SPEECH/06/793
Andris Piebalgs, Energy Commissioner, Round table on Energy Efficiency in the Committee of Regions, Brussels, 7 December 2006

Energy efficiency: the best way towards a sustainable, competitive and secure energy system

Thank you so much for the invitation to participate in the today’s event, dedicated to Energy efficiency for regional development. Energy efficiency is one of my favourite subjects as my motto is the best energy is the energy that is not used! My conviction is that without active involvement of actors at regional level we can’t get far with our ambitious Energy Efficiency agenda. Therefore I am glad to see the big interest today’s event has attracted.

Using the opportunity, I want to commend the organisers of today’s event – FEDARENE and Assembly of European Regions – as well as its host – the Committee of Regions – for their ambitious level of activity in co-ordinating and facilitating energy policies at regional level and for their significant input in the policy formulation at EU level.

I am particularly happy to note that today’s event will have a tangible result – a Declaration of European Regions for Energy and renewable energy sources that will be signed later on today. I am sure that this action will motivate other regions that have not yet defined quantitative objectives in terms of energy efficiency and renewables development to do so!

Why the subject of energy efficiency is so important?
Whenever we open a newspaper, we find worrying headlines related to energy supplies – so called oil peak seems to be approaching, situation in many supply countries seems to be more instable than ever before, many strategic investment projects are experiencing difficulties of different sorts.

Also recently published Stern Review on the Economics of Climate change as well as the World Energy Outlook 2006 by International Energy Agency prove that business as usual is not an option. The energy future we are facing today, based on projections of current trends, is dirty, insecure and expensive. At the same time they show us the way to Cleaner, Cleverer and More Competitive Energy Future.

There is still time to avoid the worst impacts of climate change, if we act now and act internationally.

The dangers of unabated climate change would be equivalent to at least 5% of GDP each year. In contrast, the costs of action to reduce greenhouse gas emissions to avoid the worst impacts of climate change can be limited to around 1% of global GDP each year. People would pay a little more for carbon-intensive goods, but our economies could continue to grow strongly.

In fact, energy efficiency is a perfect tool to address 3 goals of our developing common energy policy – sustainability, security of supply and competitiveness. Therefore I consider that it was a timely action by the Commission to adopt ambitious Action Plan on Energy Efficiency. And I am happy it was supported by Member States during the Energy Council meeting of 23 November 2006.

A few words about the overall thrust of the Action Plan.
In the Plan, we consider, we are even confident, it realistic to save 20% of our energy consumption by 2020.

Achieving the additional 20% savings would lead by 2020 to an annual savings of primary energy of around 390 Mtoe, -more than the combined annual energy consumption of Germany and Finland.

This represents an annual cost savings of more than 100 billion euros by 2020, if oil prices average around 48 USD (a figure recently endorsed also by IEA as the lowest possible energy price for the years to come). Of course, this will take some investment in energy efficiency, but the net savings is estimated to be at least half of this amount by 2020.

The wider ambition of this Plan is to transform and complete the internal energy market by improving the functioning of the demand side and providing EU citizens with the globally most energy-efficient goods and services available.

I would also like to mention a few words on the areas covered by the Action Plan.

In the first place, the Commission intends to proceed with dynamic minimum energy performance requirements (Ecodesign directive) and will update labeling requirements for energy-using products. This means that, on the one hand, we will get out of the EU market the least efficient appliances and that, on the other hand, we will ensure that the consumer can easily find out which are the most efficient appliances. We will put an end to a situation when almost all appliances on the market are “A” – labeled. "A" label should be reserved to 10-20% of the most efficient appliances.

There is a huge potential also in buildings sector which consumes as much as 40% of energy. In my view, the 1000m2 benchmark for application of minimum efficiency requirements we have in the Energy performance of buildings directive is close to the lowest common denominator. However, Member States as well as their regions could and should consider doing much more already now and not wait for a move from Brussels. This will pay off!

Substantial energy efficiency gains can be obtained from the right planning of the streets alone (Northern orientation of kitchens and Southern orientation of sitting rooms).

As indicated in the Plan, the Commission will propose action to ensure that in the longer term our buildings become "near zero emitting" – called also "passive houses". I know there have already been realised several good demonstration projects (such as Velux "Soltag" or "Attika"), but I would like to see more of them.

Measures have also been proposed for the power generation and distribution sector. For example, we will develop binding efficiency requirements for small generation capacity (capacity lower than 20MW). As to big generation capacity – the bulk of it is covered by the Emission Trading System, and the very strict approach adopted by the Commission for the allocations in the second trading period as well as ambitious post-2012 strategy will make the big generators move.

As often advantages of centralised electricity generation are out-weighted by transmission and distribution losses, the Commission will take necessary (legislative) steps to promote grid access of decentralised generation.

Also existing framework for CHP will be strengthened at EU level, but involvement and support of regional and local authorities will be needed for the new framework to deliver.

It goes without saying that transport will be among the Commission priorities as far as its energy efficiency agenda is concerned. It is our most vulnerable sector in terms of security of supply with oil making up 98% of fuel consumption and it is also the sector with huge potential for increased energy efficiency.

Therefore it is considered that the average new car fleet should achieve CO2 emissions of 120 g/km in 2012 through an integrated set of measures.

Big importance is being attached also to the creation of a "Covenant of Mayors" which is planned in 2007 and which will bring together in a permanent network the mayors of 20-30 of Europe’s largest and most pioneering cities. To achieve significant energy efficiency improvements in the urban environment we need to have more intensive exchange and application of best practices at local level. Of course, the role of the Covenant of Mayors will not be limited to transport sector, but this is clearly the most problematic sector for our cities.

I am happy to see that during the Energy Council meeting on 23 November 2006 the Member States ministers deemed it possible to go beyond the list of actions proposed by the Commission, by suggesting such measures as mandatory fuel consumption meters for cars, aerodynamic improvements and Galileo-linked voluntary speed limiters.

It is obvious that improved financing tools, as well as coherent taxation and energy pricing are key for the Europe’s succeeding with its energy efficiency agenda.

In terms of taxation we have introduced relatively high excise duties on energy and this had its results. Compare, for instance, US and Europe’s car parks in terms of fuel efficiency! Of course, we have to do much more.

Our next task in this respect is to stop so called "tank tourism" in Europe by further harmonising taxation for commercial diesel.

We are also hoping that one day Commission’s 2005 proposal to include CO2 element in car taxes will become a law.

As far as direct taxes are concerned Commission’s possibility to influence the laws of Member States is even more limited that in case of indirect taxes. Nevertheless, we can guide Member States through our state aid rules. For instance, currently we have at EU level state aid rules for environment protection which allow MS to grant certain support for energy efficiency improvements. Several Member States and their regions have used this possibility and adopted fiscal measures to promote the purchase of energy efficient appliances and cars that emit less CO2.

At the same time there are reasons to believe that producer-oriented tax measures might be more effective and cheaper. Therefore it is planned to re-examine in 2007 current state aid rules (Notably guidelines on environmental aids) which explicitly prohibit support of the production of energy-efficient goods.

Another tool we intend to use more actively is public procurement. Inter alia in 2007 my fellow Commissioner, Vice President Jacques Barrot intends to come up with a new proposal establishing a quota for clean vehicle purchases.

Speaking about financial instruments one should also mention EU Funds. In this respect I would like to express my regret that with respect to Structural and Cohesion Funds financing for 2007-2013 Member States plan to direct for the needs of energy efficiency improvements too few of available resources. Can’t we do better?! We’ll do our best at the Commission when the texts of the draft operational programs reach us, but it is even more important that local and regional authorities exercise the needed pressure on their national governments.

For me it is not only important to see how much percent of the allocated financing Member States plan to direct for the specific objective of increasing energy efficiency. It is important that the idea of energy efficiency is "mainstreamed" in all EU spending. For instance, if EU helps with financing of a construction of a new school or hospital, it has to be built with energy efficiency concern in mind. Where appropriate, one has to consider also installing of solar panels, etc.

It is also clear that measures to influence our behavior through information, awareness raising, education and training will play an important role. Very often we simply do not know how much more energy and consequently money our old fridges and traditional light bulbs are eating compared to their energy efficient equivalents. The role of regional and local authorities in spreading this information is crucial!

Last but not least: we have to aim at “exporting” our energy efficiency policy worldwide. Here, the launching of an international framework agreement on energy efficiency has been proposed. We will start the debate in January during the Sustainable Energy Week and I hope that we will be able to present the initial results of this debate already on the occasion of the next G-8 summit. The Global Energy Efficiency and Renewable Energy Fund, which the Commission adopted recently, is another useful instrument in this area.

In conclusion, I would like to underline once again how important it will be for us all to play an active and ambitious role in the implementation of the Action Plan. We will need to provide credible information to energy consumers; we will need to ensure enforcement of our laws and regulations; we must ensure that proper financing is available for investment in energy efficiency. We must also be sure that our taxes are coherent and work to improve energy efficiency. The list of what we must do is long. The time we have to do it is rather short.

Additional background information (provided by Infrasite’s Editorial Staff)
Barroso Opening speech External energy conference
European Action Plan on Energy Efficiency
The Stern Review can be downloaded at www.sternreview.org.uk