Learning To Be More Energy Efficient in Europe and Central Asia: Lessons from Success Stories

A few lessons in energy efficiency policy can go a long way in Europe and Central Asia, where despite improvements in the past two decades, many countries remain highly energy intensive, according to a World Bank Group study.

Measures taken by countries that have succeeded in cutting their energy intensity – including the addition of environmental costs to energy prices, good governance through institutional capacity building with sustained monitoring and evaluation of energy efficiency targets, recognition of the varying needs across different sectors, and attention to detail such as knowledge sharing programs – can be used to guide countries whose energy intensity remains high, “Lessons Learned From Energy Efficiency Success Cases” found.

Why is this issue of particular focus in Europe and Central Asia?

A major reason is that there is an opportunity ready to be addressed: more than 60 percent of the primary energy used to provide energy services in the region is lost in processing or delivery. This means there is significant room for improvement and savings.

Also, the benefits derived from energy efficiency go beyond commercial considerations. Working on energy efficiency is the least expensive way for governments to improve their energy security. It is also the most effective method to reduce the negative environmental impacts of energy consumption. Additionally, industries would become more competitive, helping create jobs by increasing their market share.

ROOM FOR IMPROVEMENT

To be sure, the region did improve its energy efficiency in the period from 1990 to 2007 – energy intensity dropped 32 percent in Europe and Central Asia and EU-15 countries.

One key lesson gleaned from such reforms is to get energy pricing right, the report found. But the approach to that could be different in different countries. Of the countries that succeeded in getting their energy intensities down, some increased energy prices rapidly, while others did so in a more gradual manner and looked to civil society to help make the process easier. Nearly all successful countries removed energy price subsidies: those with the lowest energy intensity also included environmental taxes. Including environmental taxes within energy prices has not been easy, with governments careful about timing, gaining political support and providing opportunities for everyone to mitigate the impacts of higher prices through energy efficiency programs and social safety nets for the poor. The point to be noted is that energy prices are adjusted mainly to reflect all of the costs of energy supply.

Developing an energy efficiency policy, setting targets and passing laws and regulations to implement this policy is also important.

So are establishing an agency to monitor the energy efficiency program and developing mechanisms to coordinate it among different ministries and units, and ensuring that adequate low-cost financing is made available to compensate for market rigidities and other external factors. The best examples were countries that coordinated both horizontally among Ministries at the Federal level and vertically at the Federal, provincial and municipal levels.

MORE LESSONS THAN ONE

These measures would need to be constantly monitored and evaluated. Doing this would help high energy intensity countries to update their energy efficiency programs as needed to adjust for changing conditions.

Energy efficiency reforms often work faster in the industrial sector as compared to the residential sector. Policies that encourage industries, particularly ones in the private sector, to cut energy costs are crucial. The competitive environment within the EU implicitly helps encourage energy efficiency programs as a part of cost consciousness needed in a competitive market.

With the residential sector, taking a short-term approach (such as setting energy requirements in new buildings), medium-term (addressed through Buildings Certificates Programs) and long-term (through designing nearly zero-energy buildings) approach would help address energy efficiency issues, the report found.

Still, for energy efficiency measures to work, more work is necessary. For example, making buildings energy efficient does not cost more much more, while applying appliance standards and could be one more way to achieve energy efficiency. Lastly, knowledge sharing programs are also critical, the report found. The bottom line - good governance with strong and sustained support for governments is key to success.