Policy Developments and Challenges in Delivering Energy Efficiency Policy Developments and Challenges in Delivering Energy Energy efficiency has never been as and implementation of energy efficiency relevant as it is today. If the global potential policies and programmes. Drawing upon Efficiency for energy saving can be realised, this would the experience of countries from Western have profound implications for energy Europe to Central Asia, along with examples in Challenges and Developments Policy security and for avoiding greenhouse from Japan, Australia and the United States, gas emissions. it provides an invaluable guide to recent developments, current policies and to the The main challenge for policymakers is challenges that remain. how to deliver real, tangible improvements in energy efficiency, but this is a complex The analysis is drawn from the work task. Our use of energy is part of the fabric conducted by the Energy Charter on of our daily lives and our economies, and the implementation of its multilateral our choices about energy depend on a host Protocol on Energy Efficiency and Related of factors, including available technologies Environmental Aspects (PEEREA), and was and information, and the structure and completed with cooperation from the operation of national markets. Changing European Bank for Reconstruction and the way that we use energy is not something Development and from Euroheat & Power. that can be done overnight. In line with the request in the Ministerial Yet this report demonstrates that Declaration adopted in Kiev in 2003, this Delivering Energy Efficiency delivering energy efficiency is possible, report was presented to the 2007 Belgrade and examines in detail the ingredients that Ministerial Conference of the UNECE can contribute to successful development ‘Environment for Europe’ process. Energy Charter Energy Charter Secretariat 2007 European Bank for Euroheat with cooperation from Reconstruction and & Power Secretariat Development European Bank for Euroheat with cooperation from Reconstruction and & Power ISBN 978-905948-053-7 Development Information contained in this work has been obtained from sources believed to be reliable. However, neither the Energy Charter Secretariat nor its authors guarantee the accuracy or completeness of any information published herein, and neither the Energy Charter Secretariat nor its authors shall be responsible for any losses or damages arising from the use of this information or from any errors or omissions therein. This work is published with the understanding that the Energy Charter Secretariat and its authors are supplying the information, but are not attempting to render legal or other professional services. Copyright First Edition, 2007 © Energy Charter Secretariat, 2007 English hard copy ISBN 978-905948-053-7 Depot D/2007/7850/6 English pdf ISBN 978-905948-054-4 Reproduction of this work, save where otherwise stated, is authorised, provided the source is acknowledged. All rights otherwise reserved. Policy Developments and Challenges in Delivering Energy Efficiency Energy Charter Secretariat September 2007 With cooperation from the European Bank for Reconstruction and Development and Euroheat & Power Energy Charter Secretariat FOREWORD Energy Efficiency has never been more relevant than it is today. It is a tool which allows policymakers, simultaneously, to achieve the three main objectives of energy policy: (i) improvement of energy security; (ii) reduction of adverse environmental impacts arising from the use of energy; and (iii) improvement of industrial competitiveness. Many improvements in energy efficiency can be achieved in a short time with readily available technologies and with high cost-efficiency, especially on the demand side. Projects that improve energy efficiency, in particular on the supply side, are facilitated by and dependent upon technology transfer. Moreover, the potential for and value of implementing an energy efficiency strategy exist both in monopolistic and in liberalised market economies, even if the range and the effectiveness of energy efficiency policies can increase alongside the introduction of market mechanisms. With climate change being the principal policy driver, a large number of initiatives and measures relating to energy efficiency have been adopted in recent years at regional, national and international levels. Since the Evian Summit in 2003, G8 leaders have acknowledged that Energy Efficiency is a key area for G8 action, with the subsequent adoption at Gleneagles in 2005 of a specific Plan of Action on Energy Efficiency. Both the St.- Petersburg G8 summit (2006) and the Heiligendamm Summit (2007) confirmed the commitments made at Gleneagles and underlined the need to enhance energy efficiency and energy savings. At regional level, the European Union has taken a range of initiatives on energy efficiency, and has also made a proposal to create a new framework agreement on energy efficiency with key external trading partner countries and international organisations. Other relevant initiatives are ongoing in the International Energy Agency (IEA), the United Nations Economic Commission for Europe, and, at national level, from many countries of the world with national plans and policy measures for energy efficiency. The main challenge today is not to generate additional political will; this, I believe, we have. The challenge is to find a way to channel a commitment towards energy efficiency into cost- effective policies and measures, and to ensure that political will is matched by adequate financial and human resources. In short, the challenge is to deliver real and tangible energy efficiency improvements. This has to be done by maximising the added value of all outcomes from different existing initiatives. This report presents a perspective from the Energy Charter on policy developments and trends in energy efficiency. It was prepared in response to the Ministerial Declaration of the Kiev ‘Environment for Europe’ Conference, held in May 2003, and represents a follow-up to the Secretariat’s report ‘The Road towards an Energy Efficient Future’ that was presented in 2003. Four years on from the Kiev Conference, it is clear that much has been accomplished and that efforts to improve energy efficiency have been given additional momentum by high prices and heightened concerns over climate change and energy security. Yet, it is equally evident that more needs to be done, for example to put in place the necessary institutional FOREWORD capacity to formulate and implement energy efficiency policies, and to ensure good coordination between institutions responsible for improving energy efficiency, those responsible for safeguarding the environment and addressing climate change, and those in charge of economic policy-making. It is my conviction that international cooperation to improve energy efficiency will form an increasingly prominent part of efforts to tackle climate change and enhance energy security, by providing policy momentum, a comparative analytical foundation, capacity development, and access to technologies and financing. It is in this spirit that I am very pleased to make the Charter’s experience available to the 2007 Belgrade Ministerial Conference and to a wider audience, based on our work with the implementation of the Energy Charter Protocol on Energy Efficiency and Related Environmental Aspects (PEEREA). I take this opportunity to thank the European Bank for Reconstruction and Development and also Euroheat & Power for their contributions to the text, which also benefited greatly from discussions in the PEEREA Working Group under the chairmanship of Peter Helmer Steen. Rod Janssen, consultant to the Charter Secretariat, undertook drafting and research for this report, and Tudor Constantinescu from the Secretariat ensured overall coordination of the work under the direction of Eric Sorensen and, from 1 February 2007, Dario Chello. Tim Gould assisted in finalising the text and Olga Sorokina and Galina Romanova provided essential support in preparing the English and Russian versions for publication. This report is made publicly available under my authority as Secretary General of the Energy Charter Secretariat. André Mernier Secretary General 14 August 2007 ENERGY CHARTER TREATY THE ENERGY CHARTER TREATY The Energy Charter Treaty provides a multilateral framework for energy cooperation that is unique under international law. It is designed to promote energy security through the operation of more open and competitive energy markets, while respecting the principles of sustainable development and sovereignty over energy resources. The Energy Charter Treaty was signed in December 199 and entered into legal force in April 1998. To date the Treaty has been signed or acceded to by fifty-one states plus the European Communities (the total number of its Signatories is therefore fifty-two). The Treaty’s provisions focus on four broad areas: • the protection of foreign investments, based on the extension of national treatment, or most-favoured nation treatment (whichever is more favourable) and protection against key non-commercial risks; • non-discriminatory conditions for trade in energy materials, products and energy- related equipment based on WTO rules, and provisions to ensure reliable cross- border energy transit flows through pipelines, grids and other means of transportation; • the resolution of disputes between participating states, and – in the case of investments – between investors and host states; •