Getting more out of less
Environment
With the International Energy Agency predicting more than a 50 per cent growth in world energy demand by 2030, to have a realistic chance of controlling greenhouse gas emissions one needs to ask how unprecedented global growth, primarily in emerging economies, can be aligned with climate protection.
The reduction of greenhouse gas emissions can be achieved theoretically in three ways: a reduction in economic growth; having low-carbon sources replace the energy mix; and improving energy efficiency.
The first can hardly be considered as an option, as growth reduction would cause the global economy to stagnate.
Moving towards a less carbon-intensive society is an important factor, with the potential of tapping clean coal, nuclear and renewable energy sources. However, with the exception of nuclear energy sources, most of these technologies are not as yet widely available at market conditions.
On the contrary, there is immense potential in the world to increase energy efficiency through cost-effective technologies or behavioural strategies, many of which are already available or being developed.
Thus, more efficient use of energy would be deemed the least costly measure to abate greenhouse gas emissions. A recent McKinsey study on Germany reveals that this is especially true for the residential sector, which has untapped cost-effective energy potential that could reduce carbon dioxide emissions to almost 60 million tonnes by 2020 (see chart).
Although between 1990 and 2004, energy end-users in EU15 improved their efficient use of energy by 11 per cent, more than 30 per cent of all Europe's energy is lost as wasted heat during industrial processes for instance, or at the point of electricity generation, transmission or usage.
The actual total wastage of energy is much higher when considering the whole life cycle of some industrial sectors' products. Materials like aluminium, steel or plastic, once recycled, can greatly reduce energy and emission volumes. Furthermore, during recent years, several sectors experienced a stagnation of energy efficiency improvements, indicating that the relatively simple measures have already been used.
Although European states have to register more improvements, viewing the global picture of progress in this area, Europe would be deemed to be very energy-efficient. In fact, were all the economies in the world to reach Europe's rate of energy productivity, then a reduction of over 25 per cent would be registered in the world's energy consumption.
According to a study by McKinsey Global Institute entitled Curbing Global Energy Demand, a reduction in energy demand of more than 20 per cent can be reached by 2020 through the use of already available energy efficiency technologies when comparing to a business-as-usual scenario. Industrialising economies would have to account for over 70 per cent of these energy savings. Thus, substantial technology transfers are required from industrialised to industrialising economies. Stimulating voluntary technology transfer to outside Europe should be a priority in the EU's external policy.
The Malta Federation of Industry endorses the views of the Confederation of European Business (BusinessEurope) of which it is a member. BusinessEurope believes that no disproportionate and costly legislation or any unilateral and unreasonable carbon price increase would need to be introduced, should energy efficiency be promoted in a smart manner.
Such a promotion would be aimed at reducing production-related emissions and at adopting innovative and competitive approaches. BusinessEurope puts forward the following policy recommendations so as to reach the EU energy and climate change goals:
1. Benchmarking of EU emission trading
The EU Emission Trading Scheme (ETS) imposes costs that seriously threaten competitiveness, especially in the case of energy-intensive industries. Any policy that focuses on regulation and ignores the cost-effectiveness of policy measures, would lead to innovation being discouraged and production being relocated, to the detriment of both economic growth and the environment. Introducing the possibility of allocating emission rights according to criteria such as technology benchmarks, rather than auctioning, could alleviate this threat, rewarding companies that are improving their emission efficiency and enticing them to continue to innovate rather than pressurising them to seek non-EU locations for their emissions.
2. Improving the Clean Development Mechanism (CDM)
The functioning of this mechanism, which enables clean technology to be exported to industrialising economies so that greenhouse gas reduction can be conducted at the cheapest expense, should be enhanced over the long term. Furthermore, so as to align themselves to the obligations imposed under the EU's ETS, credits from CDM projects companies are purchased. It is recommended that there should not be any restrictions on how many of such credits are permitted.
3. Supporting international sectoral approaches
International sectoral approaches would help in achieving reduction targets in greenhouse gas emissions. Thus, efforts to develop such approaches should be supported and, in this way, move towards a global action to address the climate change problem.
4. Liberalising trade multilaterally without discrimination
Should global trade in green goods and services be facilitated, then energy efficiency would be improved. However, there is no generally accepted definition of what is deemed an environmental good. At the same time positive discrimination for such goods would tend to set administrative burdens with only a minimal contribution to the environment.
So the best route to take would be an ambitious drop in trade barriers in the WTO Doha negotiations and in bilateral trade negotiations. It is very important that intellectual property rights and WTO local content rules are fully enforced by the EU so that investments are protected when technologies are voluntarily transferred.
5. Fostering R&D and innovation
With world-class solutions to cost-effectively reduce energy consumption often coming from European industry, Europe's energy goals would be facilitated if the EU's Strategic Energy Technologies (SET) Plan adequately involved industry as a crucial party in the equation. Additional ways of creating European lead markets in the energy field must be sought so that the industrial base will remain in Europe and continue to ensure world-class climate-friendly innovation of technologies and solutions.
6. Implementing the energy efficiency action plan
The European Commission has indicated the way through its Green Paper and action plan on energy efficiency. Yet, a lot of the cost-effective options featured in the action plan, like construction-related measures, are not developing at a sufficient pace.
7. Seizing untapped heating and cooling potential
Energy efficiency can be improved through heating and cooling measures like the use of "waste" energy for heating, cooling or power generation, as well as the implementation of the Combined Heat and Power Directive.
8. Spreading information and know-how
Information and educational campaigns should be encouraged at all levels with a special emphasis on SMEs and the new member states. European industry is willing to share experiences and best practices with firms located in the new member states, so as to assist in overcoming the EU's information asymmetry. Furthermore, policy-makers can help in promoting cost-effective energy-efficiency solutions throughout society in Europe and in the world.
9. Developing appropriate energy performance standards and labelling
So as to avoid bureaucratic and overlapping legislation, policy-makers and effected businesses should cooperate with each other as regards to ongoing studies undertaken by the Commission. Closer collaboration with trading partners, such as the US, should also be sought by Europe on energy efficiency standards and an open process towards negotiating global eco-labelling standards.
10. Promoting energy performance contracting
The current EU framework of legislation and programmes, for instance the Energy Performance of Buildings Directive, promotes energy efficiency but does not fully incorporate the sustainability process, which is crucial for energy efficiency to be attained. Processes like energy performance contracting, which cover the whole process from identifying to implementing measures, should be encouraged so that the market would be brought much faster up to speed.
11. Maintaining a flexible IPPC system based on best available techniques
The best available techniques for each industrial sector are defined and disseminated throughout Europe under the current environmental permit system for industrial installations set up by the EU Directive on Integrated Pollution Prevention and Control (IPPC). The current revision of the IPPC Directive should retain the flexibility of this system.
12. Completing the internal energy market
Electricity producers will be enticed to improve their installations' energy efficiency, should a competitive internal energy market be established.
• Mr Muscat is the director general of the Federation of Industry.
The Federation of Industry, in collaboration with the British High Commission, is organising a seminar on energy efficiency, the second on environmental issues in relation to industry.
The seminar will include talks from both a Maltese as well as the UK perspective, with presentations from the Malta Resources Authority and UK environmental consultant Justin Segrave-Daly.
It will be held at the Excelsior Hotel in Floriana on Monday, February 25 from 9 a.m. to 12.30 p.m.
The reduction of greenhouse gas emissions can be achieved theoretically in three ways: a reduction in economic growth; having low-carbon sources replace the energy mix; and improving energy efficiency.
The first can hardly be considered as an option, as growth reduction would cause the global economy to stagnate.
Moving towards a less carbon-intensive society is an important factor, with the potential of tapping clean coal, nuclear and renewable energy sources. However, with the exception of nuclear energy sources, most of these technologies are not as yet widely available at market conditions.
On the contrary, there is immense potential in the world to increase energy efficiency through cost-effective technologies or behavioural strategies, many of which are already available or being developed.
Thus, more efficient use of energy would be deemed the least costly measure to abate greenhouse gas emissions. A recent McKinsey study on Germany reveals that this is especially true for the residential sector, which has untapped cost-effective energy potential that could reduce carbon dioxide emissions to almost 60 million tonnes by 2020 (see chart).
Although between 1990 and 2004, energy end-users in EU15 improved their efficient use of energy by 11 per cent, more than 30 per cent of all Europe's energy is lost as wasted heat during industrial processes for instance, or at the point of electricity generation, transmission or usage.
The actual total wastage of energy is much higher when considering the whole life cycle of some industrial sectors' products. Materials like aluminium, steel or plastic, once recycled, can greatly reduce energy and emission volumes. Furthermore, during recent years, several sectors experienced a stagnation of energy efficiency improvements, indicating that the relatively simple measures have already been used.
Although European states have to register more improvements, viewing the global picture of progress in this area, Europe would be deemed to be very energy-efficient. In fact, were all the economies in the world to reach Europe's rate of energy productivity, then a reduction of over 25 per cent would be registered in the world's energy consumption.
According to a study by McKinsey Global Institute entitled Curbing Global Energy Demand, a reduction in energy demand of more than 20 per cent can be reached by 2020 through the use of already available energy efficiency technologies when comparing to a business-as-usual scenario. Industrialising economies would have to account for over 70 per cent of these energy savings. Thus, substantial technology transfers are required from industrialised to industrialising economies. Stimulating voluntary technology transfer to outside Europe should be a priority in the EU's external policy.
The Malta Federation of Industry endorses the views of the Confederation of European Business (BusinessEurope) of which it is a member. BusinessEurope believes that no disproportionate and costly legislation or any unilateral and unreasonable carbon price increase would need to be introduced, should energy efficiency be promoted in a smart manner.
Such a promotion would be aimed at reducing production-related emissions and at adopting innovative and competitive approaches. BusinessEurope puts forward the following policy recommendations so as to reach the EU energy and climate change goals:
1. Benchmarking of EU emission trading
The EU Emission Trading Scheme (ETS) imposes costs that seriously threaten competitiveness, especially in the case of energy-intensive industries. Any policy that focuses on regulation and ignores the cost-effectiveness of policy measures, would lead to innovation being discouraged and production being relocated, to the detriment of both economic growth and the environment. Introducing the possibility of allocating emission rights according to criteria such as technology benchmarks, rather than auctioning, could alleviate this threat, rewarding companies that are improving their emission efficiency and enticing them to continue to innovate rather than pressurising them to seek non-EU locations for their emissions.
2. Improving the Clean Development Mechanism (CDM)
The functioning of this mechanism, which enables clean technology to be exported to industrialising economies so that greenhouse gas reduction can be conducted at the cheapest expense, should be enhanced over the long term. Furthermore, so as to align themselves to the obligations imposed under the EU's ETS, credits from CDM projects companies are purchased. It is recommended that there should not be any restrictions on how many of such credits are permitted.
3. Supporting international sectoral approaches
International sectoral approaches would help in achieving reduction targets in greenhouse gas emissions. Thus, efforts to develop such approaches should be supported and, in this way, move towards a global action to address the climate change problem.
4. Liberalising trade multilaterally without discrimination
Should global trade in green goods and services be facilitated, then energy efficiency would be improved. However, there is no generally accepted definition of what is deemed an environmental good. At the same time positive discrimination for such goods would tend to set administrative burdens with only a minimal contribution to the environment.
So the best route to take would be an ambitious drop in trade barriers in the WTO Doha negotiations and in bilateral trade negotiations. It is very important that intellectual property rights and WTO local content rules are fully enforced by the EU so that investments are protected when technologies are voluntarily transferred.
5. Fostering R&D and innovation
With world-class solutions to cost-effectively reduce energy consumption often coming from European industry, Europe's energy goals would be facilitated if the EU's Strategic Energy Technologies (SET) Plan adequately involved industry as a crucial party in the equation. Additional ways of creating European lead markets in the energy field must be sought so that the industrial base will remain in Europe and continue to ensure world-class climate-friendly innovation of technologies and solutions.
6. Implementing the energy efficiency action plan
The European Commission has indicated the way through its Green Paper and action plan on energy efficiency. Yet, a lot of the cost-effective options featured in the action plan, like construction-related measures, are not developing at a sufficient pace.
7. Seizing untapped heating and cooling potential
Energy efficiency can be improved through heating and cooling measures like the use of "waste" energy for heating, cooling or power generation, as well as the implementation of the Combined Heat and Power Directive.
8. Spreading information and know-how
Information and educational campaigns should be encouraged at all levels with a special emphasis on SMEs and the new member states. European industry is willing to share experiences and best practices with firms located in the new member states, so as to assist in overcoming the EU's information asymmetry. Furthermore, policy-makers can help in promoting cost-effective energy-efficiency solutions throughout society in Europe and in the world.
9. Developing appropriate energy performance standards and labelling
So as to avoid bureaucratic and overlapping legislation, policy-makers and effected businesses should cooperate with each other as regards to ongoing studies undertaken by the Commission. Closer collaboration with trading partners, such as the US, should also be sought by Europe on energy efficiency standards and an open process towards negotiating global eco-labelling standards.
10. Promoting energy performance contracting
The current EU framework of legislation and programmes, for instance the Energy Performance of Buildings Directive, promotes energy efficiency but does not fully incorporate the sustainability process, which is crucial for energy efficiency to be attained. Processes like energy performance contracting, which cover the whole process from identifying to implementing measures, should be encouraged so that the market would be brought much faster up to speed.
11. Maintaining a flexible IPPC system based on best available techniques
The best available techniques for each industrial sector are defined and disseminated throughout Europe under the current environmental permit system for industrial installations set up by the EU Directive on Integrated Pollution Prevention and Control (IPPC). The current revision of the IPPC Directive should retain the flexibility of this system.
12. Completing the internal energy market
Electricity producers will be enticed to improve their installations' energy efficiency, should a competitive internal energy market be established.
• Mr Muscat is the director general of the Federation of Industry.
The Federation of Industry, in collaboration with the British High Commission, is organising a seminar on energy efficiency, the second on environmental issues in relation to industry.
The seminar will include talks from both a Maltese as well as the UK perspective, with presentations from the Malta Resources Authority and UK environmental consultant Justin Segrave-Daly.
It will be held at the Excelsior Hotel in Floriana on Monday, February 25 from 9 a.m. to 12.30 p.m.