Brief History of Climate Policy

The question of how climate change might affect human activities appeared on the international agenda in 1979 at the World Climate Conference (WCC).3 The conference issued a declaration calling on the world's governments '( ) to foresee and prevent potential man-made changes in 2 It can be argued that it is problematic to use the categorization of sceptics and supporters because it is too difficult to capture the complexity of the issue and the diversity of viewpoints by categorizing the debate...

E2 Geopolitics and Global Energy Security

Understanding of energy security relies on geographical diversification of energy supplies, sources and stability of prices. Since the extraction and burning of coal started, energy is powering the world economy. Depletion of stocks and global energy supplies make countries vulnerable to disruptive events, no matter where they take place. The first oil crisis of 1973 or the invasion of Iraq in 2003 exemplified the consequences for nations when energy supply became uncertain. Therefore, national...

Energy Efficiency and Climate Change

Conserving Power for a Sustainable Future B. Sudhakara Reddy Gaudenz B. Assenza Dora Assenza Franziska Hasselmann Wi O Los Angeles London New Delhi. Singapore Washington DC Copyright B. Sudhakara Reddy, Gaudenz B. Assenza, Dora Assenza and Franziska Hasselmann, 2009 All rights reserved. No part of this book may be reproduced or utilized in any form or by any means, electronic or mechanical, including photocopying, recording, or by any information storage or retrieval system, without permission...

Commercialization of Energy Efficient Technologies The Mechanism

EETs are among the most complex cluster of technologies for commercialization. First of all, most of these technologies are alternatives for well-established existing technologies and are still evolving, which makes it difficult to decide what exactly should be diffused or commercialized in terms of knowledge, techniques and hardware. Second, these technologies require an interconnecting series of difficult technological choices concerning resources, transformation processes and transportation...

A3 Real World Second Law Efficiencies

Second law efficiencies as low as in our stylized example are far from being unrealistic. The second law efficiency of overall electricity consumption, for example, is estimated by Gilli et al. to be lower than 6 per cent on a world-wide average.57 In contrast to low second law efficiencies, however, commonly high first law efficiencies support the impression that further efficiency improvements are hardly possible. Moreover, while our example merely focuses on the efficiency with which space...

Benefits of Energy Efficiency

The short- and long-term benefits of EE are given in Table 5.1. In households, improving the efficiency of energy use resulting in reduced energy requirement to provide a given amount of lighting, cooking, heating and other services is equivalent to an increase in income on account of 1 Dr Eric Ferguson 2003 (personal communication). Table 5.1 Positive Aspects of Energy Efficiency Table 5.1 Positive Aspects of Energy Efficiency Reduces load, peak demand and energy use Less oil wells,...

Consumers

Consumers play an important role in the choice of technology and are the main actors. From the perspective of the consumers, the technology choice depends mainly on the annual energy budgets coupled with the availability of a particular technology. The costs of energy utilizing devices like stoves or water heaters also have an impact. Thus, the consumer makes a choice based on the desires and priorities, especially the financial resources and related constraints. However, there are other...

Economics

Economic activities not only include wealth and prosperity in a financial sense but also the provision or protection of qualitative features, such as environmental amenities and quality of life. Some of these qualitative features can be provided by economic activities. Equally important is the challenge to prevent the economy from creating excessive externalities and damaging the quality of life. The Human Development Index and similar alternatives to the indicator of GDP attempt to capture a...

Climate Realists

Between climate change supporters and sceptics, there has been a tiny minority of analysts who are convinced of the urgency of the problem while remaining profoundly sceptical of the proposed solutions. Most of them are from developing countries and their voices have largely gone unheard. The data about emissions show (Figure 2.3) that developed countries (Annex 1) emit far more than that of developing countries (non-Annex 1). Global emissions, on per capita emissions, increased from 0.01...

Financing Energy Efficiency in Transition Economies

This chapter discusses the linkages between energy efficiency (EE) and the financing mechanism. Now that more financial and institutional resources are available to support EE in transition economies, it is important to channel these resources into profitable investments and indicate to financial institutions that their money is safer and profitable in EE projects. Getting finances in emerging markets means overcoming significant challenges. It requires careful planning, serious investment of...

A4 Conclusion

In this contribution, we have illustrated the concept of second law efficiency with a stylized example. We have highlighted that technological efficiency potentials are, by far, not exhausted. This result contradicts common impressions of high technological efficiencies that are based on the concept of first law efficiency. The discrepancy is a consequence of the major distinction between both concepts. While first law efficiencies solely refer to the single technology actually applied for a...

Energy Efficiency Policies

Energy efficiency policies usually consist of instruments of governmental intervention into the energy market. These instruments aim to overcome barriers to investment in EE improvements. Although there are some standard policy measures for governmental intervention in markets, such as taxes, subsidies, laws, regulations and provision of information or provision of services, their application varies according to each sector, taking into account their different characteristics. Table 4.3 gives...

Clean Development Mechanism

The CDM authorizes Annex I countries or their authorized public and private sector representatives to implement GHG emissions reduction projects in developing countries (non-Annex I countries) in exchange for GHG emissions reduction credits. CDM differs from JI in that the host country for CDM project activities is not one of the Annex I countries. However, the host country must be a signatory to Kyoto, and it must also establish a designated national authority (DNA) to authorize the project...

Soft Financing

In a pure market situation, there are several options and possibilities to make investing in EE more attractive, such as for instance softening the market 24 Hagler Bailly Consulting, Inc. 1996a. 25 Schipper et al. 1992, 159-73. To provide a non-reimbursable grant as a kind of subsidy To provide a reduced interest rate for a loan To provide a guarantee from the public sector To provide extra time for payment, repayment for a loan To provide financing with equity features and To help in a case...

Manufacturing Industry

Industry can promote EE as well and complement state policies and programmes. It has expertise as well as knowledge of the plant and processes. They can position their projects to respond to customers' needs and can influence policy making. The manufacturers have a relationship with the customers, who rely upon their products, services and expertise. This is likely to result in increased interest by energy users in EE, which will in turn give confidence to manufacturers to develop new methods...

Conclusion

The term climate refers to the aggregate of all weather appearances over a period of time. It is widely agreed that the climate is changing but its future trajectory and impacts on the environment and society remain uncertain.79 There can be little doubt '( ) that man is capable of influencing the climate through human activities of many different kinds'.80 Although a matter of some debate with regard to data reliability, the curve of the global mean temperature has been rising since 1861 and...

Flexibility Mechanisms

The Kyoto Protocol establishes three flexibility mechanisms emissions trading, JI and CDM to provide economic incentives for parties to seek out cost-effective emissions reduction opportunities and to promote sustainable economic development. The cost ofreducing GHG emission varies markedly across emissions source, geographic region and from country to country. The flexibility mechanisms seek to capitalize on this variability by allowing parties to meet their emissions reductions obligations...

Business Perspectives

It took a long time for the business community to come to terms with energy efficiency. John B. Robinson argues that the relative novelty of the energy efficiency field together with its technical nature and the invisibility of energy caused a lack of good information on EETs, their potentials and costs.7 There are also other issues pertaining to the attitudes. They include the lack of recognition of non-market needs of consumers, and the focus of the private sector on environmental remediation...

Introduction

A key issue in the debate on climate change is how much it will cost to reduce greenhouse gas (GHG) emission levels. In contrast to the 'no-rush' approach advocated by sceptics, supporters believe that the cost of delay is much higher than the cost of immediate action.1 When it comes to detailed calculations of the cost of climate change mitigation, sceptics sometimes use worst case assumptions, which partially 1 UNEP and UNFCCC 2002, Information Sheet 24. or completely exclude the use of...

Favourable Policy and Regulatory Environment

Government and utility programmes can spur local markets for EE technologies and services. Many governments are adopting policies that encourage or require increased EE because it can reduce environmental damage, alleviate power shortages and increase global competitiveness and productivity. To increase the rate of diffusion of EE technologies, political will and commitment to EE is often critical to removal of market barriers such as high tariffs on imported EE technologies or subsidy...

Energy Efficiency A Technological Perspective

Technological innovation is a key factor in microeconomic explanations of consumer behaviour. Technological change may be interpreted as socio-technical innovation. The need or demand for clean clothes, as for instance, was satisfied by hand washing years ago, but is satisfied by automatic washing machines today. Technology mediates psychological needs and demand for products.28 Technology also plays a role in market models. Technological progress and technological advance are crucial in...

Deregulation and Increased Competition

The electric power industry is a case in point. The USD 500 billion US and European electric power industries are being deregulated to allow for increased competition in wholesale generation and retail energy services. This is driving the development and deployment of technologies that improve energy efficiency, reduce costs to customers and respond to customer demand for improved power quality. One example is distributed generation, which enables customers to manage and produce their...

Favourable Business Climate

The business climate of a country determines whether projects within that country can attract financing at reasonable interest rates. To assess the overall business climate of potential markets, the following market characteristics should be examined The economic growth rate, in terms of gross domestic product (GDP) Overall market size for specific EE technologies and services Government policies toward foreign investment Inflation, interest and exchange rates Taxes, tariffs, red-tape and other...

Private Financing

For many years sustainable energy projects were funded almost exclusively by the public sector, and many projects were designed and implemented by multilateral institutions without significant private participation. The second stage, in which we are now, increasingly involves cooperative arrangements among governments, multilateral institutions and private investors. And the third, the future stage, may involve full commercialization in which the role of governments and multilateral...

The Selection of Performance Benchmarks

Once the research questions are set, the next step is to define the criteria based on which the performance of MIs is analyzed. In other words, a decision is needed on which benchmarks are used to assess whether particular projects or programmes have been successes or failures. The selection of variables is not to be taken lightly, since it has implications on the feasibility of the research as well as the validity of the outcomes. The performance of MIs can be measured in terms of multiple...

Towards an Analytic Taxonomy

The classification schemes mentioned above are useful only if they are complemented with an analytic approach. For this, the taxonomy can begin with the question, 'What are the reasons for a negative decision by a private investor ' The possible answers for this could be The investor's perception that the investment will be unprofitable, that is, the rate of returns on the investment will be smaller than the risk-adjusted opportunity cost of capital. The investor's perception that the...

Energy Efficiency and Clean Energy as New Hitech Markets

Energy efficiency and clean energy may provide an opportunity to participate and create a new market. Patrick Mazza from Climate Solutions, an advocacy group, suggests that 'Clean energy generation and end-use efficiency represent a USD 3.5 trillion market over the coming 20 years, even with no new public priority'.26 There will be plenty of business opportunities in resource efficiency and productivity in the energy, water, agriculture, transportation and forest product industries. Examples of...

Institutional Design8

According to Keohane et al.9 institutions can be understood as .persistent and connected sets of rules and practices that prescribe behavioural roles, constrain activity and shape expectations. They may take the form of bureaucratic organizations, regimes , or conventions (informal practices). Based on the success or failure of problem-solving efforts, one can evaluate these institutions in implementation ('implementation' refers to the measures governments take to translate international...

The Guarantee Fund

Financing to EE projects can also be made available to the ESCO on a project-by-project basis. In this case, it can be assumed that financing for 100 per cent of the project cost is available however, it may be prudent to have the ESCO and customer to have a financial stake in the project as well. As a 30 Hagler Bailly Consulting, Inc. 1996a. 31 Schipper et al. 1992, 159-73. 33 Hagler Bailly Consulting, Inc. 1996a. prerequisite to the financing, the ESCO can enter into a performance contract...

Removing Reducing and Avoiding the Barriers

It is important to explore the relationship between the independent variables, which are the stimuli mechanisms, and the linking variables, the drivers and barriers, respectively. This relationship can be described as a process of stimulating the drivers and overcoming the barriers to private investment. Overcoming the barriers would reduce the overall financing need for energy efficiency and promote sustainable development. It is important to recognize that the process of overcoming barriers...

Understanding Tradeoffs for a Successful Energy Policy

Existing technologies and approaches can deliver significant gains in EE. However, to date, there has only been limited success in terms of adopting these technologies and approaches by industries and domestic markets. This is because, there is a general belief that inefficient practices are primarily caused by social, economic, informational and institutional actions working against a shift to more energy efficient practices. For example, there is a general acknowledgement of the fact that...

The Role of Institutions in Promoting Energy Efficiency

Using the example of support for clean energy in countries in transition, this chapter discusses the lessons of experience of institutions in supporting energy-efficient technologies (EETs). The emphasis is on analyzing the performance of organizations, particularly the multilateral institutions (MIs) in promoting EETs. A key conclusion from the analysis is that although there may be some technical blueprints that MIs can apply to all countries, there are no blueprints for the design of...

Identifying Sources of Financing

Sources of financing for EE projects in emerging markets range from commercial banks, to specialized EE funds, to socially responsible investors. Financing through commercial banks remains difficult, in many cases, because EE investments often do not meet the standard investment criteria, such as collateral requirements. However, a growing number of specialized financing sources for EE efficiency are presently available. Each source has its own set of priorities and criteria used to select...

Tradeoffs

Many supporters are willing to countenance tradeoffs between a better environment and health on one side and wealth on the other side. Some 69 Raffensperger and Tickner 1999. supporters believe that developing countries need to make trade-offs between growth and a cleaner environment. Others believe that developing countries have an opportunity to leapfrog developed countries in terms of adopting cleaner technologies as a basis for development. The notion of leapfrogging over old technologies...

Financial viability of EE Projects

There exists communication gaps that presently exist within the financial institutions on EE projects. Hence, it is important for the institutions to provide specialized EE-related training so that they would better understand how to assess the risks associated with such projects. There is also the need for a special, comprehensive assessment system for EE projects as they tend to be multi-faceted both technical as well as financial in nature. Standardized appraisal methodologies may also...

The Energy Environment Nexus The Climate Change

Energy is closely linked with key contemporary global challenges the world faces social development and poverty alleviation, environmental degradation and climate change and is therefore a defining issue of our time. Climate change is especially of concern to the energy sector, since the use of energy accounts for about 60 per cent of greenhouse gas emissions. But above all, it is a global concern because without new policy action, we run the risk of irreversibly altering the environmental...

Local Institutions

Local financial institutions (Figure 9.3) and commercial credit providers offer finance through leasing and term loans. This is partly due to a lack of information about the potential of EE and partly due to a lack of resources. Financial institutions and other sources of private sector funding follow a well-defined due diligence process while evaluating loan and investment proposals. Environmental risks are often undervalued. It is here that the main challenge of mainstreaming EE lies....

The Concept of Barriers and Drivers and its Application to Energy Efficiency

The aim of the present chapter is to examine the nature of barriers and drivers to energy efficiency (EE), the circumstances in which they arise, their relative importance in different contexts and the manner in which different actors intervene to overcome these barriers. The chapter reviews current perspectives on barriers and drivers, classifies them according to their influencing patterns and provides supporting evidence for their prevalence. Finally, this chapter develops a new systematic...

Supporters

Many supporters of action on climate change agree with sceptics that the climate is influenced by multiple contributing factors, including natural causes. Without adopting a mono-causal point of view, many supporters nonetheless argue that the theory of human influence on the climate is well established. They also believe that many consequences of climate change, although not certain, are documented so well already that it would be irresponsible to wait for action. Hence the main issue for...

Role of Actors Needs and Priorities

In order to achieve the goal of optimal stable state of actor influence leading to the highest level in the comfort ladder, their needs and priorities need to be analyzed accurately. First and the most important step is substituting inefficient technologies with efficient ones. As basic energy needs are met, consumer priorities shift to other, often higher quality services. Consumers can climb the technology ladder quickly due to shifts in technologies. This leads to an increasing stress on...

Actor Analysis

All the actors, and their decisions, describe the whole socio-technical structure and the processes that occur.33 Here we propose to classify actors into various levels, micro, meso, macro and meta. Micro level actors are those that influence at the lowest level, for example, at the consumer level. Meso level actors are those at the intermediate level, that is, in the supply stage. The macro level actors are at a higher level state and central government, and the meta level actors are at the...

Building a Sound Performance Analysis

Assuming that there are no data constraints, an idealized performance analysis would involve four steps evaluation, explanation, prediction and prescription. The fourth step includes general recommendations in terms of objectives and targets (what needs to be achieved) as well as guidelines to the ways in which these targets can be achieved in particular circumstances (how it can be achieved). These steps are then followed by a fifth step, without which the performance analysis hardly is a...

Cultural Reasons

At the core, many problems can be traced back to a lack of political will and a culture that does not value the environment as highly as economic progress. Nature and the economy are perceived in terms of a trade-off that is irreconcilable. One economics professor in the Czech Republic highlighted this trade-off by stating that '( ) a hungry child does not care about a blue sky'.17 There is a widespread perception of being left behind economically, fuelling a sense of urgency to catch up with...

Energy Efficiency and International Environmental

This chapter looks at the relationship between international environmental law and energy efficiency (EE). International environmental law has spoken repeatedly on the concept of EE but typically in the form of general statements in support of domestic efforts to improve efficiency and not in terms of specific goals or enforceable obligations. This is because historically international law has left EE policy to the domestic sphere. Certain provisions of international climate change treaties...

Need for Energy Efficiency

The thinking in developing countries and transition economies on energy production and utilization is mostly on the pattern prevailing in Europe and North America. Many countries adapted a nearly identical path of large scale, supply-side-oriented energy development. However, despite decades of adherence to this path, these countries have not met even the basic energy needs of the majority of their people. In such circumstances, a different paradigm of energy development needs to be developed....

Domestic Financial Institutions

Financial institutions have to make a valuable contribution in protecting the environment while maintaining the health and profitability of their businesses. They have crucial links with commercial activity that generally degrades the environment. Their commitment and support for the precautionary approach to environmental management, which attempts to anticipate and prevent environmental degradation, is essential for achieving sustainable development. Financial institutions taking an...

Energy Efficiency Actors Perspectives

EE programmes provide economic, environmental and social benefits for two reasons. First, the persistence of GHG reductions and the sustainabil-ity of EE programmes depend on individuals and local organizations that help support a programme during its lifetime. Both direct and indirect programme benefits will influence the motivation and commitment of programme participants. Hence, focusing only on environmental impacts would present a misleading picture ofwhat is needed in making a programme...

Good Project or Venture Economics

The cost effectiveness of a product or service to the customer is a key determinant of the likelihood of success. Simple payback is calculated by dividing capital costs by annual savings or revenues to the customer. In general, shorter paybacks have a greater likelihood of success. Private project financing in transition economies is generally available for projects having a simple payback period of less than two years, and one year in countries with high interest rates and high inflation.

Environment as a Competitive Market Force

Transportation industry is a good example for this. Environmental concerns, issues and regulations are impacting the business strategies and investment decisions of major corporations world-wide. For example, while global warming was not given much attention in the early and mid-1990s, companies in the energy and automotive industries are now integrating the issue into their core businesses and long-term strategies. Pressures to reduce local air pollution are also increasing. For example, the...

Market Failures

Payback gap consumers face higher interest rate than producers. Differences of prices from marginal cost with franchised monopolies or regulatory oversight, prices rarely reflect marginal cost. Risk sheltering of the utility monopoly franchise or regulatory oversight shield utility from risk. Rate of return regulation leads to an incentive to over invest. are not seen by market actors. Lack of information consumers do not choose EE technologies because of lack of knowledge. High transaction...

Energy for a Sustainable Future

The term sustainable was popularized in 1987 by the World Commission on Environment and Development (WCED), a body that became known as the Brundtland Commission.34 The concept of sustainable development has come to embody a holistic vision of societal change, including political, economic and cultural.35 The strength of the concept is that it reflects widely shared concerns about the state of the world, and that it provides a common umbrella to numerous measures aimed at improving this...

Public Policy Institutions

Public policy shaping institutions influence the EET market indirectly through taxes and subsidies. Taxes have a negative influence and subsidies a positive influence. Policy makers as actors of energy consumption work alongside those who frame policies pertaining to economics, technology and social welfare. The role of policy makers is to address the most pressing technology challenges facing the nation, including enhancing the efficiency of energy use. Sound energy policy requires more than a...

The Kyoto Protocol and the Marrakech Accords

Supplementing and strengthening the UNFCCC, the Kyoto Protocol establishes legally binding emissions reduction targets for the Annex I industrialized countries. The parties agreed that the total level of emissions reductions among all Annex I countries would be reduced to a level at least 5 per cent below the 1990 levels by the 2008-2012 timeframe. Responsibility for achieving these emissions reductions are divided up among the signatories at different levels depending on individual country...

Marketbased Climate Policy

All environmental policy instruments, including traditional command and control mechanisms, such as performance standards and economic instruments, such as taxes and subsidies can have an impact on private investment decisions. However, market-based measures have the greatest potential to attract profit-minded investors for climate change mitigation. The main idea of market-based mechanisms is to solve environmental problems in an economically efficient way by sending appropriate price signals...

Government

The MIs play a significant role in the development of countries. There are institutions at the local, national and international levels and have stakes in organizations. National and international committees suggest guidelines to preserve the environment. Governments are often both consumers and suppliers of goods and services, and there is a conflict of interest in both these roles. Hence, governmental institutions are taken for study in the stakeholder analysis. State policy has a major...

Powering the World Economy

In ancient times, human beings had a modest need for energy. They relied mainly on the energy from animal strength to do work. Humans first learned to control fire around one million BC and since then have used fire to cook food and to warm their shelters.8 There were water mills, wind mills and also solar energy for drying of foods. About 1000 BC, the Chinese discovered coal and started using it as a fuel, primarily for heating. Before the advent of coal, many regions experienced fuel crises...

Win Win Climate Policy

Climate change mitigation is related to costs. This chapter develops an outline of a win-win-oriented climate policy. As an introduction to the problem, the debate on abatement of costs is reviewed first. The discount rate partly influences how much money is spent on climate change mitigation. Therefore, this chapter discusses the question 'What discount rate should be applied for problems that are likely to peak in the medium to long-term futureThe third section examines whether climate...

The Concept

The commercialization concept describes the process of developing an idea into a marketable product. Commercialization is the total process of moving a technology from the concept stage, to the production of a product and from there, to market acceptance and use. Innovation is distinguished in the literature on the study of science and technology from invention even though these two terms are used interchangeably in ordinary language. The term innovation is used to describe the process of...

Energy Economy and the Environment

Energy development is a barometer of economic progress. The substitution of energy for human power in the performance of agriculture, industry and domestic services has contributed to the process of economic growth. The increased availability of energy services stimulates economic activity along different stages of the development process. Economic development accelerates when a society uses energy in new forms, adaptable to a range of needs based on its social and cultural characteristics....

The Economics of Energy Efficiency

Generally the term EE is defined in a technical sense and relates a given level of service to a given level of input. To put it differently, an increase in EE occurs when either energy inputs are reduced for a given level of service or service is increased or enhanced for a given level of input. To be energy efficient per se is to provide services with an energy input that is small relative to a fixed standard or normal input. It is important to note that EE should not be regarded as an end in...

Fundamentals of Energy Efficiency

Energy efficiency (EE) is widely viewed as an important element of economic and environmental policy. However, there is little agreement on specific EE goals and the strategies to attain them. The lack of consensus stems from the fact that there are differing views about the meaning of EE and the means of implementing it. How much one will actually benefit from EE depends on how one approaches the issue. Also, the success in EE improvements depends on how well various actors help each other,...

Understanding the Energy Efficiency

The question being asked very often is why consumers and firms do not invest in cost-effective energy efficiency opportunities. Partly, the answer is that consumers and firms discount future savings of energy efficiency investments at rates well in excess of market rates for borrowings or savings. This pattern is referred to as the 'energy efficiency gap'.20 To understand the EE gap, it is essential to study (a) the characteristics of markets for energy-efficient technologies (EETs), (b) the...

Governmental Perspective

This perspective looks at the net costs of the EE project as a resource option based on the total costs to the government and the customer. Energy efficiency issues that also need to be looked at from the government perspective include national development goals, social equity, national priorities, self-reliance, energy security, policy making as well as institution forming. Energy inefficiency plagues almost all of the developing countries that face energy shortages. The process of reforms...

International Efforts on Energy Efficiency

The link between EE and pollution reduction has been discussed repeatedly in international treaties. The reasons for international support of EE are not limited to air pollution reduction. They also include a desire to reduce dependence on foreign oil supplies via using less imported fuels8 and sustainable economic development. The Council of Europe recognized in 1970 that 'improvements of the thermal insulation of buildings, ( ) results in a significant reduction of fuel consumption'.9...

The Geopolitics of Energy

In the new millennium, new realities affecting the energy industry are constantly emerging not only because of events in the Middle East but also because of the environmental impacts of energy consumption and concerns about global sustainability. A strong interaction exists among energy, economics, technology, geopolitics and sustainability. The challenge for policy makers is to secure the long-term energy future without destroying the environmental systems that support the human race. It would...

Energy Efficiency Project Development

There are various projects dealing with various aspects of energy and GHG reduction strategies on a country-specific basis. The international funding for most of these projects comes from the Global Environment Facility (GEF), United Nations Development Programme (UNDP), the World Bank, the Asian Development Bank (ADB), and so on. The ongoing assistance for a given option does not automatically rule out the option, as it needs to be ascertained whether involvement is still needed for furthering...

Integrating Climate Policies with Development Priorities

As climate change negotiations advance, it is becoming increasingly clear that there is a greater need to shift the focus on developing countries since the international negotiations have not adequately addressed their priorities for sustainable development, support for adaptation activities, aid assistance and technology transfer. This is because affordable and accessible modern energy services along with poverty reduction are essential to achieve sustainable development. Lack of access to...

Policies and Measures

Article 2 to the Protocol directs the parties to carry out PAMs domestically to achieve the emissions reductions targets. Unlike the UNFCCC, which is silent on the types of policies and measures available, the Kyoto Protocol lists eight representative PAMs that a country can take. Included in that list is the '( ) enhancement of energy efficiency in relevant sectors of the national economy'.72 But, as with the UNFCCC, the Kyoto Protocol leaves it up to the individual countries to decide which...

Actors in the Field of Energy Efficiency

There is a growing recognition that the usual investment decisions, such as payback period, rate of return on investment or net present value, do not account adequately for actual business behaviour. Technical solutions given in Figure 4.2 are not likely to succeed unless there is an interface between 32 Technical experts at the World Bank Group and the Global Environment Facility 1997 (interviews). Figure 4.2 Technology Choices for Private Sector Investment in Energy Efficiency Figure 4.2...

Noregrets and Winwin Opportunities

Already in 1992, the United Nations Framework Convention on Climate Change (UNFCCC) encouraged the use of cost-effective mechanisms for tackling climate change. This principle was reaffirmed later in the Kyoto Protocol. The principle of cost effectiveness influences (a) the type of project and (b) the type of policy instruments. This section focuses on types of projects, whereas the next one discusses policy instruments. No-regrets options have the potential to be welcomed by both, sceptics and...

The Role of Multilateral Institutions

In order to understand the role of multilateral institutions (MIs) in financing efficiency improvements and the mitigation of environmental degradation, we need to take a glimpse at some of the international instruments put into place for tackling these issues, namely, the 1992 Rio Earth Summit and the Agenda 21, and the United Nations (UN) Millennium Declaration in September 2000. Of the many items in the Rio agenda, those relevant to this section are the financing of the development process...

The Energy Efficiency Debate

There has been a long running debate between energy economists and energy analysts about various aspects of energy efficiency. One aspect is the rebound effect. Although definitions vary, this effect describes the following linkage the efficient use of energy leads to an increase in the use of energy. This may offset the savings in energy use achieved by the EE improvement partly.6 The theory of the rebound effect is rooted in the neoclassical 6 Compare with Schipper 2000. This effect is also...

The Benefits and Drawbacks of Energy Efficiency

The aim of this chapter is to discuss the methods of assessing the advantages and drawbacks of energy-efficient technologies (EET) as well as projects. It is a proven fact that in specific situations and well-chosen energy efficiency (EE) proposals, benefits significantly outweigh drawbacks. However, it is important to mention the perceived and actual disadvantages and complications. In the present chapter, both these aspects are discussed from the perspective of the governments, businesses...

Role of Institutions in Promoting EE

It is widely accepted that the participation of various institutions is essential for the effective management and financing of EE programmes. 2 Even today, several of these factors still play a role in particular subsidies and information barriers. These institutions, including the government, industry, state utilities, financial institutions, non-governmental organizations (NGOs) and consumers have knowledge and network, but often lack funds, institutional capacity as well as extensive...

E5 Individual Interests Versus Societal Interests

Diffusion of EE measures depends mainly on human interaction for acceptance and behaviour. Energy efficiency investment has effects of society-wide interest that can be used by policy makers to catalyze voluntary behaviour. In a free market, customers will get the best price and can buy only the goods and services they wish to buy. However, the free market approach only works if the market for efficiency is structured in such a way that customers can actually express their desire for EE through...

Interrelationships among Various Actors

Actors do not act independently since several actors have similar goal, that is, to supply energy to consumers in a cost-effective manner. The interrelationship among the actors may be analyzed by using a diagram. Figure 4.3 shows the government at the highest level connected to energy suppliers who in turn are inter-related to the consumer through intermediaries. If we Figure 4.3 Inter-relationships among Actors Figure 4.3 Inter-relationships among Actors want to change the existing system, we...

Energy Efficiency Conclusion

Certainly there are several reasons, a number of pros and cons to improve energy efficiency. Theoretically, with the magic formula ceteris paribus, the pros prevail and the experience from developed countries confirms this in practice as well. Transition economies have a chance to either improve or introduce energy efficiency, and despite the fact that the obstacles and negatives exist, EE has a great potential, which should be utilized. Whilst an increase in energy efficiency investment can...

Energy Savings Insurance

There are uncertainties about the projected energy savings and apprehension about potential disputes over these savings which involve financial risk. Energy Savings Insurance (ESI) formal insurance of predicted energy savings transfers financial risks away from the facility owner or energy services contractor. ESI providers manage risk via pre-construction design review as well as post-construction commissioning with measurement and verification of savings. ESI potentially can reduce the net...

Joint Implementation

JI authorizes parties from Annex I countries to implement GHG emissions reduction projects in other Annex I countries in exchange for emissions reduction credits created by the projects.78 The project sponsor can then count the credits, in the form of emissions reduction units (ERUs), towards meeting its own emissions reduction targets under Kyoto.79 The emissions reductions must be in addition to any GHG emissions reductions that 76 UNFCC, Marrakech Decision 13 CP.7., Annex I. 77 UNFCC,...

The Stakeholder Interaction Model

The stakeholder interaction model29 analyses the relations between MIs and various levels of stakeholders, including state agencies, NGOs, businesses, commercial banks and the general public. Not least, this model concerns itself with the interactions among MIs, which are characterized by competition versus cooperation as well as by complementarity versus overlap. Traditionally, the interaction among stakeholders has been inadequate, not only in the field of sustainable energy, but in all...

About the Authors

Sudhakara Reddy is a professor at the Indira Gandhi Institute of Development Research, Mumbai, India. He is a Member of the Editorial Committee on Energy Efficiency, Switzerland. He has also served as Expert, Evaluation of projects on Renewable Energy FP7 Programme, European Commission, 2007 Member, Expert Appraisal Committee for Thermal Power and Coal Mine projects Ministry of Environment and Forests, Government of India Member, Board of Management, Indira Gandhi Institute of Development...

Consolidated Bibliography

ABGR (Australian Building Green Rating) Scheme. 2001. Available online at www.abgr.com.au. Acemoglu, Daron and Simon Johnson. 2005. 'Unbundling Institutions', Journal of Political Economy, 113(5) 949-95. ADB (Asian Development Bank). 2006. Clean Air Initiative for Asian Cities (CAI-Asia), project report, Asia Development Bank (ADB). Available online at www.cleanairnet.org evaluation. -. 2008. 'Role of Multilateral Institutions'. Available online at http www.adb.org MDGs multilateral.asp...

The Commercialization

The commercialization process involves a process of developing technology from a concept to a commercially available device through the following steps Concept Feasible Device Working Device Manufacturable Device Commercially Disseminated Device Thus, technological diffusion is based on ideas, the conversion of ideas into inventions, the commercialization of inventions into innovations, and finally, the widespread adoption and dissemination of innovations by users. The terms commercialization...

Causal Model of Private Investment Decision

If the objective is to maximize private investment in EETs at a minimum cost to the consumer, we need to find out which factors (drivers and barriers) influence private investment decisions. But a list of factors is not sufficient. We need to know the relative contribution (causal weight) of these factors in terms of influencing investment decisions. Only then we would be able to design and prioritize measures to mobilize private capital for clean technologies. There are two types of measures...

Scientific Knowledge

In general, sceptics and supporters agree that there is a need for more knowledge on climate change, but they disagree on how much certainty has been achieved already, and how much is needed. Supporters believe that there is a sufficient basis of established facts to justify measures on climate change now. George Marshall argues that waiting for a complete scientific understanding will not be accepted as an excuse by future generations affected by global warming. Moreover, he states that '( )...

Drawbacks of Energy Efficiency

While the benefits seem sufficient to justify investment in energy efficiency, individuals typically do not use societal criteria when making personal Figure 5.1 Methodology of Selecting Projects Figure 5.1 Methodology of Selecting Projects or business decisions. Consequently, if policy makers want individuals or corporations to invest in EE so that society can realize the benefits, they have to address the drawbacks that inhibit individuals or business houses from making these investments. It...

Relationship between Banks and ESCOs

ESCOs are dependent on local financing. Several models can be used 35 Partial loan guarantee to interest local banks Customers repay the developers of successful EE projects. Whichever financing model is used, ESCOs have to find a bank that understands efficiency financing. Some banks have proved that it is possible to save money by being efficient. For instance, the investment bank Salomon Brothers has complex programmes on recycling, waste reduction, energy efficiency, environmental education...

Level of Actors Actors at the Micro Level

The first 'actor' to look at is the consumer whose technology choices depend on the income, needs, prices, costs and availability of equipment and fuel, on the 'status value' of energy sources ('for example, Liquefied petroleum gas LPG is more modern') and on other factors. If we can find out the intensity of these choice factors it would help in predicting future behaviour. There are also NGOs who try to help the consumer in providing information about various energy technologies,...

Structure of the Causal Model

The structure of the causal model is illustrated in Figure 6.4. The causal model links the stimulation mechanisms (the independent variables) with the private investment response (the dependent variable) through the determinants of private investment (linking variables in the causal pathway). The input variables (stimuli mechanism) are categorized into macro, meso and micro. The variables are ordered from those that stimulate the drivers 17 Cost effectiveness is one of 10 operational principles...

Alternative Explanations of Climate Change

Supporters are not convinced about most alternative explanations of observed warming trends forwarded by sceptics. For example, supporters argue that there are not sufficient data to support the conclusion that the warming is due to sunspot activity, since satellite monitoring of the sun started not until the late 1970s.67 They also point out that the warming cannot be explained by the theory of long-run fluctuations, as going by this theory, the world would currently be in a cooling phase....

Internal and External Performance Variables

The performance of MIs is affected by internal and external drivers, and constraints. Internal drivers and constraints are characteristics of organizational capacity, which include individual capabilities as well as factors such as availability of funds, priority given to sustainable energy, openness of organizational culture, like the ability and willingness to collaborate with other institutions, and other variables. External drivers and constraints are variables pertaining to other...

Influence of Actors and Factors

Technology choice analysis is facilitated by a state diagram depicting the influence of various factors and the corresponding actors. Figure 4.5 describes the Actor Factor Influence Linkage state. Different types of actors, level of influence (low or high), and so on, are depicted. Household budget directly influences the fuel choice, whereas availability and price influence it indirectly. Policy makers have a great influence directly as well as indirectly. Actually the nature of influence can...

The Process

Diffusion is the process by which a technology is adapted and gains acceptance by the consumers. The factors influencing the diffusion include (a) technology appeal, (b) how information about the technology is communicated, (c) time and (d) the nature of the social system into which the technology is being introduced. To increase the diffusion process, it is important to investigate how these factors interact to facilitate or impede the adoption of a specific technology among members of a...

Rationale for EE Intervention

Nearly all devices and systems are less energy efficient in practice than their maximum efficiency in theory. There is always potential for improvement. Thus, few things are truly energy efficient. A device or system can only be more or less energy efficient than the alternatives at a given time, in a given situation. Thus, the technical potential can be defined as the achievable savings resulting from the maximum EE improvement available at a given time, regardless of cost considerations....

Externalities as Benefits and Drawbacks of Energy Efficiency

This section illustrates the large number of externalities in energy efficiency, since EE provides external benefits or imposed external costs in addition to financial outcome and energy production. As suggested in Table 5.9, the positive externalities are substantial. The table shows that externalities exist on a local, national, regional and global level. Institutions, such as the GEF focus mainly on global externalities. This contrasts with the fact that national and local benefits and the...

The Choice of Discount Rate

There are three types of capital investments Those that have a net economic cost, those that are costless and those that yield a profit. Mobilizing private capital is not different it can be costly, costless or profitable. How much money should be invested in climate change mitigation or in mobilizing private capital for climate change mitigation partly depends on the discount rate. Discounting converts the (full) values of the impacts that occur at different points of time into common units,...

A2 The Concepts of First and Second Law Efficiency

The basic difference between both concepts is that while first law efficiency solely relates to the specific technology applied in order to satisfy certain tasks, for example, illumination and space heating, the concept of second law efficiency takes into account both the actual technology employed and the technology that would theoretically be the best for the same task. Our following example on whether to heat a house with either electric furnaces or heat pumps illustrates the difference...

Asia Pacific Partnership on Clean Development and Climate

The Asia-Pacific Partnership on Clean Development and Climate (APPCDC) brings together Australia, People's Republic of China, India, Japan, Republic of Korea, the United States and Canada to address the challenges of climate 106 Commission of the European Union, Proposal for a Directive of the European Parliament and of the Council amending the Directive establishing a scheme for greenhouse gas emissions allowance trading within the Community, in respect of the Kyoto Protocol's project...

The UN Framework Convention on Climate Change UNFCCC

Adopted on 9 May 1992, the UNFCCC represents a landmark international agreement acknowledging the urgent need for the international community to address the growing risk of climate change. The UNFCCC establishes as 50 In the UK, the Royal Commission into Transport which recommended, inter alia, improving the fuel efficiency of UK cars by 40 per cent by 2005. Hamer 1994, 6. 51 The European Car Manufacturers promised to cut their CO2 emissions from new models by 25 per cent. This voluntary...

The Organizational Capacity Model

The organizational capacity model explains performance in terms of the ability and efficiency of institutions. In this model, it is useful to distinguish between MIs that are oriented towards operational activities and others that focus to a greater extent on normative activities. In practice, most organizations have both normative and operative functions, but some organizations like the World Bank concentrate more on the operative side of the spectrum, whereas the UN agencies generally tend to...