Energy Efficiency and Greenhouse Gas Emissions Abatement

Transcription

1 Energy Efficiency and Greenhouse Gas Emissions Abatement Dr David Crossley Managing Director Energy Futures Australia Pty Ltd Emissions Reduction Conference Sydney, November

2 Presentation Topics What is energy efficiency? 30 years of energy efficiency Energy use and GHG emissions Energy efficiency and emissions abatement Why do people use energy inefficiently? Increasing the take-up of energy efficiency Conclusions Information resources 2

3 What is Energy Efficiency? Energy efficiency measures, unlike energy conservation, aim to reduce energy consumption while at the same time maintaining or increasing the level of useful output or outcome delivered For example, on hot days, electricity consumption could be reduced through: an efficiency measure, such as installing ceiling and/or wall insulation, which reduces the amount and cost of electricity used to maintain a cool home; or a conservation measure, such as turning up the air conditioner thermostat and tolerating a hotter house, or by completely turning off the air conditioner and going to the pool or the movies 3

4 30 Years of Energy Efficiency 4

5 Mid-1970s to early 1980s Focus on energy conservation, initially in response to concerns about energy security following the 1973 first oil price shock, then resource depletion Policy concerns: depletable resources (especially oil) should be extended as long as possible investments in energy conservation may be more cost-effective than increasing supply low level, but growing, concern about environmental impacts of energy production and use 5

6 Mid-1980s to early 1990s Increased energy consumption, coupled with growing interest in energy efficiency, rather than conservation Policy concerns: doing more with less energy efficiency is possible without reducing production or altering lifestyles energy efficiency makes economic sense and improves competitiveness valid role for governments and regulators to implement policies and programs to overcome barriers to energy efficiency environmental issues in the background 6

7 Mid-1990s to early 2000s Microeconomic reform dominates the agenda energy efficiency takes a back seat Policy concerns: establishing competitive markets will resolve any inefficiencies in the use of resources if market failures and barriers to the efficient use of energy exist, they can be overcome through market mechanisms increasing recognition of climate change issues and initial development of market-based responses 7

8 Today Mid 2000s Growing concern about climate change, development of the carbon economy and commercial opportunities in GHG emission reduction Policy concerns: international cooperation on climate change mitigation development of market mechanisms to reduce GHG emissions role of energy markets in encouraging or inhibiting the use of demand-side options which can reduce GHG emissions 8

9 Energy Use and GHG Emissions 9

10 Current GHG Emissions in Australia (1) Net CO2-e Emissions in Australia, 2003 Source: Australian National Greenhouse Gas Inventory

11 Current GHG Emissions in Australia (2) Stationary energy is the largest contributor to GHG emissions in Australia, comprising 48.7% of national emissions Stationary energy includes emissions from electricity generation, fuels consumed in the manufacturing, construction and commercial sectors, and emissions from other sources like domestic heating Electricity generation is by far the largest source of emissions in the this sector, contributing approximately 71% of stationary energy emissions The remainder of emissions from this sector comes from direct combustion in manufacturing and construction 11

12 Trends in GHG Emissions Trends in CO2-e Emissions in Australia, 1990 to 2003 Source: Australian National Greenhouse Gas Inventory

13 Trends in Stationary Energy Emissions (1) CO2-e Emissions from Stationary Energy Combustion in Australia Source: Australian National Greenhouse Gas Inventory

14 Trends in Stationary Energy Emissions (2) CO2-e Emissions from Electricity Generation by Fossil Fuels in Australia Source: Australian National Greenhouse Gas Inventory

15 Trends in Stationary Energy Emissions (3) Between 1990 and 2003, the increase in GHG emissions from stationary energy were contributed by: Coal +77.6% Gas +20.5% Oil +3.0% Biomass -1.0% Coal accounted for the highest absolute increase in emissions Natural gas emissions showed the largest relative growth, increasing by 44.9% (14.9 Mt) between 1990 and 2003 Electricity generation emissions increased by 47.4% (61.2Mt) between 1990 and

16 Projections of GHG Emissions (1) Projections of CO2-e Emissions in Australia, 1990 to 2020 Source: Tracking to the Kyoto Target 2004, Australian Greenhouse Office 16

17 Projections of GHG Emissions (2) Increases in CO2-e Emissions by Sector, Australia 1990 to 2008/12 (after policy measures) Source: Tracking to the Kyoto Target 2004, Australian Greenhouse Office 17

18 Projections of Stationary Energy Emissions CO2-e Emissions from Stationary Energy in Australia, 1990 to 2020 Source: Tracking to the Kyoto Target 2004, Australian Greenhouse Office 18

19 Energy Efficiency and GHG Emissions Abatement 19

20 Role of Energy Efficiency Energy efficiency is currently the most cost effective approach to abatement and delivers real economic benefits Tracking to the Kyoto Target 2004, Australian Greenhouse Office 20

21 Potential Impact of Energy Efficiency (1) EE Improvement Potential (%) Residential Commercial Mining Agriculture Manufacturing Construction Energy Efficiency Improvement Potential in Australia (NFEE Phase 2 Low Scenario) Source: Allen Consulting Group NFEE Phase 2 Report 21

22 Potential Impact of Energy Efficiency (2) Impact of Energy Efficiency on GHG Emissions in Australia (50% take up rate for EE technologies in NFEE Phase 2 low scenario) Source: Allen Consulting Group NFEE Phase 2 Report 22

23 Potential Impact of Energy Efficiency (3) National Framework for Energy Efficiency Phase 2 low scenario assumes a 4 year payback for energy efficiency technologies Modelling assumes a 50% take-up (progressively over 12 years) of the energy efficiency technologies specified in the NFEE Phase 2 low scenario By year 12, the improved energy efficiency measures reduce GHG emissions from the stationary energy sector by about 2.8% (9.5Mt) relative to what would otherwise have been the case Decline in emission reductions after year 12 is an artefact of the modelling which assumes no expenditure on energy efficiency measures after year 12 23

24 Other Benefits of Energy Efficiency The NFEE modelling also identified a number of other benefits in year 12 from the specified take up of energy efficiency technologies: GDP is around $975 million (0.09%) higher employment is increased by about 2,600 people (0.02%) energy use is reduced by about 75.5 petajoules (2.8%) including taking into account the rebound effect 24

25 Why Do People Use Energy Inefficiently? 25

26 The Energy Efficiency Gap (1) Source: Armstrong/SEAV NFEE Phase 1 Report 26

27 The Energy Efficiency Gap (2) Using energy efficiently would seem to be in the interests of any rational producer or consumer, firm or household Yet individuals do not always seek greater energy efficiency, even when this is cost-effective for them The reason for this lies in the perspectives of the hundreds of thousands of real-life people who each make individual decisions about energy use If people behave economically rationally, they would be expected to take up those energy efficiency measures which are cost-effective to them (ie are privately cost-effective) Economically rational people may not take up those energy efficiency measures which are not cost-effective to them, but which provide benefits (eg GHG emission reductions) to society as a whole (ie are socially cost-effective) 27

28 The Energy Efficiency Gap (3) However, in economic theory terms, rational producers and consumers seek to economise on the use of all inputs, not just energy; from this perspective, not taking up privately cost-effective energy efficiency measures may be perfectly rational if there are better uses for the time and money involved In practical terms, this means that rational people are not efficient in the way they use energy for a myriad of different reasons; these reasons all originate from the fact that, from these people s perspectives, energy efficiency is not important In any case, real-life people do not necessarily exhibit rational behaviour, as defined by economists 28

29 Market Failures and Barriers The Productivity Commission identified the following types of market failures and barriers to energy efficiency: Market failures which arise where the market fails to provide or allocate goods and services to their most efficient use, eg imperfect information and split incentives Behavioural, cultural and organisational barriers which arise because of limits on the decision-making abilities of individuals and organisations Other barriers and impediments such as the additional costs of adopting energy-efficient investments or the impact of those investments on output, eg implementation costs, risks and uncertainty, and asset replacement costs 29

30 Productivity Commission s Conclusions Failures in markets for energy efficiency technologies can inhibit the adoption of energy efficiency improvements at current (and expected) energy prices. Government intervention may be warranted on these grounds if the social benefits of intervention exceed the social costs. The case for government intervention rests primarily on the benefits of reducing harmful environmental externalities. 30

31 Increasing the Take-up of Energy Efficiency 31

32 Measures for Promoting Energy Efficiency Source: European Union White and Green Project 32

33 EE Promotion Measures in Australia (1) R,D&D there are various Commonwealth and State government schemes supporting R,D&D in general, no support dedicated specifically to energy efficiency Awareness and information in the late 1970s and early 1980s, broadly targeted awareness programs were the only type of energy efficiency promotion measure implemented in Australia; now information programs are closely targeted to specific audiences Grants, loans and tax incentives no tax incentives; grants and loans are available through the Commonwealth and State governments, either for GHG reduction in general or specifically for energy efficiency, eg NSW Energy Savings Fund, SEAV programs 33

34 EE Promotion Measures in Australia (2) Energy labelling energy labelling for appliances has been progressively implemented in Australia since the mid- 1980s; one of the first energy labelling schemes in the world Standards Minimum Energy Performance Standards for appliances have been progressively implemented since the mid-1990s; some building regulations and land use planning controls incorporating energy performance standards are now in place Voluntary agreements commenced in the mid-1990s with the Commonwealth Government s Greenhouse Challenge program 34

35 EE Promotion Measures in Australia (3) Taxes there are no taxes promoting energy efficiency (eg a carbon tax) in Australia Certificate trading the NSW Greenhouse Gas Abatement Scheme includes an energy efficiency component ( white certificates ) Regulation the Commonwealth Government has recently imposed a requirement that large energy users must conduct energy efficiency assessments; the NSW Government has similarly imposed a requirement that all major energy users must submit energy savings action plans 35

36 Conclusions 36

37 Conclusions (1) Energy use is currently a large contributor to Australia s GHG emissions; in 2003 stationary energy use contributed 48.7% of national emissions Stationary energy use will also make the largest contribution to the increase in national emissions between 1990 and 2008/12; this increase is estimated as 89 Mt Increased energy efficiency can contribute to reducing Australia s GHG emissions; very conservative modelling forecast that energy efficiency could reduce GHG emissions by 9.5 Mt over a 12 year period Energy efficiency also provides other benefits, including increased GDP and employment 37

38 Conclusions (2) Various market failures and barriers, as well as people s behavioural choices, are preventing both privately and socially cost-effective energy efficiency measures from being taken up Consequently, there is a valid role for governments and regulators to implement policies and programs to overcome barriers to energy efficiency; however, there are differences about how broad the scope of these actions should be Ultimately, unless there are major increases in energy prices (and maybe even then), the contribution to emission reduction made by energy efficiency will depend on the effectiveness of government actions in stimulating changes in people s energy-using behaviour 38

39 Information Resources David Crossley: Reviews of documents on demand management and energy efficiency in Australia are available at my company s website: National Framework for Energy Efficiency: 39