Governmental Perspective

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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 that are taking place in many developing countries emphasizes appropriate pricing and efficiency in the use of resources, including energy resources. Programmes to promote energy efficiency and incentives to adopt efficiency improving measures play an important role. A significant benefit from improved energy efficiency is the reduction in GHG emissions and a well practiced concept to facilitate parts of the Kyoto Protocol (1997) and further governmental agreements concerning environmental issues.2

Studies carried out at the Indira Gandhi Institute of Development Research (IGIDR), Bombay, India, reveal that the power sector is responsible for the highest direct CO2 emissions in India, followed by iron and steel, road and air transport and coal tar.3 There could be a significant reduction of these emissions through improving the efficiency of coal and electricity use. Hence, environmental benefits of energy efficient measures play an important role in reducing GHG emissions.

If efficient measures are not implemented, power plants have to be constructed for which land, energy, steel, concrete as well as transportation

2 Under the United Nations Framework Convention on Climate Change (UNFCCC) in Kyoto, Japan (December 1997) countries agreed the first protocol which among others 'strengthens the commitments of industrialised countries to reduce GHG emissions by establishing legally binding targets in the time frame 2008—2012 for a "basket" of six categories of direct greenhouse gases (CO2, CH4, N2O, PFCs, HFCs and SF6)' (OECD 1999a, 16).

3 Parikh et al. 1994.

facilities are required. During the operation, power plants use coal with significant ash content and emit CO2, SO2, NO2, and so on, which pollute air, water and land. Thus, environmental benefits also provide motivation for the implementation of energy efficient options. Also, alternative power generation through co-generation and biomass gasification reduces the electricity consumption. Since there are significant energy and carbon savings, Global Environmental Facility (GEF) funding will help these technologies to penetrate faster.4

Growing imports of oil are a major worry of many policy makers in developing countries. Thus, the government encourages programmes that substitute oil with other fuels or that increase the efficiency of oil use, particularly in the transportation sector. Thus, for example, it promotes the usage of compressed natural gas for vehicles, subsidizes electric vehicles and subsidizes urban mass transport.

Energy security is an important issue that has to be tackled by the government. Over the last three decades, we have witnessed events that have transformed the outlook of the global oil market. The first oil crisis of 1973, the invasion of Kuwait by Iraq and the recent war on Iraq have resulted in sharp fluctuations in energy markets and reawakened concerns about energy security both for oil producers and consumers. Ensuring oil supply means being prepared to mitigate any short-term disruption of supply, and foster investment into a sustainable long-term supply. Mitigating short-term disruptions to oil supply involves use of oil stocks and emergency response measures, such as demand restraint, fuel switching and surge in production. Securing reliable, competitive and environmentally sustainable long-term oil supply in the world is the responsibility of the governments. In this respect,

• promotion of indigenous resource development;

• diversification of the energy mix and the supply sources for any individual fuel; and

• improved energy efficiency play an important role in reducing oil demand.

Archaic economic, financial and institutional barriers might have kept out many efficiency measures. Due to controls and subsidies in this sector, many of the EETs do not even enter the demonstration level. To become attractive, these technologies need the removal of controls and the introduction of price reforms. This is happening gradually in all energy sub-sectors and many others besides steel, textiles and fertilizers.

4 Parikh et al. 1994.

Moreover, due to the liberalization of import, developing economies are exposed to the rigours of competition and efficiency upgrades. Joint ventures in capital goods, such as cars, refrigerators and other consumer goods result in energy efficiency.

Russia is an example worth mentioning here as it contrasts with the rest of Europe. For example, it takes five tons of coal in Russia to produce the amount of electricity that only one ton of coal would yield in the US. Similarly, it takes roughly eight Russian power plants to generate the amount of electricity that a single plant in western Europe produces and eight times more electricity to light a house in Russia than in Germany.

In short, economic prosperity and growth are enhanced by EE. Conversely, high-energy intensity places an enormous burden on long-term industrial competitiveness and poses critical problems to improving living standards. Energy inefficiency becomes a drain on factories, machinery and resources, affecting competitiveness. Hence, it is important that the government improves the efficiency of the energy supply systems and reduces losses at the demand side. In Thailand a valuable mechanism exists, which serves as the starting point of an integrated nation-wide energy efficiency programme. The National Energy Policy Office is an effective and pragmatic body in creating energy policies and establishing priorities for the economy. Thailand is a stellar regional example of introducing energy initiatives and priorities. The government and businesses understand the importance of energy conservation and recognize the need to do more.

An appropriate policy environment is necessary for the replicability and the sustainability of the EE options, if funded. Similarly, energy development agencies should be set up to pursue EE strategies. Along with that, power finance corporations, which take up small modernization projects to improve supply-side efficiencies, are needed. The established system for promoting efficiency improvements needs to be transformed to operate effectively in the new environment.

The recent policy of economic liberalization seeks to promote an entry of the private sector—domestic and foreign—into all areas of the energy sector, be it coal, oil, gas or electricity. This means, that the administered prices have to go which means reduction in subsidy, if not complete removal.

Moreover, due to the liberalization of import, the economies of various countries are exposed to the rigours of competition and efficiency upgrades. Joint ventures in the manufacture and distribution ofcapital goods, such as cars, refrigerators and other consumer goods have resulted in EE improvements.

5 Hill 2001.

6 Ibid.

Hence, strong government support and encouragement is needed to enforce minimal efficiency standards and other legislation. An institutional framework is required to ensure appropriate equipment certification, testing and energy auditing. The most effective approach is a collaborative effort between the government and businesses. To implement energy efficiency programmes and policies, the financial infrastructure is a must to support these investments. Some successful models have included financial support to help businesses to switch to more efficient systems. Energy service companies, leasing programmes, guarantee funds and insurance mechanisms are some of such models, which can play a critical role in the phase of transformation.

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