Practices

Costs and Benefits of Energy Efficiency Obligation Schemes

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This report, elaborated by the Regulatory Assistance Project (RAP), reviews the main characteristics of the leading Energy Efficiency Obligation Schemes (EEOs) in Europe and the United States, and answers basic questions as to scope and scale to inform European policymakers as they consider extending the Energy Efficiency Directive (EED) beyond 2020.

 

Drawing on data from five Member States—the United Kingdom, Denmark, France, Italy, and Austria—the report explores the full range of costs and benefits of EEOs that need to be considered in future impact assessments and presents our findings on the costs, bill impacts, and multiple benefits of EEOs under Article 7 of the EED. Data from the states of California and Vermont in the United States are included for comparison.

 

The analysis shows that, within a few years of adoption, the benefits from EEOs far outweigh the costs. From a long-term perspective, EEOs can substantially reduce energy consumption and bills, delivering benefits to consumers who would otherwise face more exposure to volatile energy prices. Evidence from countries with long-running EEOs also shows energy consumption decreasing over time, which corroborates our findings.

 

According to the report, EEOs also deliver a wide range of benefits in addition to reduced energy consumption and bill savings for participants—they deliver substantial, measurable savings across energy systems and to society as a whole. These include health benefits, increased comfort, economic stimulus, job creation, cost savings in transmission and distribution, avoided CO2 allowance costs, and air quality improvements.

 

However, the current practice of largely ignoring those multiple benefits in cost-benefit analyses underestimates the true value of efficiency and sends potentially misleading messages. Methods for carrying out impact assessments and evaluations need to be adjusted to ensure realistic and complete accounting for the multiple benefits, at both the EU and the national level.

 

 

To download the report, please visit the relevant RAP webpage at the link below.