thepurpose of monitoring energy consumption in the industrial sector, a projectwas initiated in Cupertino with SSI and SPO to compile a new data basesystem for information on plants consuming annually 500 toe or more energy.Evaluation of the information for the period 1995-1998 has been finalised andthe results published by SSI. The evaluations for the years of 1999 and 2000are under way.

A comprehensive industrial data base survey has been launched by NECC inco-operation with SSI to define energy consumption, energy saving potential,the energy management approach and systems and technical infrastructure inthe industrial sector such as boilers, motors and furnaces. Within the scope ofthis study, questionnaires were sent to 1 300 manufacturers who consumemore than 500 toe of energy. The first data collection for 1995 was publishedat the end of 1997. The survey will provide the data necessary for theelaboration of energy efficiency indicators for the industrial sector.

8

PUBLIC SECTOR

Government Buildings

In accordance with the circular entitled Measures to be taken byGovernmental Organisations and Institutions in order to reduce their energyconsumption issued by the Prime Minister, all governmental organisationshave prepared annual reports on energy consumption in their buildings.These reports were sent to EÝE/NECC by the Ministry and evaluated byNECC. These studies will also continue for the next few years. In 1999,information concerning 2 037 governmental buildings was evaluated.According to the evaluation results, the energy consumption of these buildingswas very high (more than 250 kWh per square metre); 48% of them havedouble-glazing and 40% have roof insulation. For the next heating season, atraining seminar was organised in Ankara in September 2001, co-ordinated byMENR and EÝE/NECC, for governmental buildings. Similar seminars areplanned for the other regions of Turkey in the coming years. Another project will soon be started in co-operation with the German TechnicalOrganisation (GTZ), the Erzurum Municipality and EÝE/NECC. The durationof this project will be three years. Its aim is to enable municipal authorities aswell as users of public and private buildings to take measures designed toreduce the use of energy in buildings. Implementation of the project will berealised in Erzurum and studies related to standards, regulations and trainingwill be carried out in Ankara.


Vehicle Testing

In 1992, the Ministry of Environment issued a regulation providing foremissions testing for cars, trucks and vans. The regulation imposes penaltiesfor non-compliance with the maximum emissions allowed. Emissions testingis mandatory for the sale of used vehicles. However, this testing does notinclude any energy efficiency control.

Road Transport

The first stage of Ankara’s subway was inaugurated in September 1996 and isnow being expanded. Another subway is also in use and additional lines arebeing built in Istanbul.

Railway The government plans to increase the number of modern locomotives and thelength of electrified rails. It also plans to increase the operating efficiency ofthe public railway company and to reduce its losses.


Energy Survey

A statistical survey of energy consumption patterns in the transport sector for1998 was carried out by the State Statistical Institute in Cupertino togetherwith EÝE/NECC. The final report was submitted to EÝE in 2001.


In the 2000/2001 in-depth review of the energy policies of Turkey, the IEAstated: The Government of Turkey should: � Closely monitor energy supply and demand and revise the forecasts to

take account of the progress of liberalisation, energy efficiencyimprovements, structural changes in industry and other major factors inorder to better inform all players' investment.

9

Although, there is not yet a regular or systematic nation-wide energy efficiencymonitoring system in Turkey, certain statistical studies have been carried outby EÝE/NECC and SIS to analyse energy consumption patterns in sub-sectors.

Industrial energy consumption surveys covering about 1 200 industrialestablishments were conducted by SIS in Cupertino, together withEÝE/NECC, in the years 1995, 1996, 1997 and 1998. The results of thesurvey reveal that the total amount of energy consumed by the establishmentswith an annual energy consumption of 500 TEP and over, constitutes nearly75% of the total energy consumption in the industrial sector. Results of thestudies are also used to assess industrial energy efficiency potential.

For several reasons it is very difficult to estimate accurately the amount ofenergy savings achieved. The main reason is the very large fluctuationsoccurring in the number of industrial establishments and capacity utilisationrate observed in recent years.

However, EÝE/NECC has developed an Energy Managers Database basedon the regulation issued in November 1995 (Measures to be taken to IncreaseEnergy Efficiency in Industrial Establishments). The database has been usedto follow up energy management activities in industrial establishments.Compared to the situation in 1997, it has been observed that almost allindustrial establishment have taken measures for energy conservation andrealised the projects; in addition, energy efficiency targets have been definedfor particularly large industrial establishments for the coming years.

At the end of 1997, a nation-wide statistical study for the analysis of energyconsumption in residential buildings was implemented by SIS. It is envisagedthat the consolidated data from the survey would be used to assess theenergy efficiency status in the building sector.

In pursuance of the circular issued by the Prime Minister's Office in November1997, all government organisations are obliged to prepare annual reportsregarding energy consumption of their premises and to transmit these reportsto the Ministry of Energy and Natural Resources. These reports are thenforwarded to EÝE Administration by the MENR for evaluation. The review andevaluation studies, performed by EÝE/NECC, will continue in the future.

Furtherinformation

For further information, please contact: Ms. Tulin KeskinIndustrial Energy Conservation Division ManagerEÝE/National Energy Conservation CenterEÝE Gen.Müd.Eskisehir Yolu06520 AnkaraTel.: +90 (312) 28 784 51Fax: +90 (312) 28 692 84E-mail: [email protected]


1

UNITEDKINGDOM

Updated March 2003

BACKGROUND The United Kingdom met its commitment under the UN FrameworkConvention on Climate Change (FCCC) of returning emissions of CO2 andother greenhouse gases (GHG) to 1990 levels by the year 2000.

Energyand theEnvironment

At the Third Conference of the Parties (Kyoto, December 1997) the EuropeanUnion as a whole agreed to reduce the emissions of a basket of six gases by8% from 1990 levels by the period 2008-2012. In June 1998, the EuropeanUnion Council of Environment Ministers reached a Burden-Sharing Agreementon emission reduction commitments to re-allocate internally the 8% reductionagreed at Kyoto. The reduction commitments are expressed as a percentageof 1990 levels for the 2008-2012 period. Under the Burden-SharingAgreement, the UK is committed to reducing its emissions by 12.5%. Thegovernment has also set itself a challenging domestic target to reduce CO2

emissions to 20% below 1990 levels by 2010.

The UK signed the FCCC at Rio de Janeiro in 1992 and submitted its firstnational communication in February 1994. In compliance with the FCCCobligations, the UK’s second and third national communications werepublished in February 1997 and October 2001 respectively. Following a periodof consultation with a wide range of stakeholders, the UK government,together with the devolved administrations, published the UK Climate ChangeProgramme in November 2000. Further details on the final version can befound at http://www.defra.gov.uk/environment/climatechange/cm4913/index.htm

The third national communication reports on the progress made to implementpolicies to reduce emissions, and with policies to adapt to the impacts ofclimate change. It provides additional information about the financialassistance that the UK provides to developing countries, and the leading rolethat the UK has been taking on research and systematic observation.

UK ClimateChangeProgramme

The UK Climate Change Programme aims to:

• Deliver the UK’s legally binding target under the Kyoto Protocol. Thepolicies and measures that it sets out could cut greenhouse gas emissionsby an estimated 23% below 1990 levels by 2010. This means that carbondioxide emissions alone could be reduced by an estimated 19% below1990 levels by 2010. Together with policies whose impact has not beenquantified, the measures could also achieve the domestic goal.

• Set out a package of cost-effective, flexible policies and measures in whichall sectors of the UK’s economy play their part. The package aims tosafeguard and enhance the UK’s competitiveness and deliver widerbenefits through lower energy costs for businesses and people, as well asthrough less fuel poverty, improved air quality, reduced risk to health, andnew business and export opportunities.

• Respond to the need for action to cut emissions in the longer term (beyond2010) by putting in place policies that give clear signals about the changesthat will be required.

Planned measures relating to energy efficiency are summarised below anddescribed in detail in the text on specific sectors.

Key elements ofthe UK ClimateChange Strategy

IndustryIssues

The following actions have been taken; for more information, see below underIndustry.


2

• The Carbon Trust was established in April 2001 as a non-profit organisationto lead on business and public sector energy efficiency and support thecreation of a low carbon economy in the UK. The Carbon Trust nowmanage the non-domestic part of the old Energy Efficiency Best Practiceprogramme re-launched as Action Energy. Action Energy provides energyefficiency advice and support to business and the public sector.

• The Climate Change Levy (CCL) effective from 1 April 2001 aims toencourage energy efficiency and help meet the United Kingdom's targets toreduce GHG emissions.

• The Climate Change Agreements between energy-intensive sectors ofindustry and the Secretary of State are a new policy mechanism forachieving environmental objectives.

• The Enhanced Capital Allowances Scheme introduced on 1 April 2001gives 100% capital allowance in the first year for investments in any of thetechnologies in the published list.

BuildingsIssues

The UK Climate Change Programme related to the residential/commercialsectors includes the following issues:

• A review and tightening of the energy efficiency requirements in theBuilding Regulations (Part L).

• Enhancements to the Standard Assessment Procedure (SAP) as a ratingtool for housing.

• Input to the development of the proposed EU Directive on the EnergyPerformance of Buildings.

• New Home Energy Efficiency Scheme (Warm Front).• Public Sector Targets.• Energy Efficiency Commitments.

All these policies and measures will be dealt with below under the sectionsResidential/Commercial and Industry.

TransportIssues

The UK Climate Change Programme aims at cutting emissions from thetransport sector through:

• The UK Powering Future Vehicles Strategy, which sets the framework forpromoting the development, introduction and take-up of low carbonvehicles and fuels.

• European-level agreements with car manufacturers to improve the averagefuel efficiency of new cars by at least 25% by 2008-2009, backed up bychanges to vehicle excise duty and the reform of company car taxation andbetter information for consumers to encourage the purchase of more fuel-efficient vehicles.

• Transport 2010, the 10 Year Plan: £180 billion1 of investment and publicspending on transport over the next ten years to cut congestion and reducepollution (see below under Transport)

Performance andInnovationUnit (PIU)Review

On 25 June 2001, the government announced that the Performance andInnovation Unit (PIU), attached to the Cabinet Office, was to carry out a reviewof the strategic energy policy issues for Great Britain. The review was setwithin the context of meeting the challenge of global warming, while ensuringsecure, diverse and reliable energy supplies at competitive prices. The mainaim of the review was to set out the objectives of future energy policy and todevelop a strategy that ensures current policy commitments are consistentwith longer-term economic, environmental and social goals. The reviewconsidered the role of coal, gas, oil and renewable sources of energy in theUK’s future energy balance as well as combined heat and power and theenhancement of energy efficiency. The review also considered what role, ifany, the nuclear industry should play in meeting the objectives of the

1 On average in 2001, £1 = US$ 1.441.

3

environment and security of supply.

The project’s findings are expected to greatly influence the government’sfuture policy on security and diversity of energy supply and on climate change.The PIU Review Team reported to the Prime Minister at the end of 2001, andthe PIU review was published in February 2002.

The PIU project stated three main energy policy challenges and attempts todevelop ways of addressing these. The government also underlined thatcompetitive markets will continue to be central to energy policy. The threechallenges are:

• Managing potential conflict between energy and environmental objectives.Meeting the long-term targets for emissions reductions, whilst ensuringfuture projections for energy demand are met, is thought to requirefundamental changes in energy and fuel markets, the management ofenergy demand, the development of new technologies, infrastructure andpolicy.

• Ensuring continued security and diversity of energy supplies over the long-term including ensuring appropriate investment incentives to maintainsufficient spare capacity to be able to cope with supply shocks, especiallywithin the regulatory regimes for the energy utilities.

• Managing potentially conflicting policy goals for energy prices. Whereashigher energy prices could be a potent instrument for advancingenvironmental objectives, they are in potential conflict with fuel poverty andindustrial competitiveness objectives (see below).

The review put forward a programme to accelerate the UK’s energy efficiencyimprovements. At its centre was the suggestion of a challenging new target toimprove domestic consumers' energy efficiency by 20% between 2002 and2010, and by a further 20% between 2010 and 2020. This would approximatelydouble the existing rate of improvement. The gains in terms of energy savingsin a year could reach about 0.25% of GDP by 2020, over and above the cost ofthe investment needed to unlock these savings.

See http://www.cabinet-office.gov.uk/innovation/2002/energy/report/index.htmfor further details on the PIU report.

Energy WhitePaper - OurEnergy Future –Creating a LowCarbon Economy

In response to the PIU report, a public consultation was launched to considerthe issues raised and help inform the development of a new energy strategyfor the UK, the Energy White Paper. This consultation, which closed on13 September 2002, received submissions from over 6 500 individuals andorganisations The White Paper was published on 24 February 2003 and is thefirst comprehensive, forward-looking statement of energy policy in the UK forover 20 years.

A major underlying theme of the White Paper is the need for the country tomove towards a low carbon economy. To this end, the government hasaccepted a recommendation made in the Royal Commission on EnvironmentalPollution’s (RCEP) 22nd report in 2000 that the UK should put itself on a path toa reduction in carbon dioxide emissions of some 60% from current levels byabout 2050, with real progress by 2020. (A formal response to the RCEPreport was published alongside the White Paper.) Other key messagesrelating to energy efficiency in the White Paper include:

• Energy Efficiency will have a key role to play in achieving the UK’s carbonreduction goals. The government expects more than half the emissionsreductions in the existing Climate Change Programme – around 10 MtC perannum by 2010 – to come from energy efficiency. Further ahead, thegovernment believes that energy efficiency can contribute around half ofthe additional 15-25 MtC savings likely to be needed by 2020.

4

• The current Energy Efficiency Commitment (EEC) runs until 2005. Thegovernment will consult on an expansion of the EEC to run from 2005 to atleast 2008, possibly at twice its current level of activity. A possibleextension of the EEC beyond the domestic sector will also be considered.

• The government will continue to work with the English Fuel PovertyAdvisory Group to find the most effective ways to deliver the Fuel PovertyStrategy objectives, including the target that no household in Britain shouldbe living in fuel poverty by 2016-2018.

• The government remains committed to a target of 10 GWe of good qualitycombined heat and power being installed by 2010. Further measures willalso be introduced to help address the current market difficulties andsupport the achievement of our target.

• The government will strengthen its analytical and strategic capabilities inthe field of energy policy to ensure that the aims it has set out in the WhitePaper are delivered. This will be achieved through the establishment of aSustainable Energy Policy Network (SEPN) of departmental policy units.The Department of Trade and Industry (DTI), the Department ofEnvironment, Food and Rural Affairs (Defra), the Foreign andCommonwealth Office (FCO), Treasury, Office of the Deputy PrimeMinister (ODPM), the Department of Transport (DfT) and the DevolvedAdministrations are all likely to be involved in this network.

See http://www.dti.gov.uk/energy/whitepaper/.


Measures alreadyExisting and/orBeing improved

BuildingRegulations

Minimum legal requirements for the energy performance of new buildings havebeen in force since 1965, with the standards tightened regularly every fewyears. The current building regulations, which came into force in July 1995,raised the minimum standard so that new buildings must be 25-35% moreenergy-efficient than before.

In January 1998 the government commissioned a further comprehensivereview to explore the practical possibilities of regulating the existing stock ofbuildings, as well as further improving standards for new construction. Specialconsultation procedures were set up in order to involve all parts of the industryand energy activists throughout the review process.

Proposals for revisions to the regulations were published in June 2000 forfurther consultation. As a result, the government laid down the Building(Amendment) Regulations before Parliament on 11 October 2001 (SI 2001 No3335); the accompanying Approved Documents L1 and L2 that give guidanceon ways of meeting the requirements were published on 31 October 2001.These changes came into effect on 1 April 2002. The new Regulations forman important part of the Climate Change Programme and include a number ofenhanced features. New dwellings will be required to meet improvedstandards of insulation and heating and a new standard for lighting. Differentroutes to compliance are available, including the use, for housing, of theCarbon Index Method, calculated following the SAP procedure (see below).For buildings other than dwellings, similar improvements are required forinsulation and there are new requirements for heating, lighting and air-conditioning, including the provision of energy meters, and testing andcommissioning. A Carbon Performance Rating Method is included in thedocuments as a way of showing compliance for office buildings and there areother ways of carbon accounting for other types of buildings.

5

StandardAssessmentProcedure(SAP)

The Standard Assessment Procedure (SAP), introduced in July 1995, is thegovernment standard for home energy rating. Under the Building Regulations,new dwellings and conversions in England and Wales have since 1995 beenrequired to have a SAP Energy Rating. The government is also working withmortgage lenders to encourage them to incorporate SAP energy ratings andenergy efficiency advice into their survey reports and to offer "green loans" orother financial services to improve energy efficiency. The government is alsoworking with house-builders to encourage them to use high SAP ratings as ameans of promoting the achievements of those in construction already buildingto high standards of energy efficiency and to encourage others to follow theirexample. A new version of SAP was published in 2001, updating thecalculation tables and incorporating additional features such as an extendedscale (to encourage even higher standards) and a carbon index to be used forthe new Building Regulations (see above).

EnergyEfficiencyLabelling

To comply with EU directives on mandatory energy labelling for domesticappliances, the UK has instigated regulations for refrigeration appliances,washing machines, washer-dryers and tumble dryers. Regulations requiringlabels for light bulbs have been in force since 1 July 1999 and for dishwasherssince 8 July 1999. An EC directive was adopted on 27 January 1998.

EnergyEfficiencyStandards

Minimum energy efficiency standards for refrigerators and freezers have beenin place since 3 September 1997 to comply with EU directives. Similarstandards came into force for fluorescent lighting ballasts on 21 May 2002.

For new central heating boilers, a transitional period operated from 1 January1994 to 31 December 1997 when manufacturers could supply compliant ornon-compliant boilers. From 1 January 1998, all boilers have to comply withthe requirements of the directive.

The new Climate Change Programme plans the development of energy labels,standards and other product-related measures designed to deliver "markettransformation" in the energy efficiency of lighting, appliances and other keytraded goods.

EnergySaving Trust

The Energy Saving Trust (EST) is an independent non-profit-makingorganisation set up in 1992 by the UK government, British Gas and the Britishpublic electricity suppliers to develop and manage new programmes topromote the efficient use of energy in the domestic and small businesssectors. The Trust works to promote, through partnership, the sustainable andefficient use of energy, spreading the message of energy efficiency throughadvertising programmes, advice centres and the endorsement of energyefficient products. The Trust is also active in promoting energy services, andencouraging local authorities to develop energy efficiency strategies.

In April 2000, the Energy Efficiency Partnership for Homes was launched bythe Trust. The Partnership, which is facilitated by the Trust, brings together allthose with an interest in promoting domestic energy efficiency and aims tocreate a long-term framework for implementing energy efficiency in homes.

Government funding for the Trust in 2002-03 was made up of over £24 millionfor work with the domestic and small business sectors and over £29 million ontransport-related programmes. The Trust also levers in considerable sums ofinvestment from outside bodies – an estimated £75 million in 2000-01.

By March 2001, the Trust’s programmes had levered in a minimum of £350million in investment from non-Departmental sources; stimulated some300 000 installations of energy saving devices and provided advice and energyservices to over one million individuals and organisations. Between 1996 and2001, government-funded EST programmes achieved energy savings of over4 000 GWh.

6

In 2000, a review of the Trust's government funded programme concluded thatthe Trust has a valuable contribution to make to the government's objectives inpromoting energy efficiency and that there was a continuing case forgovernment funding in pursuit of those objectives which cannot be madethrough other funding sources. No major weaknesses were identified by thereview, which was carried out by Defra's in-house consultancy unit.

“Warm Front” --New HomeEnergy EfficiencyScheme

Warm Front is a radical reshaping of the former HEES (Home EnergyEfficiency Scheme) which it replaced on 1 June 2000. It offers completepackages of home insulation and heating improvements to those householdsmost vulnerable to cold-related ill health. The package offered to a householdis tailored to the property type.

Warm Front has two levels of assistance, acknowledging that the poorer over-60s are unlikely to see significant increases in income as in other groups. Thetwo levels are:

• Warm Front – for households with children under 16 and in receipt of anincome-related benefit or a disablement benefit. Some 4 millionhouseholds are eligible. The maximum grant is £700 for households usingmains gas, solid fuel, oil or off-peak electricity for heating. For householdsusing more expensive on-peak electric, bottled gas or paraffin for heating,the maximum grant is £1 500.

• Warm Front Plus – for the over-60s in receipt of certain income-relatedbenefits. Some 3.7 million households are thought to be eligible. Themeasures now include central heating systems for the main living areas.The maximum grant is £2 500. Gas central heating systems are providedto owner-occupiers and private rented tenants. Warm Front will meet allinstallation and maintenance costs through the period of the lease.

The focus of the scheme reflects that the private sector has the greatest need,with nearly 70% of the fuel poor. In the early part of the scheme assistancewas also made available to the social sector up to a maximum value of £45million or support over two years whichever came sooner. No newapplications for support in the social sector were accepted after October 2001.

This is a devolved area and Warm Front operates in England only. Wales,Scotland and Northern Ireland have their own programmes.

UK FuelPovertyStrategy

Among the most important policy initiatives in UK energy policy is the UK FuelPoverty Strategy launched by the government on 21 November 20012. Thephenomenon of fuel poverty in the UK is the result of a combination of multiplefactors. The UK housing stock is the oldest in Europe, and especially olderresidential buildings and houses are poorly insulated as well as difficult toinsulate. Low-income households spend a comparatively large part of theirbudget on space heating in any case, but in addition they are drawn to the low-rent, poorly insulated end of the housing market, which is more expensive toheat than the average housing stock.

Hence, fuel poverty stems from many factors, including the state of thehousing stock, available income (including social security benefits) and itsdistribution, as well as energy prices. The government has defined a fuel-poorhousehold as “one that cannot afford to keep adequately warm at reasonablecost”, i.e. one that needs to spend more than 10% of its income on all fuel useand to heat its home to an adequate standard of warmth. Adequate standardsof warmth are defined as 21 C in the living room and 18 C in the otheroccupied rooms, in accordance with the temperatures recommended by theWorld Health Organisation. Taking into account the above definition, thenumber of fuel-poor households in England in 2000 was 3.9 million if housing

2 Department of Environment, Food and Rural Affairs (Defra), Department of Trade and Industry (DTI): The UKFuel Poverty Strategy. London, November 2001.

7

benefits were not included as part of income and 2.8 million if they were. In1998, the same numbers were 4.5 million and 3.3 million, respectively on thesame basis. In 1996, the number of fuel poor households in the UK wasestimated to have been around 5½ million on the first basis.

Households inhabited by the elderly, by children and by the chronically sick ordisabled are particularly vulnerable to fuel poverty. In 2000, this vulnerablegroup was estimated at 2.2 million to 2.4 million households if housing benefitswere included as part of income, and 3.1 million to 3.3 million if they were not.

The government has set out in its 2001 Fuel Poverty Strategy document howit, and, in particular, DTI, Defra and the devolved administrations, intend toreduce fuel poverty in the UK. The document sets a target to seek an end tofuel poverty for vulnerable households by 2010. Fuel poverty in other, lessvulnerable households will be tackled once progress is made on the prioritygroup. The specific interim targets are:

• England: by 2004, the government aims to have assisted 800 000vulnerable households through Warm Front to reduce the number of non-decent social sector homes by one-third.

• Scotland: by 2006, the government aims to ensure that all pensionerhouseholds and tenants in the social rented sector live in centrally heatedand well-insulated homes.

• Wales: by March 2004, the government aims to have assisted 38 000 likelyfuel-poor households through Warm Front in Wales.

• Northern Ireland: by 2006, the government aims to have assisted at least40 000 households in fuel poverty through the new Warm Homes Schemeand partnership programmes.

In the 2002 in-depth review of the energy policies of the United Kingdom, theIEA stated:

The Government of the United Kingdom should:

• Avoid, where possible, using energy policy measures to pursue social andother policy objectives. If this is unavoidable, clearly delineate the trade-offs and costs of such measures.

The Market Transformation Programme is a policy research, development andsupport programme funded by Defra to improve the availability, adoption anduse of domestic appliances and traded goods in the commercial sector thatuse less energy and do less harm to the environment. To date, the programmehas established sector reviews in ten major sectors, covering 27 producttypes, representing 75% of UK electricity consumption. It is also seeking todevelop and implement practical policy measures, such as mandatory energylabels, minimum energy efficiency standards and voluntary agreementsnegotiated with manufacturers within the framework of the EuropeanCommission. Defra monitors the product sales changes resulting from thisprogramme.

AffordableWarmthProgramme

Transco’s Affordable Warmth Programme aims to tackle fuel poverty byhelping registered housing associations and local authorities to install gasenergy efficient heating systems in up to 1 million homes through the use oflease finance.

This new approach, developed by Transco plc, the national gas pipelineoperator, required a change in the tax rules relating to the leasing of heatingequipment. The new rules mean that Affordable Warmth leases, which aretargeted at local authorities and Registered Social Landlords (RSLs), are a fuelpoverty/energy efficiency programme attractive to both landlord and tenant,because the installation is cheaper (owing to the lease basis and capital

8

allowances) and can be financed more flexibly. Transco is redesigning thefinancial framework which will allow a further reduction in cost. Moreinformation can be found at www.affordablewarmth.co.uk .

DesignAdviceService

The Design Advice Service offers professional, independent and objectiveadvice on the energy-efficient and environmentally conscious design ofbuildings. The service covers both new-build and refurbishment projects andis part of the Action Energy programme managed by the Carbon Trust.

Are you doingyour bit?

The Are you doing your bit? multi-million pound publicity campaign waslaunched in 1998 with the aim of motivating people to make small butimportant behavioural changes in their everyday lives to benefit their local andglobal environment. Simple campaign messages encourage individuals to“Fight global change by saving energy” and to:

• Reduce local pollution by changing the way we travel.• Reduce waste.• Conserve water

In addition to encouraging individual action, the campaign, through its nationalmedia presence and promotional activity, supports partners' initiatives byraising the profile of environmental issues and providing a cohesive "umbrella"branding. More information can be found at: www.doingyourbit.org.uk



• Pursue its involvement in the residential/commercial sector to promoteenergy efficiency while avoiding duplication. Reinforce the energyefficiency measures targeted at the commercial sector, in particularoffices.

PUBLIC SECTOR


The public sector – including central and local government, schools, hospitalsand universities – accounts for a relatively small percentage of the UK’s totalgreenhouse gas emissions, less than 5%. It has a responsibility to lead byexample in reducing emissions of greenhouse gases and is subject to theclimate change levy. This gives an added impetus for managers to ensurethat energy is used efficiently.

A number of energy consumption targets have been set for the public sector.

CentralGovernment

The government set a target for reducing energy consumption in its ownbuildings by 20% on 1990/91 levels. By March 2000, savings of 17% had beenmade, equivalent to just over 0.3 million tonnes of carbon. The governmenthas now set a new target of reducing CO2 emissions from its estate by 1% ayear against 1999-2000 levels and expects to introduce a new energy savingstarget in due course, based on the results of the current exercise tobenchmark its estate.

Education UK Climate Change Programme gave a commitment to benchmark schoolsand improve their energy management over a five-year period. It is expectedthis will lead to 10% energy savings, equivalent to a reduction of 0.16 milliontonnes of carbon over the next nine years.

HealthSector

The government has set a mandatory target for National Health Service (NHS)bodies in England to reduce primary energy consumption by 15% of 2000levels by 2010 (equivalent to 0.15 million tonnes of carbon).

9

Local Authorities

Home EnergyConservationAct 1995

The Home Energy Conservation Act (HECA) 1995 requires all UK localauthorities with housing responsibilities to prepare, publish and submit to theSecretary of State, an energy conservation report identifying energyconservation measures which they consider practicable, cost-effective andlikely to result in significant improvement in the energy efficiency of allresidential accommodation in its area. Significant improvement was defined inguidance as 30% (34% in Northern Ireland) over ten years from an agreedbaseline of either April 1996 or April 1997. Authorities have developed theirstrategies and set targets for improving energy efficiency. Using the help andguidance available through central government programmes, and by buildingon their existing activities and developing partnerships, authorities are nowimplementing the measures identified in their strategies and reporting onprogress being made. In the first four years to March 2000, authoritiesreported an overall energy efficiency improvement in the domestic sector ofjust over 6%.

EnergySavingTrust

The Energy Saving Trust is establishing effective methods for generatinginterest, capacity and action within local authorities to enable them to takeforward the challenges raised by HECA and the climate change programme.The Trust’s programme is designed to identify and pilot a range of supportactivities for local authorities, including infrastructure support and grantfunding, and to enable and encourage local government to work with theprivate sector to generate local consumer activity.

INDUSTRY


The CarbonTrust

The industry-related elements of the UK Climate Change Programme focus onthe Carbon Trust to deliver carbon savings from business.

The aim of the Carbon Trust is to help the UK move towards a sustainable, lowcarbon economy whilst maintaining business competitiveness. In the short-term, the organisation will concentrate on helping business save energy andmoney. In the longer term, it will develop the UK’s capacity to meet theproblems of climate change, considering not only commercial andtechnological factors but also wider socio-economic factors that hinder themove towards a low carbon economy.

The Trust’s first year’s funding is up to £50 million, from Climate Change Levyreceipts and from the government’s Energy Efficiency Best PracticeProgramme (EEBPP). The Trust has taken over the non-domestic part of theEEBPP, and is now the UK’s main energy efficiency information, advice andresearch programme for organisations in the public and private sectors. TheCarbon Trust also administers and promotes the government’s EnhancedCapital Allowance (ECA) scheme for energy saving technologies that has beenoperational since April 2001.

ClimateChangeLevy (CCL)

The Climate Change Levy (CCL), effective from 1 April 2001, was introducedon energy use in the non-domestic sector (industry, commerce, agriculture andthe public sector). Its aim is to encourage energy efficiency and help meet theUnited Kingdom's targets to reduce GHG emissions. It applies to gas,electricity, liquefied petroleum gas (LPG) and coal. The rates of the levy arebased on the energy content of the different energy products. They areequivalent to 0.43 p/kWh for electricity, 0.15 p/kWh for gas, 1.17 p/kilogram forcoal and 0.96 p/kilogram for LPG. Fuel oils do not attract the levy as they are

10

already subject to hydrocarbon oil duty. The levy is added to energy billsbefore VAT is applied.

Residential energy users, charities and very small businesses (using domesticamounts of energy) are exempt from paying the levy. There are also furtherexemptions for transport, for the production of taxable commodities andhydrocarbon oils, use in "good quality" combined heat and power plants, and innon-fuel uses. Energy-intensive businesses can reduce their levy payments byparticipating in voluntary Climate Change Agreements. Companies can obtainan 80% discount if they enter into Climate Change Agreements that extend fora period of 12 years. There is a separate 50% discount for a period of up tofive years for horticultural producers. The levy package, including the ClimateChange Agreements, is expected to save at least 5 million tonnes of carbonper year by 2010.

The revenues generated from the levy are recycled back to businesses via a0.3 percentage point cut in the main rate of employers’ National InsuranceContributions and additional support for energy efficiency measures. Thegovernment calculates that there will be no net gain to the public finances fromthis reform. The levy package as a whole will be broadly neutral for themanufacturing and service sectors of the economy. The revenues also providemoney for improving business energy efficiency. The sum of £50 million wasavailable under the levy package in 2001-02 to support the provision of energyefficiency advice, promoting the take-up of low carbon technologies and thepromotion of renewable energy projects. A further £70 million in 2001-02 wasallocated to finance a system of 100% first-year enhanced capital allowances(ECAs) against tax for firms making energy saving investments. This wasincreased by £20 million in the 2002-03 budget, although this includes supportfor both energy-saving technologies and low-emission vehicles and fuelinfrastructure. The scheme is worth around £200 million in the period 2001-2003, depending on take-up.



• Consider again modifying the Climate Change Levy to reflect the carboncontent of fuels.

ClimateChangeAgreements

The Climate Change Agreements between energy-intensive sectors of industryand the Secretary of State are a recent policy mechanism to achieveenvironmental objectives. In return for agreeing and meeting stringent targetsto reduce energy consumption or emissions, these sectors are entitled to an80% reduction in the Climate Change Levy. Eligible for entry to agreementsare all users that operate processes subject to regulation under the IntegratedPollution Prevention and Control (IPPC) directive, as implemented by thePollution Prevention and Control (England and Wales) Regulations 2000 (orsites operating processes that would be subject to such regulation but for thefact that they fall beneath the relevant threshold, except for combustion plants)

The rationale for this eligibility criterion is that the processes in question aresubject to a regulatory requirement to use energy efficiently. This requirementdoes not apply to other non-domestic energy users. The levy discount isdesigned to maintain the competitiveness of the energy-intensive sectors whileproviding an incentive at the margin to improve efficiency further. The eligiblesectors cover all the main energy-intensive sectors of industry that are subjectto international competition.

Currently there are 44 sector level (“umbrella”) agreements with 40 industrysectors. Some of these sector associations have a number of agreements to

11

cover specific industry sub-sectors. Around 5 500 “underlying agreements”have been concluded with participating companies. The agreements coveraround 13 000 individual facilities, and more sites are joining.

Facilities that are covered by a Climate Change Agreement are entitled to paythe reduced rate of Climate Change Levy until the end of March 2003. At thetime of writing (February 2003) sectors are being assessed on targetperformance for the first “milestone” period of each agreement. Companyenergy efficiency data have been supplied via sector organisations and willpermit actual energy savings to be compared against milestone targets. In thisprocess companies are required to report the performance of their facilities tothe relevant sector association. The sector associations will in turn reportperformance to the Department of the Environment, Food and Rural Affairs(Defra). Also, throughout the course of the agreements, the data are subject toindependent audit by auditors acting on behalf of the Secretary of State. Defraundertook an informal progress review in January and February 2002 toensure that robust sector data processing systems were in place. This hasbeen repeated in January/February 2003.

The sector performance will be tested against the sector target adjusted forexits and entrants, carbon trading under the UK Emissions Trading Scheme,where applicable, product mix and/or throughput. If the sector (or sub-sector)has failed to meet this adjusted target, the individual facilities will be assessed.If the target has not been met, the relevant facilities will not be required toleave the agreement. They can remain within the agreement, but they will notbe eligible for the levy discount for the next two-year certification period. If thefacilities catch up with projected energy savings targets at the next reviewstage, then they can be re-certified and will, once again, pay the levy at thereduced rate. In specific and isolated cases where regulatory or planningrequirements imposed by the government have prevented the facilities frommeeting their targets participants may be allowed to retain Levy discount.However, the facilities will still need to demonstrate that they have madesatisfactory progress and that they have met qualitative requirements such asthe development of an energy management plan.

Companies that have entered into Climate Change Agreements will be able touse the Emissions Trading Scheme to help them meet their emission targets.Emissions trading is expected to be the principal mechanism for dealing withfluctuations in performance within each target period. The agreements willtherefore have an important role to play in establishing emissions trading in theUK as the agreements cover around 60% of the energy used by manufacturingindustry.

Facilities are also subject to audit requirements by other environmental, taxand trading regimes e.g. by Defra for Combined Heat and Power QualityAssurance, by the Environment Agency for Integrated Pollution Prevention andControl (IPPC), by HM Customs and Excise for payment of the levy, and byindependent verifiers for trading. It is the government’s intention to co-ordinatethese regimes to avoid duplication of effort by both operators and auditors andto minimise the need for data collection, recording and inspection.



• Consider again eliminating restrictive definitions limiting the eligibility ofindustries for voluntary climate change agreements, as well as incentivesand possibilities for free-riding.

12

EnhancedCapitalAllowancesScheme

Using experience gained in other European countries, the UK introduced on1 April 2001, a system of Enhanced Capital Allowances. While most capitalexpenditure in the UK can be written off against capital allowance on areducing balance basis, energy-saving investments eligible under ECA allow100% first year allowances against taxable profits in the first year ofexpenditure. Initially, the scheme covers eight technologies: CHP, boilers andadd-ons, pipe insulation, motors, variable speed drives, lighting, refrigerationand thermal screens. The technologies and criteria will be reviewed annuallyand the Energy Technology Product list updated monthly. Administered jointlyby the Carbon Trust and the Inland Revenue, the scheme will be worth around£70 million in 2001-2002 and £130 million in 2002-03, depending on take-up.For more information see: www.eca.gov.uk

EnergyEfficiencyBest PracticeProgramme(EEBPP)

The Energy Efficiency Best Practice Programme (EEBPP) launched in 1989was the UK's main energy efficiency information, advice and researchprogramme. In July 2002 the programme was split into domestic and non-domestic sectors that are now managed by the Energy Saving Trust and theCarbon Trust respectively.

The EEBPP had a target, set in 1989 and subsequently upgraded, to stimulateannual energy efficiency savings worth £800 million at 1990 prices, equivalentto 5 million tonnes of carbon (MtC) a year by 2000, 4.5 MtC of which is inindustry and 0.5 MtC. In the residential sector; EEBPP supports the NegotiatedAgreements and its targets are thus linked with achievement of the sectortargets; it also assists those organisations subject to the full Climate ChangeLevy in mitigating its effects.

The Programme web site http://www.energy-efficiency.gov.uk/ is continuouslyupdated and receives an increasing number of visits, about 50 000 per monthto the database. Five thousand users have registered.

EuropeanBestPracticeInitiative

The success of the Best Practice approach to preparing and deliveringindependent, high quality information and advice has been recognisedthroughout the world. Australia, Brazil, Canada, China, and New Zealand haveall adopted elements of the idea and adapted them to local conditions. Morerecently, the European Community has taken up the idea. Building on afeasibility study led by the UK and with major contributions from seven EUcountries to test the best approach on a European scale, a pilot phase,supported by the EC SAVE Programme, and by national contributions willfocus on Europe-wide benchmarking of processes and on an internationalExtranet linking energy agencies. Fourteen countries are participating,including some EU Accession States.

Making aCorporateCommitmentCampaign(MACC)

The voluntary Making a Corporate Commitment Campaign (MACC) waslaunched in 1991 with the aim of obtaining top management commitment toresponsible energy management. MACC2 was launched by Michael Meacher,Minister for the Environment in June 2000. MACC2 is a way of helpingorganisations improve their resource efficiency and environmentalperformance in a managed, targeted and transparent way. It is designed towork equally well in industrial, commercial and public sector organisations. Bysigning up to MACC2, organisations are making a commitment to improvetheir performance on:

• Greenhouse gas emissions.• Production of waste.• Consumption of water.

Organisations signing up to MACC2 commit themselves to:

• Publicly declare their commitment to achieve specific improvement targets.• Register their commitment.• Agree to make their commitment and targets public.

13

• Agree to report annually on their progress towards meeting their targets.

Eco-Managementand AuditScheme(EMAS)

The EC Eco-Management and Audit Scheme (EMAS) is a Europe-widevoluntary registration scheme launched in April 1995. It provides businessesengaged in manufacturing, waste management, power generation and miningand quarrying, with the opportunity of obtaining public recognition for acommitment to improve their environmental performance. Participatingcompanies are required to implement an environmental management systemand produce an independently validated public statement about their progress.

Guidelines forCompanyReporting ongreenhouse gasemissions

These guidelines were designed to help and encourage companies tomeasure and report publicly on their greenhouse gas emissions from energyconsumption, transport and industrial processes. They provide guidance onsources of emissions, how to gather the data, and also how to convert the data(for example, from electricity bills) into CO2 equivalents. The guidelinesencourage companies to set public targets for emissions reductions, and sincetheir launch in 1999, have become widely used amongst the growing numberof companies that produce environmental reports.

See http://www.defra.gov.uk/environment/envrp/index.htm for a copy of theseand other guidelines on environmental reporting.

ActionEnergy

Action Energy is the main source of energy efficiency advice and support forbusiness and the public sector in the UK. When the Carbon Trust took overmanagement of the non-domestic part of the EEBPP they relaunched it asAction Energy. As well as providing all of the services available under theEEBPP, including site visits and access to the extensive library of energyefficiency literature, they have since added an interest-free loan scheme forSmall to Medium sized Enterprises to help towards energy efficiency projects.Loans of between £5 000 and £50 000 (repayable over five years) areavailable to help SMEs overcome the initial costs of energy efficiency projects.

See http://www.actionenergy.org.uk/ for further information.

EnvironmentalTechnologyBest PracticeProgramme

Envirowise, formerly the Environmental Technology Best Practice Programme(ETBBP), was launched in 1994. It promotes the use of better environmentalpractices that reduce business costs for industry and commerce, and providesall sectors with information and advice on environmental technologies andtechniques by means of publications, events and a free EnvironmentalHelpline. The programme's projected budget, shared between Defra and DTI,is £54 million over the 13 years to 2006/7. The overall target for theprogramme is that it should stimulate annual cost savings for industry of £580million by 2015.

EnergyEfficiencyCommitments

Both gas and electricity suppliers have a statutory responsibility to provideenergy advice to consumers. The Energy Efficiency Commitment (EEC)implemented from April 2002 replaced the previous programme known as theEnergy Efficiency Standards of Performance, EESOP; according to theseprogrammes, gas and electricity suppliers are required to encourage or assistdomestic customers to take up energy efficiency measures. The Utilities Act2000 transferred responsibility for the EEC from the Regulator to thegovernment. The Energy Efficiency Commitment should provide a challengeto energy suppliers while stimulating, in a sustainable way, the development ofthe energy efficiency industry. By directing 50% of the energy benefits to apriority group of low-income consumers, it will help reduce fuel poverty.

The overall target for the Commitment is 62 TWh, with 50% of the energysavings being targeted at customers receiving benefits or tax credit. The EECwill cut greenhouse gas emissions by around 0.4 MTC a year by 2005. TheRegulator's role is to administer the Commitment, apportion the overall targetto each supplier, determine which energy efficiency measures qualify and thesavings attributable, and monitor suppliers' performance against their targets.

14

The government has indicated in its Energy White Paper a desire to consult onextending the Commitment to 2008, at possibly twice its current level ofactivity, and beyond the bounds of the domestic sector.

See http://www.defra.gov.uk/environment/energy/eec/ for further details.

CombinedHeat andPower (CHP)

In 1993 the government set a target of 5 000 MW installed capacity as part ofthe Climate Change Programme. In 2000, CHP qualifying power capacityexceeded 4 600 MW on over 1 500 sites, and was expected to be 5 000 MWby the end of 2001. While just under 50% of the CHP installations in the UKare small plants, with an electrical qualifying power capacity of less than100 kW, schemes larger than 10 MW account for over 80% of the total CHPinstalled electrical capacity. In 2000, 6% of the total electricity generated in thecountry came from CHP schemes. The government has set a target of10 000 MW of CHP capacity by 2010 as an important part of the ClimateChange Programme. It has introduced a number of measures to promote CHPpower plants:

• The CHP Quality Assurance (CHPQA) programme certifies the energyefficiency and environmental performance of CHP schemes; it exempts"good quality" CHP. Over 1 200 CHP schemes have registered for CHPQA,900 of which have been certified. Good Quality CHP is exempt from theClimate Change Levy (subject to State Aid clearance), eligible forEnhanced Capital Allowances on investment in energy saving technologies,and exempt from business rates of the electricity generating plant andmachinery in CHP schemes.

• Recent high gas prices and low electricity prices (which have fallen partiallyas a result of the implementation of the New Electricity TradingArrangements) have created commercial difficulties for CHP. A draftgovernment CHP Strategy addressing the market conditions affecting CHPand outlining the contribution of existing and possible new measures wasconsulted on in 2002.

Other new developments to encourage greater use of CHP include:

• The new £50 million UK-wide Community Energy Programme which aimsto promote community heating through grants to install new schemes andrefurbish obsolete infrastructure and equipment. This aims to benefit up to100 000 people, mostly on low incomes, while contributing to reductions ingreenhouse gas emissions.

• The Revision of Planning Policy Guidance Note 3: Housing, June 2000,which provides some leverage for local planning authorities to encouragedevelopers to explore the feasibility of energy efficient options, includingnewly built CHP/district heating.

• That power station developers who are seeking consent under theElectricity Act 1989 and the Energy Act must now demonstrate that theyhave explored the opportunity for CHP and sought to identify heat loads forthe waste heat.



• Consider again extending voluntary agreements to cover all largerindustries, and consider including small and medium-sized industries.

The exemption under the Climate Change Levy and inclusion in the EnhancedCapital Allowances Scheme conform to this recommendation

In the Performance and Innovation Unit (PIU Review), combined heat and

15

power (CHP) was seen as a low-cost option for carbon abatement, but notzero carbon. In the long term, it would benefit from policies that put a price oncarbon. The report suggested that current market and institutional barriers toCHP should be removed.

Further measures were introduced in the Energy White Paper, which will betaken into account in the final CHP Strategy. The government proposes toissue this later this year.

TRANSPORT


WhitePaper 1998

The government’s White Paper on the future of transport: A New Deal forTransport: Better for Everyone, July 1998, recognised that the environmentalimpacts of the growth in road traffic may be a threat to sustainabledevelopment and emphasises the need to reduce those impacts.

Three key themes to emerge from the White Paper relevant to climate changewere:

• Improving fuel efficiency of road transport, for example through increases inroad fuel duties.

• Reducing car dependence, especially in urban areas, through betterplanning and promotion of public transport, cycling and walking.

• Recognising that measures may be needed to manage or restrain roadtraffic, especially in urban areas.

The government is also concerned about the environmental impacts of therapid growth of air transport.

Transport 2010,the 10 Year Plan

Transport 2010, the 10-Year Plan designed by the Department forEnvironment, Transport and the Regions and published in 2000 is aninvestment plan for delivering the White Paper commitment to an integratedtransport system. The Plan focuses on surface transport, and improvementsin surface access to ports and airports.

The 10-Year Plan is a key part of the government's Climate ChangeProgramme. It is expected to deliver savings of 1.5 MTC per annum by 2010.The Plan aims to tackle congestion and pollution by improving all types oftransport – rail and road, public and private – in ways that increase choice. ThePlan sets the strategic framework. Individual projects and programmes willflow from decisions taken by a variety of agencies, the private sector, andthrough Regional Transport Strategies and Local Transport Plans.

The 10-Year Plan envisages the necessary level of investments, total privateand public expenditure, to be £180 billion over the next ten years. Thebreakdown is as follows: public investment: £64.7 billion, private investment:£56.3 billion, public resource/revenue: £58.6 billion. The Plan sets the strategicframework, and individual projects and programmes are to flow from decisionstaken by a variety of agencies, the private sector, and through RegionalTransport Strategies and Local Transport Plans, as well as public and privatepartnerships.

All modes of transport will benefit from this massive new investment. Spendingon railways will total £60 billion, spending on roads, local and national, will total£59 billion and local transport spending will also be increased substantially to aten-year total of £59 billion.

16

The Plan includes a wide range of measures that will help to reducegreenhouse gas emissions, including:

• Sustainable distribution strategy involving both central and localgovernment and the haulage/logistics industry. The strategy is designed topromote improvements in operational and fuel efficiency of the vehiclefleet, in particular payload (tonnes per loaded vehicle kilometre) and emptyrunning (ratio of total vehicle kilometres to loaded vehicle kilometres).

• Eighty per cent growth in rail freight volumes as a result of improvementsin rail freight’s relative competitiveness through reductions in rail costs andimprovements in service quality. Electricity used for traction by rail freightoperators is also exempt from the climate change levy.

• Substantial improvements in local public transport, including up to 25 newrapid transit lines in major cities and extensive bus priority schemes. ThePlan assumes that congestion charging schemes are introduced in centralLondon and eight other cities, and that workplace parking levy schemesare introduced in 12 cities. We have also assumed that all net revenuesare recycled into transport improvements in the urban areas concerned.

• The delivery of a 50% increase in rail patronage, measured by passengerkilometres – just under a quarter of which is forecast to come from carusers switching to rail because of reductions in fares and service qualityimprovements; and the development of reliable, convenient and affordablepublic transport services and better integration between modes.

VehicleFuelEfficiency

The increase in carbon dioxide emissions from traffic growth has beencompounded by the limited improvements in vehicle fuel efficiency, especiallyfor passenger cars, since the mid-1980s.

Although there have been substantial improvements in engine efficiency duringthe past decade, these have partly been offset by the effects of greater vehicleweight, due to increased size, better safety standards and the provision ofadditional features, such as air conditioning, some of which also require powerto operate them as well as meeting increasingly stringent European emissionsstandards.

A significant improvement in vehicle fuel efficiency is essential for delivery ofthe UK’s climate change targets. A sustainable market transformation istherefore needed to stimulate the development, manufacture and purchase ofmore fuel-efficient cars. This transformation must involve action to introducemore fuel saving technologies into vehicle design and to encourageconsumers to buy more fuel-efficient cars.

The government is committed to encouraging a market transformation forpassenger cars through a combination of fiscal measures, the EuropeanVoluntary Agreement with automotive manufacturers and through ensuringthat consumers have the information they need to choose more fuel-efficientvehicles.. The future trend in the fuel efficiency of new cars is also one of thegovernment’s sustainable development indicators

EuropeanVoluntaryAgreement toreduce CO2

emissions fromnew cars

The European Voluntary Agreements with European, Japanese and Koreanvehicle manufacturers will reduce new car CO2 emissions by 25% to 140gCO2/km by 2008 (2009 for KAMA, the Korean manufacturers association). Thevoluntary agreements have proved a highly effective mechanism for improvingthe fuel efficiency and CO2 performance of new cars. They have providedmanufacturers with a stable long-term framework within which to plan,research and introduce fuel saving innovations. This approach, which focuseson the levels of carbon emitted rather than on dictating particular technologies,gives manufacturers the flexibility to develop the best and most cost-effectivesolutions.

The government is supporting the aims of the agreements through the UK’staxation system and through other schemes to encourage people to buy more

17

fuel-efficient cars. It is estimated that the voluntary agreements, along with thechanges to vehicle excise duty and company car taxation outlined below, willresult in savings of around 4 MtC by 2010.

PoweringFutureVehicles

The UK Powering Future Vehicles strategy was launched in July 2002. Thestrategy – which was produced jointly by DfT, Treasury, Defra and DTI – isaimed at promoting the UK’s shift to low-carbon vehicle technologies andfuels, to reduce transport’s impact on the global and local environment.

It sets out government targets that by 10% of new cars sold in the UK by 2012will be low-carbon vehicles, defined as 100 or less grams of CO2 per km at thetailpipe (compared with the current new car average of 178gm). It also sets thetarget that by 2012, 600 new buses joining the fleet yearly (around 20%) willalso be low-carbon.

The government is supporting the shift to low-carbon by linking ourmainstream vehicle taxation, i.e. the graduated vehicle excise duty introducedin 2001 and graduated company car taxation, introduced in 2002, CO2

emissions.

Delivering these objectives involves more than one part of government, andthe Prime Minister has set up a Ministerial Low Carbon Group to oversee thedelivery of the low-carbon agenda. The Ministerial Group will report annually toParliament.

The strategy looks further forward to the long-term shift to ultra-low carbonvehicles and ultimately to zero emission transport. The government will put inplace further targets beyond the decade, accelerating the shift towardstechnologies such as hydrogen fuel cells.

EconomicInstruments

The government is using the taxation system to support the aims andobjectives of the EU CO2 from cars strategy and to encourage consumers tobuy smaller or more fuel-efficient vehicles.

One measure, which has already delivered reductions in emissions from roadtransport, is the fuel duty escalator – annual fuel duty increases above the rateof inflation. The escalator was introduced in 1993, first at an annual rate of 3%above inflation and then at 5%. It was increased to 6% in July 1997 and hasbeen very successful. It sent a clear signal to manufacturers to design morefuel-efficient vehicles, and to motorists to avoid unnecessary journeys and toconsider alternatives to the car. Taken in isolation, increases in duties between1996 and 1999 are estimated to have produced annual carbon savings ofbetween 1 and 2.5 MtC by 2010.

The Chancellor announced in his 1999 Pre-Budget Report that the appropriatelevel of fuel duties would be set on a Budget by Budget basis, taking accountof the government’s economic, environmental and social objectives. Revenuesfrom any real increases in fuel duty will go into a fund to be ring-fenced forimproving public transport and modernising the road network.

Cars registered on or after 1 March 2001, are subject to graduated vehicleexcise duty (VED, an annual tax on road vehicles) based upon CO2 emissions.Vehicles powered solely by electricity are exempt from VED and new gaspowered vehicles benefit from a small discount of £5 to £10. Diesel cars withlower carbon dioxide emission rates than similar petrol cars pay a smallsupplement to compensate for the fact that diesel cars may emit higher levelsof particulates and other local air pollutants such as NOx. It is these pollutantsthat pose the greatest challenge in terms of meeting the UK’s air qualitystandards. Budget 2002 announced the introduction of a new low carbon VEDrate for cars that emit less than 120 g/km of CO2. This increases the VEDdifferential between the least and most polluting cars to up to £100 per year.

18

Under Budget 2002 the new low rate of VED for cars producing less than 120g/km CO2 is £60/year for cars using alternative fuel, £70/year for cars usingpetrol and £80/year for cars using diesel.

The government also developed proposals for a comprehensive reform of lorryVED, to reflect better the environmental and track costs of different lorries. Theproposals were welcomed by the road haulage industry. As a consequence,the government’s 2001 budget introduced a new system of lorry VED thatcame into effect on 1 December 2001. These rates reduce the total burdenthat lorry VED imposes on the haulage industry, while at the same timeimproving the environmental signals that hauliers face by encouraging the useof lorries that cause less road damage and pollution. As a result of thesereforms, UK lorry VED rates are amongst the lowest in Europe for the cleanestand least-damaging lorries.

Additionally, heavy goods vehicles fitted with certain emission reductiontechnologies, e.g. particulate traps, or converted to natural gas, have for sometime benefited from lower VED rates under the Reduced Pollution Certificatescheme. However, the government wants to go further in improving theenvironmental signals from the VED system and therefore plans to offerreduced VED rates for lorries meeting the new Euro IV standard from around2004. The government also issued new motorcycle VED rates, reformed thecompany car tax and fuel scale charges for fuel provided for private use, anddeveloped proposals for lorry road user charging.

From April 2002, the existing system of company car tax, based on 35% of thecar's price, subject to business mileage and age-related discounts, will beabolished. The new system will apply to all company cars, including secondcompany cars. Company cars first registered after January 1998 are to betaxed on a percentage of their list price according to one of 21 carbon dioxideemission bands, measured in grams per kilometre (g/km). The reform willremove the perverse incentive in the current system to reduce the tax due bydriving unnecessary, extra business miles and it will provide a significantincentive to company cars drivers to choose more fuel-efficient vehicles.

It is estimated that the CO2-based reforms to VED and company car taxation,along with the European-level voluntary agreements with car manufacturers,will result in savings of around 4 million tonnes of carbon a year by 2010.

AwarenessRaising andInformation

The impact of the economic instruments is reinforced by a range of initiativesto raise public awareness and to change the behaviour of individuals andbusinesses. These include the TransportEnergy Best Practice programme(TEBPp) Motorvate (see below) and the "Are your doing your bit?" campaign.The TEBPp provides a range of information and services to help organisationsdevelop and implement green fleet management practices and travel plans.These include free guides and videos, case studies containing practicalinformation on how to implement measures and the availability of free, on-siteadvice from expert advisors to help with establishing travel plans and greenfleet management strategies.

The strategy for action in the transport sector is being underpinned by thegovernment’s "Are you doing your bit?" campaign. This major publicitycampaign aims to help raise people’s awareness of the issues by encouragingpeople to use their cars less and by conveying wider messages relating to theimpact on fuel consumption of driving more smoothly and better carmaintenance. The government is spreading these messages through a varietyof different media, including TV and radio advertisements, high profilepromotions in the national press, poster sites and bus side ads, and inliterature sent out by the Driver and Vehicle Licensing Agency and the DrivingStandards Agency.

19

Motorvate In 2000 the UK government launched a green fleet certification scheme knownas Motorvate designed to help UK business cut CO2 emissions and makeconsiderable savings on their fleet costs. Company cars make up nearly halfof all new car sales in the country and therefore have a knock-on effect on thesecond-hand market. Improving the fuel efficiency of the business vehicle fleetcould therefore have significant impacts on the environment while helping UKbusiness to improve profitability; an average fleet of 200 vehicles can save£34 000 a year by meeting Motorvate targets.

Companies can sign up for Motorvate for a modest fee to reduce their fleetCO2 emissions by at least 12% over three years. For their membership feethey receive fleet management guidance, a telephone advice service, on-siteassistance and public recognition for achieving an environmental reward.Further details can be found at www.greenerfleet.org.uk

Developing andpromoting newtechnologies andalternative fuels

The Energy Saving Trust supports the development of markets for cleaner fuelvehicles through its TransportEnergy PowerShift initiative. PowerShiftprovides grants towards the additional cost of purchasing gas, hybrid andbattery electric vehicles. The initiative has been running since 1996 and by theend of the 2002 FY had part-funded the purchase of over 12 000 vehicles.

In addition TransportEnergy also manage the New Vehicle Technology Fund(NVTF), which has a budget of £3 million for 2002-2003. The NVTF providesgrants to demonstrate innovative low carbon vehicle technologies, as set out inthe Powering Future Vehicles Strategy

The NVTF is not limited to specific technologies and it supports any vehicle-based technology with the potential to deliver significant lifecycle carbonsavings and to become a commercially viable product within a maximum offive years.

TransportPlanning

Land use planning will be vital in changing the way people travel, both now andin the future. In line with national guidance, locating development where it canbe easily accessible on foot, by bicycle and public transport will allow people tomake sustainable transport choices. It will also help to increase theeffectiveness of other transport policies that are designed to reduce theamount of trips made by car. Town centres and retail development include asequential approach to choosing sites for retail, leisure and other town centreuses. The first preference should be for town centre locations, followed byedge-of-centre sites, district and local centres and, only then, out-of-centresites in locations that are accessible by all forms of transport. The revisedPPG13 on transport aims to integrate land use planning and transport at anational, regional and local level to promote sustainable transport choices andto reduce the need to travel, especially by car. This note advises that majortravel generating development should be located where it offers a choice oftransport modes.



• Enhance the efforts to curb the energy consumption and CO2 emissionsfrom the transport sector. To achieve this, the government shouldimplement its 10-year Transport Plan swiftly and according to schedule,with an emphasis on reducing greenhouse gas emissions and improvingenergy efficiency.


The UK sets targets for its government programmes and undertakes regularmonitoring to ensure that value for taxpayers’ money is maintained. ImpactAssessments are undertaken each year to measure the effectiveness of the

20

Programmes in stimulating energy savings. For example, the ImpactAssessment of the Energy Efficiency Best Practice Programme has shownthat the programme has helped stimulate savings in UK business and thepublic sector worth about £750 million p.a. – equivalent to around 4 milliontonnes carbon a year. These savings have been achieved at a cost to thetaxpayer of a few tens of pounds per tonne.

The PIU report based on assessments of most of the energy efficiencyprogrammes and measures is a striking example of this government concern.To get money from the Treasury, the government authorities in charge ofimplementing the various energy efficiency programmes have to report to it onthe progress achieved.

Under the Climate Change Programme, the new programmes dealing mainlywith energy efficiency will generally have to report progress regularly againstinterim targets towards the UK's Kyoto target (and the UK government's own20% carbon reduction target for 2010). Some of the programmes involve taxdiscounts (e.g. the Climate Change Levy) so will be subject to close scrutiny bythe tax authorities.

Energy efficiency policies are also assessed by some independent non-profitorganisations, such as the Green Alliance or the Association for theConservation of Energy, which formulate recommendations to improve theireffectiveness.

In addition, follow-up studies are regularly commissioned to monitor thesuccess of specific initiatives and to guide future activities.



• Continue the systematic monitoring and evaluation of energy efficiencyprogrammes and use the results to enhance the quality of new andexisting measures and programmes.

• Review carefully the practical potential of energy efficiency policies to curbenergy consumption. Clarify the costs of specific policy measures.

Furtherinformation


Pete GormanSEP8 – International, Sustainable Energy PolicyDEFRAAshdown House123 Victoria StLondon SW1E 6DETel: +44 (0)207 944 6682Fax: +44 (0)207 944 6559E-mail: [email protected]

1

UNITED STATES

Updated November 2002

NATIONAL ENERGY POLICY

Responsibilities for energy efficiency policies are divided among the federal government, the state and municipal governments. The United States Federal government has issued a series of national energy strategy papers. The most recent strategy document -- the new National Energy Policy referred to as the "NEP" -- was issued in May 2001. The NEP is a plan designed to help bring together business, government, local communities and citizens to promote dependable, affordable, and environmentally-sound energy for the future. The NEP contains 105 policy recommendations addressing energy supply, energy efficiency and conservation, infrastructure, and also initiatives to strengthen global alliances. Fifty-four of the recommendations are related to energy efficiency and renewable energy. More than 23 recommendations are specifically targeted at improving energy efficiency. The entire report is available at: www.whitehouse.gov/energy. In the 2002 in-depth review of the energy policies of the United States the IEA stated: The Government of the United States should: � Persevere with the development and implementation of the National

Energy Policy to ensure that the eventual outcome is a new and coherent expression of US energy policies, instruments and programmes.

� Establish a stronger foundation for energy efficiency programmes by continuing to:

- Improve the statistical basis for developing policies and programmes. - Assess improvements in energy efficiency that are being achieved

without government intervention to set benchmarks for evaluating the cost-effectiveness of existing and proposed policies.

- Improve transparency of information on energy consumption, energy costs, and efficiency-enhancing products for consumers.

- Give attention to the potential energy security benefits of energy efficiency measures.

CLIMATE CHANGE POLICY

National Communications

The first national communication entitled Climate Action Report — Submission of the United States of America under the UN Framework Convention on Climate Change was published in October 1994. The second national communication entitled Climate Change Action Report – 1997 Submission of the United States of America under the United Nations Framework Convention on Climate Change was published in July 1997. The third national communications entitled U.S. Climate Action Report -- 2002 was released in June 2002. The US third national communications reports that US climate change programmes reduced the growth of greenhouse gas (GHG) emissions by an estimated 240 teragrams (million metric tons) of CO2 equivalent in 2000 alone. The report can be electronically downloaded from: http://www.epa.gov/globalwarming/publications/car/index.html

Interim Report of the Cabinet Level Review of US Climate Change Policy

In June 2001, the President issued the Interim Report on a Review of U.S. Climate Change Policy, conducted at the Cabinet level. In the Interim Report, the President has directed the Secretaries of Energy and Commerce and the Administrator of the Environmental Protection Agency (EPA) to improve climate change technology research and development, enhance basic

IEA��

2

research, strengthen applied research through public-private partnerships, develop improved technologies for measuring and monitoring gross and net greenhouse gas emissions, and support demonstration projects for cutting-edge technologies. The Interim Report is accessible at http://usinfo.state.gov/topical/global/climate.

Global Climate Change Initiative

In February 2002, the Global Climate Change Initiative was announced. The new US approach to the challenge of global climate change contains proposed policies that will harness the power of markets and technology to reduce greenhouse gas emissions. As part of this initiative, the United States commits to cutting greenhouse gas intensity of the economy by 18% over the next ten years. Greenhouse gas intensity is the ratio of greenhouse gas emissions to economic output. This reduction exceeds the 14% projected reduction in greenhouse gas intensity in the absence of the additional proposed policies and measures. The GHG intensity goal seeks to lower the rate of emissions from an estimated 183 metric tons per million dollars of GDP in 2002, to 151 metric tons per million dollars of GDP in 2012. The 18% GHG intensity target would put the United States on a path to slow the growth of greenhouse gas emissions. By significantly slowing the growth of greenhouse gases, this policy will put America on a path toward stabilising GHG concentration in the atmosphere in the long run, while sustaining the economic growth needed to finance investments in a new, cleaner energy technology and systems. This goal is comparable to the average progress that nations participating in the Kyoto Protocol are required to achieve. Information on the Global Climate Change Initiative can be found at: http://www.whitehouse.gov/news/releases/2002/02/climatechange.html

Committee on Climate Change Science and Technology Integration

In October 2002, a cabinet-level Committee on Climate Change Science and Technology Integration was established that will take direct responsibility for operational oversight of the federal interagency programmes in climate change science and technology development. The Committee substructure includes the Climate Change Science Program and the Climate Change Technology Program.

The National Climate Change Technology Initiative (NCCTI)

The Interim Report of the Cabinet Level Review of the US Climate Change Policy included a Presidential Directive to the Secretaries of Energy and Commerce to develop a National Climate Change Technology Initiative (NCCTI). As of October 2002, NCCTI is continuing its in-depth review of federal research and development activities, and is developing approaches to pursue advanced technologies that can yield cost-effective means to mitigate the risks associated with climate change. NCCTI will find creative ways to motivate the development of innovative technologies, a process of open solicitations for technologies to compete against each other using the criteria of emissions reduction, avoidance, or sequestration potential is being pursued. High priority technologies that are now being pursued include: hydrogen-based energy systems, biofuels, low-speed wind turbines, fuel cells for transportation, zero net energy buildings, CO, capture and geologic sequestration, terrestrial sequestration research in forest management, and agricultural land management.

3

In the 2002 in-depth review of the energy policies of the United States the IEA stated: The Government of the United States should: � Acknowledge the influence of US emissions on global greenhouse gas

emission levels and climate: � Quantify the impact of current energy-environment policies on projected

greenhouse gas emissions at the national and global levels. � Develop specific targets for the control of US greenhouse gas emissions. � -Complement current research and development efforts on climate-

friendly technologies with a policy framework, including economic instruments, designed to achieve significant reductions in greenhouse gas emissions over a specified period.


Residential and commercial buildings consumed 36% of the nation’s energy in 1999 and utilise almost two-thirds of all the electricity generated. The production of energy consumed in buildings, primarily electricity, represents a major source of acid rain, smog, and greenhouse gas emissions, and includes 47% of US sulphur dioxide emissions, 22% of nitrogen oxide emissions, and 35% of carbon dioxide emissions. The growth in the economy, as well as the nation’s rising population is leading to more, larger, and better equipped homes and commercial buildings, resulting in increasing energy consumption in this sector. Introduction of new energy efficiency technology can have significant economic and environmental benefits. In terms of economic impact, Americans spend approximately one-quarter trillion dollars per year to heat, cool, light and operate appliances and other equipment in buildings.

Sample of Measures already existing and/or being improved

Buildings Research and Development

DOE develops, implements and co-ordinates the R&D to improve the energy efficiency of building components and integrated systems. Its R&D addresses both the building envelope (walls, windows, roofs) and equipment (heating and cooling equipment, lighting, etc.) and their integration into optimal "whole building" designs. This "whole buildings" approach allows builders to simultaneously reduce construction and energy costs and helps build energy systems that deliver the proper amount of service (e.g. heating, cooling, lighting, etc.) where needed. The approach also identifies ways that systems can work harmoniously to provide increased energy and construction savings as well as improve the quality and comfort of the buildings.

Weatherization Assistance Program

The Weatherization Assistance Program provides cost-effective services to low-income families who otherwise could not afford the investment in energy efficiency, giving priority to households with elderly members, persons with disabilities, and children. The programme has reduced the heating and cooling costs of low-income households by weatherising more than 5 million homes since its inception in 1976. A companion programme, called Weatherization Plus, aims to expand the Weatherization Assistance Program from its current focus on heating and cooling energy conservation in low-income homes to a broader focus on whole-house energy usage and whole-community efforts. The Weatherization Assistance Program is administered by the US Department of Energy http://www.Eren.doe.gov/buildings/weatherization_assistance/

Low Income Home Energy Assistance Program (LIHEAP)

The Low Income Home Energy Assistance Program (LIHEAP) is a federal block grant programme that helps low-income consumers pay the costs of heating and insulating their homes in the winter, and cooling their homes in

4

the summer. Approximately 4 million low-income households receive assistance through the LIHEAP each year. LIHEAP is administered by the US Department of Health and Human Services. http://www.ncat.org/liheap/

Building Codes

During the 1970s almost all states and local governments established energy efficiency standards for new residential buildings. The 1992 Energy Policy Act makes it mandatory for states to certify that their energy codes have been updated to meet or exceed minimum levels of efficiency. To help states update their codes law and ensure that codes are enforced, DOE is working with state and local governments, home builders, and material suppliers to improve energy code compliance. This is important since residential and commercial buildings account for about 17% of US primary energy use. Two-thirds of new US residential construction, amounting to some 900 000 homes annually, falls under federal, state and local residential energy codes. Some 122 million square feet of additional commercial construction each year falls under commercial energy codes. More information on buildings codes is available at http://www.energycodes.gov/ In the 2002 in-depth review of the energy policies of the United States, the IEA stated: The Government of the United States should: � Give priority to enhancing energy efficiency in the transport and building

sectors, notably by: � Continuing to work with the states to strengthen building codes. � Continuing to provide federal leadership through standards and guidelines

on products, buildings and systems designed to improve efficiency in buildings.

Appliance Standards

Federal legislation mandates many appliance energy-efficiency standards. The 1987 National Appliance Energy Conservation Act (NAECA) sets efficiency standards and establishes schedules for mandatory review of standards for each product covered. By law the US must set standards at the maximum improvement in energy efficiency that is technically feasible and economically justified. Very detailed engineering-economic analyses keep the requirements cost-effective for consumers. Since 1978, efficiency standards have been established for a wide range of appliances. Residential products covered under NAECA include refrigerators and freezers, room air-conditioners, central air conditioners, furnaces, water heaters, washing machines and dryers, and several other appliances. Some of these standards set minimum energy efficiency levels, while others were prescriptive (for example, washing machines were required to have a cold rinse option). The 1992 Energy Policy Act amended NAECA to establish minimum standards for commercial and industrial equipment, including commercial heating and air-conditioning equipment, water heaters, and electric motors. The standards revision process was modified in 1997. DOE improved, and made more transparent, the standard-setting process, and developed a comprehensive framework for standards analyses. Since the process was revised, DOE has issued final rules for refrigerators, refrigerator-freezers and freezers, room air-conditioners and electric ranges, electric ovens and microwave ovens. For refrigerators, refrigerator-freezers and freezers and room air-conditioners, DOE found that more stringent standards were justified. The new standards for refrigerators, refrigerator-freezers and freezers have been effective since 1 July 2001. The new room air-conditioner standards became effective on 1 October 2000. DOE decided

5

not to institute energy efficiency standards for electric ranges, electric ovens and microwave ovens. DOE determined potential estimated savings were not sufficient to merit the added burden of costs to be placed on industry and consumers. In 2000, DOE published amended standards for commercial and industrial fluorescent lamp ballasts that essentially require the use of electronic ballasts. These standards will begin to go into effect in 2005. In 2001, DOE published amended standards for washing machines, residential water heaters and commercial heating, air conditioning and water heating equipment. The washing machine standards will require a 22% reduction in energy use by 2004 and a 35% reduction in energy use by 2007. The residential water heater standards will go into effect in 2004 requiring a 4% improvement in the energy efficiency of electric water heaters and an 8% improvement in gas water heaters. The standards for the commercial products cover 18 product categories of commercial air conditioners, heat pumps, furnaces, water heaters and hot water storage tanks. These standards will become effective in 2003.

Voluntary Programs

The US federal government is implementing a number of voluntary programmes in the residential/commercial buildings sector to accelerate the adoption of highly-efficient building products, appliances and systems that can significantly reduce energy use and GHG emissions. These include, among others: � Rebuild America � Energy Star for Residential Market � Energy Star for the Commercial Market � Energy Star Labelled Products

Rebuild America

In Rebuild America, DOE is working with states and community partnerships to promote cost-effective energy efficiency investments in public housing, commercial buildings, and multifamily residences. More than 465 partnerships have been formed. Partnerships have completed nearly 420 million square feet of building renovations and are committed to another 420 million square feet of renovations. For more information about Rebuild America, visit www.energystar.gov

Energy Star for Residential Markets

Energy Star for the Residential Markets programme provides guidance for homeowners on designing efficiency into kitchen, additions, and whole-home improvement projects and works with major retailers and other organisations to help educate the public. It also offers a web-based audit tool and a home energy benchmark tool to help the homeowner implement a project and monitor progress. Builders have constructed more than 55 000 ENERGY STAR®-labelled new homes in the United States. For more information about Energy Star, visit www.energystar.gov

Energy Star for Commercial Market

The Energy Star for the Commercial Market leads building owners through a comprehensive, five-stage strategy to capitalise on building system interactions so as to maximise energy savings from a given amount of efficiency investment. The programme works with more than 5 500 organisations across the country, and in 1999 introduced a system that allows the benchmarking of building energy performance against the national stock. For more information about Energy Star, visit www.energystar.gov

Energy Star Labelled Products

The Energy Star® label is being used by EPA and DOE to promote products and services that save energy and money and help the environment. The Energy Star Labelled Products programme has been expanded in recent years to more than 30 product categories. Examples of covered products

6

include appliances, heating and cooling equipment, consumer electronics, home office equipment, windows, lighting, water coolers, dehumidifiers, ventilation fans, ceiling fans, business office equipment, roof products, etc. More than 630 million products with the government-backed Energy Star have been purchased to date and thousands of companies are to adopt more energy efficient practices. For more information about Energy Star, visit www.energystar.gov

Partnership for Advanced Technology in Housing, and Building America

The Partnership for Advanced Technology in Housing (PATH) is an industry/government partnership, led jointly by DOE and HUD (Department of Housing and Urban Development), to speed the creation and widespread use of advanced technologies, and radically improve the quality, durability, energy efficiency, environmental performance and affordability of housing, both existing and new. Run by the DOE, the Building America is a R&D programme implemented through a private-public partnership that provides systems integration R&D solutions for product housing to develop the best efficiency design strategies for new and existing buildings. The programme promotes active investigation and use of systems integration R&D solutions by homebuilders. It unites segments of the building industry that traditionally work independently of one another. It forms teams of architects, engineers, builders, equipment manufacturers, material suppliers, community planners, mortgage lenders, and contractor trades. Currently, there are five teams comprised of a total of more than 150 different companies.


The National Energy Policy contains several recommendations aimed specifically at improving energy efficiency in the residential sector. They are listed below.

Additional Funding for Weatherization Assistance Program and LIHEAP

The National Energy Policy recommends an increase in funding for the Weatherization Assistance Program and the Low Income Home Energy Assistance Program (LIHEAP).

Expand Scope of Appliance Standards

Regarding standards, the National Energy Policy recommends that the President direct the Secretary of Energy to: � Take steps to improve the energy efficiency of appliances. � Support appliance standards programme for covered products, setting

higher standards where technologically and economically justified. � Expand the scope of the appliance standards programme, setting

standards for additional appliances where technologically feasible and economically justified.

In the 2002 in-depth review of the energy policies of the United States, the IEA stated: The Government of the United States should: � Develop a comprehensive package of measures to achieve quantified

targets for efficiency of energy end-use, including. � The use of economic instruments wherever possible. � Mandatory standards. � Information programmes to raise public awareness of the benefits of

energy efficiency and conservation strategies. � Deployment programmes to ensure appropriate advanced technology

enters the market in a timely manner.

7

INDUSTRY Industry is one of the largest energy-consuming sectors, accounting for about 35% of all US energy use.


Industries of the Future

DOE’s Office of Industrial Technologies has created partnerships among industry, government and supporting national laboratories and institutions to accelerate technology R&D and deployment. Through the Industries of the Future Program, DOE works with the nation’s most energy-intensive industries to develop and apply advanced, energy-efficient technologies, processes, and practices. Eight energy- and waste-intensive industries (agriculture, aluminium, chemicals, forest products, glass, metal casting, mining, and steel) are currently involved in the programme. Two key elements of the Industries of the Future strategy are an industry-driven document outlining each industry's vision for the future, and a technology roadmap to identify the technologies that will be needed to reach that industry's goals. Further information on the IOF programme can be found at: http://www.oit.doe.gov/industries.shtml

Best Practices Program

The BestPractices Program works with industry to identify plant-wide opportunities for energy savings and process efficiency. Through the implementation of new technologies and systems improvements, companies across the United States are achieving immediate savings results. The programme provides: � Informational resources and tools � Technical assistance � Demonstrated emerging technologies Coverage includes industrial systems (such as compressed air, motors, process heating, and steam systems) as well as plant-wide assessments where plants are selected through a competitive solicitation process, and these plants agree to a minimum 50% cost-share for implementing the assessment. A BestPractices team conducts an on-site analysis of total energy use. More information can be found at: http://www.oit.doe.gov/bestpractices/

Industrial Assessment Center Program (IAC)

In the Industrial Assessment Center Program (IAC), teams of engineering faculty and students from over 26 universities around the country conduct free comprehensive energy audits or industrial assessments. They provide recommendations to eligible small and medium-sized manufacturers to help them identify opportunities to improve productivity, reduce waste, and save energy. This programme expands on, and supersedes the earlier Energy Analysis and Diagnostic Centers. One-to-two day on-site energy, environmental, and productivity audits are performed for participating companies and factories. The federal programme provides funding for the university teams; however all recommended plant improvements that are adopted are financed by the participating private sector companies, usually a plant employing between 20 and 499 workers. More than 8 000 audits and assessments have been performed since 1978 and over $200 million in plant investments have been made based on IAC recommendations. Information about the IAC programme can be found at: http://www.oit.doe.gov/iac/

NICE3 The National Industrial Competitiveness through Energy, Environment, and Economics (NICE3) programme is a cost-sharing partnership between state offices, industry, and the federal government. The grant programme provides

8

funding to states and their industries for projects that develop and demonstrate advances in energy efficiency and clean production technologies. The programme selects projects through an annual solicitation and competition ensuring the selection of highest benefit projects. State and industry partnerships are eligible to receive a one-time grant of up to $525 000. The industrial partner may receive a maximum of $500 000 in federal funding. Non-federal cost share must be at least 50% of the total cost of the project. In total, NICE³ has sponsored over 100 projects, with more than half going to small businesses. Since 1991, NICE³ has leveraged $26.3 million in federal funds, with $81.8 million in state and industry funds. http://www.oit.doe.gov/nice3/

Energy Star for Industry

Energy Star for Industry is an EPA voluntary partnership programme that enables industrial companies to evaluate and cost-effectively reduce their energy use. It helps establish energy performance benchmarks, strategies for improving energy performance, and provides technical assistance and recognition for companies' reductions in energy. Energy Star for Industry is a new initiative that integrates and builds upon the former Climate Wise programme and offers a more comprehensive partnership for industrial companies.


CHP Incentives The National Energy Policy contains a recommendation to direct the Secretary of Treasury to work with Congress to encourage legislation that promotes increased energy efficiency through combined heat and power (CHP) projects, by shortening the depreciation life for CHP projects or providing an investment tax credit.

PUBLIC SECTOR


Energy Efficiency and Water Conservation at Federal Facilities

In March 1994, a Presidential Executive Order 12902 called for reduced energy use in federal buildings. Under the order 12902, each federal agency shall develop and implement a programme with the intent of reducing energy consumption by 30% by the year 2005 compared to 1985 levels, based on energy consumption per-gross-square-foot of its buildings in use, to the extent that these measures are cost-effective. Various measures have been implemented by individual federal agencies to reach this goal. The federal government is well on its way to meeting this goal because, since 1985, federal energy consumption has declined by almost 17%. http://www.eren.doe.gov/femp/resources/exec12902.html

Energy-Efficient Standby Power Devices

In August 2001, the President signed Executive Order 13221 regarding energy-efficient standby power devices. The Order directs federal agencies to purchase products that use no more than one watt in their standby power consuming mode. If such products are not available, agencies shall purchase products with the lowest standby power wattage. Agencies shall adhere to these requirements where cost-effective and practicable. http://www.eren.doe.gov/femp/resources/exec13221.html

9


Information to the Public

Several National Energy Policy recommendations are aimed at raising public awareness on energy efficiency include: � That EPA develops and implements a strategy to increase public

awareness of the sizeable savings that energy efficiency offers to homeowners.

� That DOE explore potential opportunities to develop educational programmes related to energy development and use. This should include possible legislation to create public education awareness programmes about energy.

� That DOE strengthen its public education programmes relating to energy efficiency.

� Develop an education campaign that communicates the benefits of alternative forms of energy, including hydrogen and fusion.

TRANSPORT In 2001, the transportation sector consumed 27% of the nation’s energy and

accounted for two-thirds of our petroleum consumption. Over 95% of transportation energy is derived from petroleum, transportation, and this contributes significantly to the US need for imported oil.


FreedomCar Research Partnership

The FreedomCAR and Vehicle Technologies (FCVT) Program partners with industry, research entities, state governments, and other federal agencies to support the development and use of advanced vehicle technologies and fuels which could reduce, and eventually eliminate, the demand for petroleum, decrease emissions of criteria air pollutants and greenhouse gases. In FreedomCAR, the DOE works with the US Council for Automotive Research (USCAR). The new partnership supersedes and builds upon the successes of the Partnership for a New Generation of Vehicles (PNGV) that began in 1993. It is, however, different in scope and breadth. FreedomCAR shifts government research to more fundamental, higher risk activities, with applicability to multiple passenger vehicle models and special emphasis on development of fuel cells and hydrogen fuel infrastructure. http://www.ott.doe.gov/freedom_car.shtml

Automobile Fuel Efficiency Standards

Corporate Average Fuel Economy (CAFE) standards for cars and light trucks remain in force. Vehicle fuel economy labelling is also an important component of the fuel economy programme. The current automobile standard is 27.5 miles per gallon (8.6 litres per 100 km), and the light truck standard is 20.6 mpg (11.4 litres per 100 km). Neither of these standards has changed significantly since the mid-1980s. These standards played a significant part in increasing automobile and light truck fuel efficiencies beyond spontaneous industry trends, mostly between 1979 and 1982 but continuing through the first half of the 1980s when some manufacturers exceeded CAFÉ standards. Later, as real fuel prices started to fall, CAFÉ caused manufacturers to accelerate use of more advanced technologies and manage their sales (through marketing and pricing) so that their average fleet fuel economy continued to meet the standards. Recent trends suggest little or no improvement in overall fuel economy levels because of the increased market share of light trucks and sport utility vehicles. CAFÉ standards have been frozen by Congress during the three fiscal years (FY) 1996 to 1998. These fiscal years correspond to model years 1998-2000 since the standards are issued 18 months in advance of their implementation.

10

Clean Cities Program

DOE’s Clean Cities Program supports public–private partnerships that deploy alternative-fuel vehicles (AFVs) and build supporting infrastructure, including community networks. Clean Cities works directly with local businesses and governments, guiding them through each step in the process of building the foundation for a vibrant local organisation, including goal setting, coalition-building, and securing commitments. Current and potential members of the Clean Cities network also help each other by sharing local innovations, addressing and relaying obstacles they encounter in pursuing alternative-fuel programmes, and exchanging “do’s” and “don’ts,” based on experiences in these programmes. Clean Cities continually pioneers innovations and aspires to make strides nationally as well as locally.

Public Transport and Commuter Options

The Commuter Choice Leadership Initiative is a voluntary employer-adopted programme that increases commuter flexibility by expanding mode options, using flexible scheduling, and increasing work location choices. Parking Cash-Out offers employees the option to receive taxable income in lieu of free or subsidised parking, and Transit Check offers non-taxable transit benefits, currently up to $100 monthly.


Review CAFÉ The National Energy Policy recommends the President direct the Secretary of Transportation to review and provide recommendations on establishing Corporate Average Fuel Efficiency standards and look at other, market-based approaches to increasing the national average fuel economy of new motor vehicles.

Tax Credits

The National Energy Policy recommends the adoption of a tax credit for fuel-efficient vehicles as well as a temporary, efficiency-based income tax credit for purchase of new hybrid fuel cell vehicles between 2002 and 2007. In the 2002 in-depth review of the energy policies of the United States the IEA stated: The Government of the United States should: � Give priority to enhancing energy efficiency in the transport and building

sectors, notably by: - Strengthening CAFE standards. - Reviewing the range of options available to improve the fuel economy of

personal and light-duty vehicles, including the possibility of increased reliance on diesel engines following the introduction in 2006 of low-sulphur diesel.

MONITORING/ EVALUATING AND ADJUSTING

Emissions

There are several mechanisms for monitoring emissions and sequestration trends. In addition to various official bodies which continuously gather and analyse data on energy production and consumption and greenhouse gas emissions, electricity utilities and companies participating in voluntary programs to undertake continuous monitoring and report on their efforts to reduce greenhouse gas emissions http://www.epa.gov/

Energy Statistics Reporting

The Energy Information Administration (EIA), created by the US Congress in 1977, is a statistical agency of the Department of Energy. EIA provides policy-independent data, forecasts, and analysis for use by the public, and

11

policymakers. EIA produces a wide range of energy and energy-efficiency publications, based on sound statistical surveys and data analysis. http://www.EIA.doe.gov/

Voluntary Reporting of GHG Emissions

The Energy Information Administration (EIA) in the Department of Energy manages a voluntary registry programme for GHG emission reporting (referred to as the 1605b programme). Under this programme, provided by Section 1605b of the Energy Policy Act of 1992, more than 200 companies have voluntarily reported their GHG emissions to EIA. The most recent report published by the EIA in February 2002, reports that through voluntary actions participating companies had reduced emissions by 73 million metric tonnes of carbon equivalent in 2000, approximately 3.8% of total US greenhouse gas emissions. Information of the 1605b programme can be found at: http://www.eia.doe.gov/oiaf/1605/frntvrgg.html

Enhancing DOE’s Registry of GHG Emissions and Emission Reductions

Improvements are being investigated for creating a comprehensive and transparent programme to register and credit real greenhouse gas reductions. The new registry programme will achieve the objective of "measurement accuracy, reliability, and verifiability". Proposed improvements also include developing fair, objective and practical methods for reporting baselines, calculating real results, and awarding transferable credits for actions that lead to real greenhouse gas reductions. After completion of this process that will fully engage the many stakeholders who are concerned about climate change, DOE plans to adopt new guidelines by January 2004, for reporting 2003 annual data. Information on efforts underway to enhance DOE GHG emissions registry is found at: http://www.pi.energy.gov/enhancingGHGregistry/index.html

Energy Intensity Indicators System

As part of the implementation of the National Energy Policy, DOE is developing a new web-based system for information on trends in energy intensity. This energy intensity information is being developed for the public, policy analysts, and policy makers. Energy intensity indicators are constructed at the economy-level, as well as at lower sector levels (buildings, industrial, transportation, electric power), sub-sectors, and for selected categories of end-use. One example is “space-heat use and efficiency indicator” (space heat energy per unit of home floor space). The new energy intensity indicators system will be available in early 2003.

Further information

For further information, please contact: Jeff Dowd Office of Energy Efficiency and Renewable Energy US Department of Energy/EE3B 1000 Independence Ave, SW Washington, D.C. 20585 Tel: +1 (202) 586-7258 fax: +1 (202) 586-2176 email: [email protected]