Carbon Solutions for 2020

16 Jul 2008Archived News Energetics in the News

Published: Ethical Investor Magazine - by Anna Reynolds,Principal Consultant; Carbon Markets and Government Policy, Energetics Pty Ltd writes about focusing on the energy we don't need to use.


Is saving energy the fastest and cheapest way to save the planet?

The national discussion about climate solutions has focused on changing the sources of the energy we use and on technologies to capture carbon emissions- rather than focusing on the energy we don’t need to use. A 20 percent reduction in Australian’s energy consumption by 2020 would save Australian business more than $8 billion a year off their energy bills
Will Australia’s new emissions trading scheme be able to drive this level of improvement in our energy efficiency?

Acting early delivers a more stable climate

Climate scientists have alerted us that the emission reductions achieved in the next decade are key to avoiding a dangerous level of global warming. Given this urgency, the most important carbon solution to focus on now is changing the way we use and don’t use fossil-fuelled energy.

In June, ministers from the world’s largest and most powerful energy consumers concluded that new energy efficiency measures are needed to ease rising prices and emissions. The G8 energy ministers also released a study on how to achieve 50 percent reductions in carbon dioxide (CO2) below 2005 levels: a target the G8 set in 2007.

This study was undertaken by International Energy Agency (IEA) and it found that end-use efficiency can deliver at least 36 percent of all emission cuts in the scenario they investigated (See graph 1). The report made clear the challenge for the G8 leaders: “… the average energy efficiency in 2050 needs to be twice the level of today, a significant acceleration compared to the developments in the last 25 years.”

Many other climate solution studies are in agreement that 30-40 percent of the deep carbon emission reductions needed can come from energy savings by business and homes. For example: European power company Vatenfall investigated the costs of technologies required to reach a 50 per cent cut in emissions by 2030. It found that end use efficiency options that have a negative cost (ie. Save money) are 35-45 per cent of the total options available.

WWF’s 2007 climate Solutions Vision estimated that about 40 percent of all the actions to combat climate change and contribute to cutting global greenhouse gas emissions by 80 per cent by 2050 will come from energy efficiency and energy conservation.

Trends heading in the wrong direction

The energy savings identified by these studies provide compelling numbers about the role of energy efficiency. Despite this, efficiency is not at the top of government and corporate agendas and Australia’s energy use is currently growing at a rate of more than 2 per cent every year (see graph 2).

Energy consumption is growing because our efforts to become more efficient are not enough to make up for an increase in economic growth and use of new electrical products. The take-up of energy efficiency around the world is slowing- in the last 15 years the rate of efficiency improvement was less than 1 Per cent a year- compared to a much better rate of efficiency improvement of 2 per cent a year in the 1970 and 1980s.

Turning the trend around

Energetics has been working to implement energy savings and emission reductions in corporate Australia for 25 years. This work has helped us to understand why energy saving measures don’t get implemented and the types of practices, laws and programs that will help change these barriers.

More energy is used in the Australian business sector than is consumed in homes, so it’s important to understand what is not happening inside business to combat rising energy use. Energetics has diagnosed over 2000 companies and we have found that over 85 per cent have no, or very limited energy management systems in place- this means there are no formal processed, little or no accountability and few people at decision making and influencing levels tasked with trying to reduce energy costs.

Business managers and leaders have many competing priorities and many still treat energy as a general overhead rather than a manageable cost. There is also a lack of information about the efficiency opportunities available because very few businesses provide this service- power companies who could do this work have been focused on selling more rather than less energy.

Keeping a focus on energy efficiency policy

There is no coherent national dialogue on energy efficiency and because there is only a small energy efficiency industry, the obvious, and most cost effective solutions for climate change have had the lowest level of focus of all solutions.

In mid-June the Ministerial Council on energy met, and contrary to the message from their G8 counterparts, Australian energy ministers decided to delay work on a national mandatory energy efficiency scheme. They also agreed than any further roll-out of measures under the National Framework on Energy Efficiency would be subject to consultation, and a decision to deploy smart-metres nationally was put off until 2012.

At the federal level, energy efficiency is being overlooked as a major piece of our carbon solutions strategy- much of the commentary in policy circles is focused on the emissions trading scheme and the renewable energy target. Both are extremely important, but neither will guarantee the kind of energy savings that we need to meet the government’s carbon emission reduction goals.

It is hoped and expected that the carbon price that is put on energy via the emissions trading scheme will help to drive businesses to improve their energy efficiency. However there may be a limit to the ability of the scheme to be this driver.

The scheme does not start for at least two years and is likely to start with a low carbon price, or even a fixed price, as floated by Professor Ross Garnaut in June. This means the carbon price signal may be too weak to be the “tipping point” for business to change their established energy consumption patterns and behaviours.

Is price the best way to get efficiency?

A price on carbon is an important market signal and very effective for directing longer term investment decisions in energy supply infrastructure. However it may not be the most useful tool for changing shorter term energy consumption patterns. Consequently increases in energy costs to business are more likely to occur than decreases in energy use- as would be possible through energy efficiency measures.

A recent study for NEMMCO found that a change in energy prices leads to significantly less than the equivalent change in energy demand- that is for every 1 Percent increase in price you get only a 0.3 per cent decrease in energy demand.

Rapidly accelerating new energy efficiency programs over the next five years could help the smooth introduction of an emissions trading scheme. Any energy saving achieved in the years before the scheme kicks in will reduce the carbon price required to achieve the carbon cap. It reduces the risk to the market from a government intervention to cap carbon prices.

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