Energy saving: ambitions and results

Transcription

Audit team
Marcoen Roelofs (Project Manager)
Algemene Rekenkamer
(Netherlands Court of Audit)
Sylvia van Leeuwen (Deputy Project Manager)
Lange Voorhout 8
Cora Kreft
P.O. Box 20015
Bas Bussink
2500 EA The Hague
Jeanine Strijk
phone + 31 70 342 43 00
Jort Verhulst
e-mail: [email protected]
Daniëlle de Wit
internet: www.rekenkamer.nl
Marjolijn van Zeeland
Print
Netherlands Court of Audit
Cover
Design: Corps Ontwerpers, The Hague
Photo: Michiel Wijnbergh / Hollandse Hoogte
Graphics
Joris Fiselier Infographics
The Hague
November 2011
Energy saving: ambitions and
results
Contents
Part I
Conclusions, recommendations and response of the minister
1
1
About this audit
2
1.1
Context of energy saving policy
2
1.2
Relationship with other policy
4
1.3
Financial importance
5
1.4
Responsible ministers
5
1.5
Our audit: audit background, questions and objective
6
1.6
Organisation of this report
7
2
Conclusions and recommendations
8
2.1
Main conclusion
8
2.2
Notes to the main conclusion
9
2.2.1
Use of policy instruments
9
2.2.2
Policy effectiveness in the manufacturing sector
11
2.2.3
Agreement between policy and company behaviour
12
2.2.4
The European CO 2 emissions trading system
13
2.2.5
Feasibility of the energy and climate goals
15
2.3
Recommendations
16
2.3.1
New vision of energy and climate policy
16
2.3.2
Revision of energy saving policy in the manufacturing sector
19
2.3.3
Stricter EU policy
21
3
Response of the minister and the Netherlands Court of Audit's
afterword
23
3.1
Response of the minister
23
3.2
Netherlands Court of Audit's afterword
25
Main conclusions, recommendations and undertakings
27
Part II Audit findings
28
1
Introduction
29
1.1
Organisation of part II
29
1.2
Terminology
29
2
Results of energy saving policy
31
2.1
Energy saving targets
31
2.1.1
European targets
31
2.1.2
National targets
32
2.1.3
Targets by sector
33
2.1.4
Feasibility of the 2% target
34
2.2
Results in 1995-2007
35
2.2.1
Energy saved as a result of policy
37
2.2.2
Influence of feedstocks on the actual saving rate
38
2.3
Energy saving per sector
39
3
41
3.1
Policy instruments
41
3.2
Reasons for selecting specific instruments
42
3.3
Policy impact known in advance
43
3.4
Policy effects by sector
44
3.4.1
Manufacturing
44
3.4.2
Built environment
46
3.4.3
Transport
47
3.4.4
Agriculture and horticulture sector
48
3.5
Implementation of European policy
49
4
51
4.1
Interaction between CO 2 emissions trade and other policy instruments
51
4.2
Ways to mitigate the negative interaction
53
5
Energy saving opportunities in the manufacturing sector
55
5.1
Characteristics and policy instruments in the manufacturing sector
55
5.2
Familiarity with and appreciation of policy instruments
58
5.3
Reasons for and against energy saving behaviour
60
5.3.1
Reasons for and against acquiring energy efficient technologies
62
5.3.2
Reasons for and against developing low-energy products
63
5.4
Agreement between policy instruments and reasons for and against
energy savings
64
5.5
Costs and benefits of policy instruments
67
5.5.1
Cost effectiveness
67
5.5.2
Context: total saving in 2008 relative to 1995
68
5.5.3
Auditability
69
5.5.4
Costs and benefits of tax schemes and grants
69
5.5.5
Costs and benefits of voluntary agreements with the manufacturing sector 72
5.5.6
Costs and benefits of the Environmental Management Act
75
5.5.7
Costs and benefits of the CO 2 emissions trading system
75
5.5.8
Costs and benefits of energy tax
79
5.6
Synthesis of costs and benefits
81
6
Consequences for climate and energy policy
83
6.1
Relationship between climate goals
83
6.2
Feasibility of the Dutch goals
84
6.3
Feasibility of the European obligations
87
6.4
Conflicts between policy goals
87
Appendix 1
Terms and definitions
89
Appendix 2
Audit methodology
92
Appendix 3
Standards
99
Literature
100
Part I
Conclusions, recommendations
and response of the minister
1
1
About this audit
1.1
Context of energy saving policy
Reducing energy consumption has been an ambition of the Dutch
government and the European Union for many years. The first national
information campaign to increase public awareness of energy use dates
from the 1970s. Energy savings will remain a priority for the future, too.
Until 2010, the Netherlands' policy had been more ambitious than the
EU's. This is no longer the case. The Rutte/Verhagen government that
took office at the end of 2010 decided not to set a national policy goal for
energy saving but undertook to 'continue and strengthen' the existing
approach (Informateur, 2010). The European Energy Strategy 2011–2020
names energy efficiency as a major goal for 2020 and a key factor for the
longer term (European Commission, 2011, p. 8).
The Dutch government thinks there are several important reasons to
make more efficient use of energy:

Firstly, energy efficiency reduces atmospheric CO 2 emissions and thus
helps combat climate change. In the scenario developed by the
International Energy Agency to limit the increase in temperature to
2°C, 52% of the reduction in CO 2 emissions required by 2030 must be
achieved through energy savings (IEA, 2009).

Secondly, more efficient use of existing energy sources will prolong
the finite supply of fossil fuels (particularly oil, natural gas and coal).

Thirdly, the efficient use of energy reduces dependence on foreign
energy sources and keeps energy affordable.
The pursuit of energy savings chimes with the social context of steadily
growing demand for energy. By way of illustration, household electricity
consumption per person in the Netherlands quadrupled between 1950 and
2008. Annual energy consumption is still increasing but energy is also
being saved each year. This apparent contradiction is due to the
government's definition of the term 'saving'. An energy saving is defined
as the more efficient use of energy per unit of production, per kilometre
travelled or per square metre of office space. It would be more accurate
to refer to 'improved energy efficiency'. An energy saving (i.e. more
efficient use) is not necessarily a reduction in total energy consumption.
2
If an increase in production is greater than the saving, total energy
consumption will be higher, although not as high as without the energy
saving (see figure 1).
Figure 1 Definition of energy saving
Figure 2 below shows energy consumption in six sectors of the Dutch
economy. The greatest consumer is the manufacturing sector (28%). 1
Agriculture and horticulture use the least energy (4%).
1
If the fossil fuels used to make products (e.g. oil for plastic and gas for fertiliser) were
included in the manufacturing sector's energy consumption, this sector's share would increase
to 42%. See also section 2.3.2.
3
Figure 2 Energy consumption by sector*
Percentage in 2008*
1.2
Relationship with other policy
National energy saving policy is an integral part of the Netherlands'
energy and climate policy. Until the end of 2010, the goal for energy
saving policy (an annual improvement in energy efficiency of 2%) was
one of the climate targets for 2020. The others were: a 30% reduction in
CO2 emissions relative to 1990 and an increase in the share of renewable
energy to 20%.
The Netherlands' energy and climate policy is in turn embedded in
European energy and climate policy. The goal of European energy policy
is to base the economy on the efficient use of a sustainable, competitive
and continuous energy supply. The European energy saving target is: a
reduction in energy consumption of 20% by 2020, compared to the level
reached in a situation of unaltered growth from 2005. This target is not
binding on the EU member states. The European Commission has
announced that it will consider setting compulsory targets for the member
states if the target for 2010 seems unattainable by 2013 (European
Commission, 2011). The other European energy and climate targets for
2020 are binding: a 20% reduction in greenhouse gas emissions relative
to 1990 and a 20% share of renewable energy. The renewable energy
4
target for the Netherlands as a member state is a share of 14% of final
energy consumption (Directive 2009/28/EC, 2009, p. 46).
As noted above, the Rutte/Verhagen government abandoned the energy
saving policy goal when it took office towards the end of 2010. Pursuant
to the coalition agreement, the new government seeks a 'continuation
and strengthening' of the national approach to energy saving' through a
'green deal with society' (Informateur, 2010). The Rutte/Verhagen
government has not set additional national targets for CO 2 emissions or
the share of renewable energy. The European targets are now the
national policy targets.
1.3
Financial importance
The funds earmarked for the Dutch energy saving policy are provided
from several ministerial budgets. Not all these budgets specify
expenditure on energy saving policy separately; in such cases, the funds
are part of a larger budget article. In consequence, the cost of the
national energy policy cannot be calculated directly from the national
budget.
Estimates, however, can be made. They indicate that about €300 million
of national funds has been spent on energy savings every year since 1999
(EZ, 2008; Harmsen & Menkveld, 2005). Tax schemes account for about
half of the expenditure. The largest scheme is the Energy Investment
Allowance (EIA, €111 million in 2008). At the same time, however, the
State has earned considerable amounts through the taxation of energy.
In 2008, energy tax raised just over €4 billion, of which €425 million from
the manufacturing and energy generation sectors. In principle, this
income replenishes the public purse but in the past it was often returned
to the taxpayer in the form of lower taxes on labour and profits.
1.4
Responsible ministers
Until the end of 2010, both the Minister of Housing, Spatial Planning and
the Environment (VROM) and the Minister of Economic Affairs (EZ) were
responsible for a part of the Netherlands' energy saving policy. The
Minister of VROM was responsible for coordinating Dutch climate policy,
including energy saving policy. The Minister of EZ was responsible for the
efficiency and sustainability of energy management and the development
and execution of climate policy for the manufacturing and energy sectors.
5
In addition, individual line ministers were responsible for the development
and execution of energy saving policy in the sectors covered by their
portfolios. 2
Upon the inauguration of the Rutte/Verhagen government, ministerial
portfolios were reshuffled and responsibility for energy and climate policy
was reallocated. The newly formed Ministry of Infrastructure and the
Environment (I&M) is now responsible for climate policy. The equally new
Ministry of Economic Affairs, Agriculture and Innovation (EL&I)
coordinates energy saving policy and is responsible for the 'green deal'.
Responsibility for specific energy consuming sectors was also changed. 3
1.5
Our audit: audit background, questions and
objective
The annual monitoring data on energy savings show that the Netherlands
has failed to achieve the government's ambitions for many years. The
ambitions have been revised on several occasions since 1995, but they
have rarely been achieved. A more detailed international comparison,
furthermore, reveals that the Netherlands uses significantly more energy
per unit of production than other OECD countries, 4 even after correction
for specific national features of the Dutch economy (CPB, 2010).
Against this background, the main audit questions were:
1.
Why have the energy saving targets not been achieved?
2.
What consequences does this have for the feasibility of the national
(and European) energy and climate targets for 2020?
3.
What opportunities are there to strengthen policy?
We answered the first two questions in respect of energy saving policy as
a whole in the period 1995-2008. Our answer to the third question is
confined to the manufacturing sector because manufacturing is the
2
The responsibilities for specific energy consuming sectors were as follows: the Minister for
Housing, Communities and Integration (WWI) was responsible for policy in the built
environment sector; the Minister of Transport, Public Works and Water Management (V&W)
was responsible for managing the volume of traffic in the transport sector; the Minister of
Agriculture, Nature and Food Quality (LNV) was responsible for policy in the agriculture and
horticulture sectors; and the Minister of Finance was responsible for the execution of green tax
measures.
3
The Minister of BZK is now responsible for the built environment sector, the Minister of I&M for
the transport sector and the Minister of EL&I for policy in the agriculture and horticulture sectors.
4
The Organisation for Economic Cooperation and Development (OECD) is an alliance of 34
countries established to coordinate social and economic policy.
6
largest energy consumer and because a major European study of the
impact of energy saving behaviour in households, schools and offices
commenced at the same time as our audit.
The audit of the manufacturing sector revolved around two questions.
Firstly, is energy saving policy in the manufacturing sector more effective
if it is consistent with the companies' reasons for behaving energy
efficiently? To answer this question, we held a survey of companies in the
manufacturing sector. The main findings are presented in chapter 5 of
this report. Secondly, are there inefficiencies in the energy saving policy
for the manufacturing sector and, if so, where are they? To answer this
question, we commissioned CE Delft, an independent research and
consultancy organisation, to investigate the relationship between policy
impact and associated costs (cost effectiveness). CE Delft will publish a
report on its investigation entitled Evaluatie energiebesparingsbelied in de
industrie. Kosten en effecten in de periode 1995-2008 (Evaluation of
energy saving policy in manufacturing. Costs and effects in the period
1995-2008). Its main findings are presented in chapter 5.
The answers to these questions provide an insight into the results of the
Dutch government's energy saving policy and its impact on CO 2 emissions
and energy security. They will also contribute to the social and political
debate on reducing energy consumption and increasing the effectiveness
of national energy and climate policy. The analysis of individual policy
instruments will also complement the policy options presented in the
report issued by the Energy and Climate Working Group set up for the
Reassessment of government functions (AZ, 2010). The Working Group
has not made a decision on the policy alternatives but has indicated that
more study is necessary.
1.6
Organisation of this report
Chapter 2 of part I presents the main audit conclusions and
recommendations. In chapter 3 we present the minister's response to the
audit and our afterword. In part II of this report, we consider the audit
findings underlying the conclusions presented in part I.
7
2
Conclusions and
recommendations
2.1
Main conclusion
The Netherlands is not achieving the government's energy saving targets.
Between 1995 and 2007, national energy consumption rose by 11%,
versus a targeted increase of just 4%. As a result, CO 2 emissions were 13
megatonnes higher than intended.
Our audit found three causes for the underachievement of the policy
targets:
1.
In recent years, fewer and weaker policy instruments have been used
than ex ante evaluations had found necessary.
2.
The policy conducted in the energy-intensive manufacturing sector in
the period 2000-2007 increasingly became less compulsory. The
policy had few results. The energy saving achieved (0.5% per annum
on average) was less than the saving that would have occurred
without policy (the autonomous development of 0.8-1% per annum).
In the period 1995-2007, the manufacturing sector as a whole
performed slightly better (1.5% per annum on average) than the
national average (1.1% per annum). The national average, however,
was significantly reduced by the transport sector.
3.
Policy in the manufacturing sector only partially matches companies'
reasons for investing in energy savings. Policy instruments in the
manufacturing sector are targeted chiefly at lowering the direct cost
of investing in energy efficient measures. In practice, however, other
reasons also influence energy efficient behaviour.
Since 2008, a fourth cause has grown in importance: part of the energy
saving achieved through the national energy saving policy is negated by
the European CO 2 emissions trading system. The trading system was
introduced in 2005 but had little if any effect in its first three years.
Companies that cut their CO 2 emissions thanks to the national energy
saving policy (for example by means of a grant or tax scheme) need to
take fewer measures to remain within their emission allowances and can
8
use or sell their excess emission allowances. This means there is less
incentive to use energy as efficiently as possible, i.e. to save energy.
9
5
The energy saving policy of the fourth Balkenende government was
inadequate to achieve the policy goals and bring the 2020 energy saving
targets within reach. The Rutte/Verhagen government said in the coalition
agreement that it would 'continue and strengthen' the approach to energy
saving. Since the government has set the same or even higher ambitions
for energy saving, even more effective policy will probably be needed to
achieve them. The Rutte/Verhagen government has not set a national
goal for CO2 reduction but the European target still applies. It is unlikely
that continuation of the Balkenende IV government's policy will achieve
the Netherlands' CO 2 reduction target. More effective policy will therefore
be necessary to reduce CO 2 emissions.
We consider this main conclusion in more detail in the sections below and
make a number of recommendations to the ministers concerned at the
end of this chapter.
2.2
Notes to the main conclusion
2.2.1
In recent years, fewer and weaker policy instruments have been used
than ex ante evaluations had found necessary.
The government's ambitions to improve energy efficiency varied from a
1.5% to a 2% energy saving per annum between 1995 and 2010. The
actual average energy saving between 2000 and 2007 was 1.1% per
annum, including the autonomous saving that would have been achieved
without policy, for example on account of global oil prices and
technological advances. 6
The Balkenende IV government's goal of a 2% per annum energy saving
was technically and financially feasible only at very high national cost. In
2006, the ex ante calculation of the policy indicated that 2% would be
barely feasible, if at all, if account was also taken of the impact of related
policy (Daniëls et al., 2006, p. 40). A subsequent study concluded that a
saving of 1.8% per annum could be achieved at relatively reasonable cost
5
There are several ways to overcome this negative interaction, see section 2.3.1.
6
It can be concluded from the literature that the autonomous sav ing lies between 0.8% and
1% (for a summary, see Davidson et al., 2011).
provided there was sufficient flexibility (Menkveld & Wijngaart, 2007,
p. 21). It was therefore clear that every effort would be needed to
achieve the target of 2% per annum. Most sectors, however, fell far short
of this target.

Only the agriculture and horticulture sector achieved a substantial
energy saving in recent years. Since this sector accounts for only a
modest share of total energy use, it has made only a limited
contribution to energy saving.

The measures introduced for the manufacturing sector were not
sufficiently binding. The saving induced by the policy was therefore
limited.

In the built environment sector, savings were achieved chiefly on
account of the European minimum efficiency standards for domestic
appliances and buildings.

Not enough instruments were used in the transport sector and
virtually no saving was achieved.
The failure of the policy was predictable. It was clear in advance to
successive governments that the energy saving ambitions were not
backed up by appropriate policy instruments. Every effort would have to
be made to have a chance of achieving the targets. A number of
important policy instruments, however, were not included in the policies
announced, or were introduced far later or in a weaker form than
foreseen. Studies carried out for the Ministries of VROM and EZ have
consistently shown in recent years that the proposed policy measures
would not achieve the targets. The ministers concerned did not respond
to these warnings and use them to strengthen policy or review the
targets.
This lack of effectiveness can be explained in part by the absence of clear
agreements on the targets and responsibilities. In 2007, when the
national energy saving goal was last revised, no specific agreements were
made on the secondary goals to be achieved in individual sectors or on
the ministers who would be responsible for them. In the years that
followed, it was therefore uncertain who was responsible for taking
additional policy measures to make up or any underachievement. In
consequence not all line ministers took decisive action when it became
clear that the energy saving in their sectors was inadequate.
We consider the results of energy saving policy in more detail in chapters
2 and 3 of part II of this report.
10
2.2.2
Policy effectiveness in the manufacturing sector
The policy conducted in the energy-intensive manufacturing sector in the
period 2000-2007 increasingly became less compulsory. The policy had
few results. The energy saving achieved (0.5% per annum on average)
was less than the saving that would have occurred without policy (the
autonomous development of 0.8-1% per annum). In the period
1995-2007, the manufacturing sector as a whole performed slightly better
(1.5% per annum on average) than the national average (1.1% per
annum). The national average, however, was significantly reduced by the
transport sector.
Between 1995 and 2008 the policy for energy intensive manufacturing
companies, which are responsible for 80% of energy consumption in the
manufacturing sector, had little effect. There are several reasons for this:

The government's main policy instrument for energy intensive
companies was the Benchmarking Agreement. A series of side letters,
however, weakened the agreement's obligations and it ultimately had
no effect: the 139 participating companies saved less energy than the
autonomous saving.

The European CO 2 emissions trading system did not work in practice
until 2008, chiefly because of the generous allocation of emission
allowances.

The most energy intensive companies were exempt from the top rate
of energy tax on electricity consumption in 1995-2008 because they
participated in the first multiyear energy efficiency agreements and
then in the Benchmarking Agreement. 7

The statutory energy saving obligations the government introduced
did not apply to energy intensive companies participating in the
European CO 2 emissions trading system. 8 At present, the emissions
trading system is the most important instrument to encourage energy
intensive and many other medium-sized and large companies to save
energy (and ultimately to reduce CO 2 emissions). The instrument has
had some effect since 2008 but at relatively high cost. This is because
the price of an emission allowance (the 'working ingredient') is still
low relative to the cost incurred by the government and the
administrative burden on industry (see section 2.2.4).
7
This exemption is still available because the companies are now participating in the successor to
the Benchmarking Agreement, the Multiyear Agreement on Energy Efficiency for ETS Companies
(MEE).
8
It is also difficult to get other companies to fulfil these obligations and it is open to question
whether they can actually be enforced. We return to this matter in our recommendations (see
section 2.3.2).
11
12
The cost benefit ratio of the various instruments in the national energy
saving policy in 1995-2008 was mixed.

Tax instruments. The Energy Investment Allowance (EIA) is the most
important tax instrument introduced by the government. It is
effective and relatively inexpensive. Energy tax is also effective and
relatively inexpensive but it would be even more efficient if the tax
brackets were refined. Unlike income tax, the higher the energy tax
bracket, the lower the tax rate.

Multiyear agreements with industry organisations. The government
has made several multiyear agreements with industry organisations
with mixed results. It cannot be determined whether the first energy
saving agreements had an independent effect (i.e. separately from
other instruments such as grants and tax facilities). At the end of the
first generation of multiyear agreements, a distinction was made
between small energy consumers and large energy intensive
companies. A second generation of multiyear agreements was
introduced for smaller consumers. These agreements had an effect
but at a high cost. Social pressure, a key factor in such agreements,
does not seem to have had any demonstrable effect in the current
arrangements. The government concluded the Benchmarking
Agreement with energy intensive companies. The successor to the
Benchmarking Agreement, the Multiyear Agreement on Energy
Efficiency for ETS Companies (MEE), came into operation in October
2009. 9 It will be several years before it can be investigated whether
this instrument has had an effect on energy consumption.
In this section we considered the effects of the policy instruments
separately from each other. As noted at the beginning of this chapter,
however, there is a negative interaction between the European CO 2
emissions trading system and the national energy saving policy.
We return to this in section 2.2.4.
2.2.3
Agreement between policy and company behaviour
Policy instruments in the manufacturing sector are targeted chiefly at
lowering the direct cost of investing in energy efficiency measures.
In practice, however, other reasons also influence energy efficient
behaviour.
The government's policy measures in the manufacturing sector consist
chiefly of instruments to reduce the direct cost of investing in energy
9
ETS: emissions trading system.
efficiency or to increase the return on such investments (e.g. by taxing
energy consumption). Our audit found that financial incentives indeed
were important for saving energy. Companies frequently expected energy
savings to increase their market share. The presence of sufficient capital
is also an important factor to invest in energy savings.
But there are also other reasons and factors that are not directly related
to the direct investment cost. A company may decide not to take energy
saving measures if it thinks they will disrupt its relationship with suppliers
and maintenance contractors (a computer-controlled energy efficient
production line, for example, might be too advanced for the tried and
trusted maintenance contractor). Companies are also more willing to
invest in energy saving measures at a natural moment (for example when
a production line is expanded or machinery is replaced).
There are also non-cost factors for investing in energy savings and
energy efficient products. One is the presence of knowledge, not only
about the energy saving potential but also about the company's own
energy management.
Our audit found that policy instruments that agreed with the reasons and
factors given above were a greater incentive to manufacturing companies
than policy instruments that did not. Aligning the current policy
instruments would therefore increase policy effectiveness. We return to
this in the recommendations given in section 5 of part II of this report.
Our audit findings regarding the manufacturing sector's reasons for and
against taking energy saving measures are considered in chapter 5 of
part II of this report.
2.2.4
Part of the energy saving is negated by the interaction between national
energy saving policy and the European CO 2 emissions trading system.
Since 2005, the EU has used the trading system to reduce the emission of
greenhouse gases (see box). In the system, major emitters of CO 2
(factories, power stations) must have 'emission allowances'. They can buy
and sell allowances. Those that successfully reduce their CO 2 emissions
can sell their excess allowances to others.
13
In 2005, the European Commission set a ceiling on total CO 2 emissions by industrial plants in
the EU. The plants include power stations, oil refineries, steel companies and glass, cement
and paper producers. The companies in question are allocated emission allowances, which, in
aggregate, make up the ceiling. If a participating company emits less CO 2 it can sell its
unused allowances to other companies. If it emits more CO 2 it must buy additional
allowances. This creates a price for CO 2 emission allowances. The participating companies
are responsible for 40% of all CO 2 emissions in Europe.
To date, the emission allowances have been allocated free of charge. The ceiling that will
apply in 2020 was set in 2005. There has been some discussion of whether it should be
lower (i.e. stricter) The ceiling for 2020 and subsequent years will be set in a series of steps,
one being taken on 1 January 2013.
The CO 2 emissions trading system will be an important factor in achieving the European
target of reducing CO 2 emissions by 20% relative to 1990. Since it relates to only 40% of
total CO 2 emissions, however, this is inadequate. To achieve the ultimate target, CO 2
emissions must also be reduced in other sectors.
Our audit found that the CO 2 emissions trading system probably did not
produce any energy savings in the Netherlands in 2005-2007. The
allowances allocated to the Netherlands were higher than the actual
emissions. Companies did not have to buy additional allowances until
2008, after which the system probably had an appreciable effect. Since
then, however, there has also been a negative interaction with the
national energy saving policy. This interaction occurs in two instances:
1.
when the national energy saving policy is directed at companies
subject to the CO 2 emissions trading system;
2.
when the national energy saving policy is directed at reducing
electricity consumption by companies or individuals that are not
participating in the emissions trading system but do influence the
electricity production of power stations. Power stations participate in
the CO 2 emissions trading system.
In both instances, energy savings lead to companies or power stations
holding unused emission allowances. Sooner or later, these allowances
will be used, after having been sold or otherwise, in the Netherlands or
elsewhere in the EU. The CO 2 emission initially avoided thanks to the
measures taken in the Netherlands will then occur at another date and
probably in another EU member state.
In consequence, all other instruments and measures taken to reduce CO 2
emissions in the sectors participating in the emissions trading system will
14
have only limited effect at European level. 10 At a European level, national
funds for energy saving policy are spent inefficiently if the CO 2 emissions
trading system works correctly. We drew the same conclusion in our 2007
audit of the implementation of the CO 2 emissions trading system
(Netherlands Court of Audit, 2007).
The negative interaction does not mean there is no point to national
energy saving policy. Since the European CO 2 emissions trading system
had very little effect during its first three years, the Netherlands would
have been in a worse position without a national policy on energy savings
and CO 2 emissions. National policy has also increased the share of
renewable energy. In our recommendations, we consider ways to use the
energy and climate policy instruments so that they strengthen rather than
weaken each other (see section 2.3).
We consider the interaction between the energy saving policy and the CO 2
emissions trading system in more detail in chapter 4 of part II of this
report.
2.2.5
Feasibility of the energy and climate goals
The fourth Balkenende government's energy saving policy was inadequate
to achieve the policy goals or bring the energy saving targets for 2020
within reach. The Rutte/Verhagen government undertook in the coalition
agreement to continue and strengthen the approach to energy saving.
Since the government's energy saving ambitions are unchanged or
higher, an even more effective policy will be needed to achieve them.
The Rutte/Verhagen government has not set a Dutch goal for CO2
reductions but the European goal still applies. It is unlikely that
continuation of the Balkenende IV government's policy will achieve the
Netherlands' CO 2 reduction target. Therefore, the need to reduce CO 2
emissions is another reason why a more effective policy is needed.
The most recent estimates indicate that the Balkenende IV energy saving
target for 2020 (2% on average per annum over the period 2011-2020)
will not be achieved, not even if the 'intended policy' proposed at the time
is implemented on time and in full (Daniëls et al., 2010). Virtually the
same is true of the European target to reduce CO 2 emissions by 2020.
10
This is true not only of the policy instruments to save energy but also of policy instruments
to stimulate renewable energy, to commission new nuclear power stations and to capture and
store CO 2 . Owing to the negative interaction with the emissions t rading system, all these
measures ultimately lead to a very limited reduction in CO 2 emissions if unused allowances are
traded.
15
The target requires the Netherlands to reduce CO 2 emissions that are not
subject to the emissions trading system by 16% 2020 relative to 2005.
According to the most recent estimate, the probability of this target being
achieved is less than 50% if the Balkenende IV policy is continued. Only if
the 'intended policy' proposed at the time were implemented could the
target be achieved.
At present, energy saving is one of the most readily available and most
affordable options to cut emissions without reducing production.
Alternatives to reduce CO 2 include:

large-scale generation of renewable energy;

increased share of nuclear power;

carbon capture and storage;

reduced energy consumption in absolute terms.
At present, however, these alternatives are not readily available on a
scale large enough to have a meaningful impact on CO 2 emissions.
Achieving the energy and climate goals is complicated by inconsistencies
in the various targets. The carbon capture and storage target, for
example, might bring the goal of reducing CO 2 emissions a step closer but
a power station with a carbon capture and storage facility currently uses
more energy than one without such a facility. In chapter 6 of part II of
this report, we provide more examples of inconsistency between the
energy and climate goals.
Other targets of the Dutch energy saving policy, such as reducing reliance
on foreign energy sources and energy affordability, are not quantified.
It cannot be said what impact failure to achieve these targets will have on
the policy goals.
We consider the consequences of energy savings for the energy and
climate policy in chapter 6 of part II of this report.
2.3
Recommendations
2.3.1
New vision of energy and climate policy
Our audit found that the Dutch energy saving policy has not been
vigorously executed in recent years. Fundamental changes are needed to
ensure that the Netherlands has access to reliable, affordable and clean
16
energy in the decades ahead. The new European energy strategy gives
high priority to energy efficiency. To keep in step with EU policy, the
Netherlands will have to give higher priority to energy efficiency than it
has in recent years.
We recommend that the government formulate an integrated vision of
energy and climate policy that clarifies:
1.
the economic and social benefits of energy savings, renewable energy
and a low-CO2 energy supply;
2.
the energy and climate policy goals and the relationship between
them (particularly the relationship between energy saving policy and
CO2 emissions trading).
Integrated vision
Our recommendation that the government formulate a new vision of
energy and climate policy is consistent with the motion passed by the
House of Representatives on 27 October 2010. The motion called for 'the
development of an integrated vision of the government's goals for the
environment, nature and climate, accompanied by an integrated impact
assessment by the Netherlands Environmental Assessment Agency and
the Energy Research Centre of the Netherlands as is customary, and to
present it to the House on Budget Day 2011' (House of Representatives,
2010). The motion underlined not only the need for a coherent policy but,
the ensuing debates revealed, also a sense that the House was not
always informed clearly and on a timely basis (House of Representatives,
2008b; 2009).
The government's vision should also clarify the new line ministries'
responsibilities and powers in their respective sectors (manufacturing,
built environment, transport, and agriculture and horticulture) and how
the ministers will inform the House of Representatives of the progress
made and of further decision-making on sectoral policy. In view of the
low saving rate and the failure of policy intentions in the transport sector,
the government's vision should pay particular attention to transport.
1. Economic and social benefits
To make the transition to clean and renewable energy, the government is
heavily reliant on the behaviour of individuals and enterprises. To create
the support necessary for change, it must clarify the economic and social
benefits of investing in renewable energy, energy saving technology and
low-CO2 processes. Various energy and climate advisory councils
underline the importance of communicating the economic and social
17
benefits of renewable energy (Innovation Platform, 2010; Council for the
Rural Area et al., 2010; VROM Council & General Energy Council, 2004).
2. Coherent energy and climate policy
The government's vision should clarify:

the relationship between energy policy and climate policy;

the necessary instruments and their principal goals;

the route to achieve the goals.
When setting the goals and priorities, it should be borne in mind that a
substantial and cost-effective reduction in CO 2 emissions can be achieved
chiefly by means of energy savings.
Estimate of policy impact and inconsistent policy goals
The policy instruments must be selected so that their expected and
reasonably estimated effects can achieve the policy goals. If it is known
in advance that they will not, the ambitions must be lowered. If policy
implementation or effects do not match the ambitions, additional
measures will have to be taken. 11
Given the inconsistent and sometimes contradictory energy and climate
goals, the government must make clear to the House of Representatives
the principal goal of each policy instrument and its potential
consequences for other energy and climate policy goals. A coal-fired
power station, for instance, will strengthen energy security but will not
reduce CO 2 emissions . Inconsistent policy goals can lead to contradictory
policy. Dutch energy and climate policy should be checked for
inconsistencies and revised where necessary. In this respect, we would
remind the government that the Netherlands signed the G20 Pittsburgh
declaration of intent in 2007 to phase out fossil fuel subsidies in the
medium term because they deter investments in clean and sustainable
energy.
Relationship with CO 2 emissions trade
Available instruments and resources should be used as efficiently as
possible. We pointed out to the government in the past that the
introduction of CO 2 emissions trade reduced the effectiveness of all other
policy instruments. We also recommended that an assessment be made of
the costs and benefits of all CO 2 emission reduction instruments
(Netherlands Court of Audit, 2007). The government has not yet followed
up this recommendation. We therefore repeat our recommendation that
11
We refer to policy implementation because it usually fails to meet the ambitions before it is
realised that the effects are below expectations.
18
all energy and climate policy instruments be aligned to reinforce each
other wherever possible. Alternatively, if the government and parliament
decide to retain instruments that, on account of international emissions
trade, are less cost effective, they should clearly explain the reasons and
consequences.
We have identified three ways in which energy and climate policy
instruments can strengthen rather than weaken each other. The three
options described below are not mutually exclusive.
1.
A first option is to focus energy saving policy on consumption that is
not subject to the CO 2 emissions trading system: (a) gas consumption
by manufacturing companies not participating in the CO 2 emissions
trading system, (b) gas consumption in the domestic, trade, services
and public sectors, and (c) energy consumption in the transport
sector.
2.
For the sectors participating in the CO 2 emissions trading system, a
second option is to target policy instruments at the development of
innovations that are profitable in the long term, for example
innovations in the biobased economy or alternatives to fossil fuels.
At present, emissions trade encourages measures that are profitable
in the short term.
3.
A third option is to strengthen the operation of the CO 2 emissions
trading system by pricing emission allowances at such a high level
that companies invest in significant improvements in energy efficiency
and in renewable, clean energy. This can be done by reducing the
emissions ceiling before the next trading period (after 2012) or by
significantly lowering the emission ceiling after 2020. This will require
a decision at European level. As a member state, the Netherlands can
support this option. If a decision is not taken in Europe, the
government could buy up CO 2 emission allowances to take them
(temporarily) out of the market. This is an expensive option and
would require concerted action by several European countries.
The operation of the CO 2 emissions trading system could also be
strengthened by critically reviewing the implementation of foreign clean
technology investment projects for which Dutch companies are allocated
emission allowances.
2.3.2
Revision of energy saving policy in the manufacturing sector
The policy conducted to date has not forced energy intensive companies
to invest in energy savings. To bring about substantial savings, policy in
the manufacturing sector will have to be reviewed. Our audit identified a
number of options to strengthen the policy. All the options relate to policy
19
instruments for manufacturing companies that are not participating in the
European CO 2 emissions trading system.
Improved application and greater enforcement of environmental permits
Pursuant to the Environmental Management Act, provinces and
municipalities are responsible for ensuring that companies that consume
a certain volume of energy take compulsory energy saving measures, on
condition that the company's financial situation is adequate and the costs
are recovered within five years. Studies have found that the Act is not
implemented in full and its effects are very limited (De Buck et al., 2007;
Haskoning, 2009; Majoor & De Buck, 2010). It is curious, we think, that
the Act makes local authorities responsible for assessing a company's
financial situation. We recommend that the Minister of Infrastructure and
the Environment review the Act's cost effectiveness and inform the House
of Representatives of its findings.
Modification of energy tax brackets
With a view to cost effectiveness, energy tax could be spread more
evenly over the various consumption brackets. This would reduce overall
costs because the most profitable measures would be taken before more
expensive measures were considered. Relatively low tax rates for the
largest consumers give them a competitive advantage over foreign
companies. The fiscal options to encourage energy intensive companies to
save energy should be studied. 12 Tax incentives will have little effect,
however, if the government continues to exempt wholesale electricity
consumers from the top bracket if they are party to an energy efficiency
agreement.
The importance of knowledge
Our audit revealed the importance of knowledge about ways to save
energy. Companies must also have an insight into their own energy
consumption. Large companies are more than capable of collecting and
using such knowledge but medium-sized companies need support.
The multiyear energy saving agreements between the government and
the various consumption sectors provide the best opportunities to share
knowledge about ways to save energy (see below).
Stricter multiyear energy saving agreements
The multiyear energy efficiency agreements the government has
concluded with various sectors have not exerted a great deal of social
12
Such a study could also consider compensation for negative income effects, for example in the
horticulture sector.
20
pressure. 13 There would be more pressure if individual companies were
aware of each other's performance. Studies of the agreements' operation
reveal that this is an important incentive, provided it does not discourage
energy savings (Lokhorst, 2009, pp. 80-81). A 'big stick' (the government
taking more stringent measures if the agreements are not kept) would
also increase an agreement's effect (Dijkgraaf et al., 2009). 14 Multiyear
agreements would also be more effective if the associated activities were
directed principally at medium-sized companies and at increasing their
knowledge of energy savings.
Public procurement of sustainable products
Companies are more inclined to take energy saving measures that
increase their market share. There is therefore more than one benefit
from the government stimulating the market by procuring energy efficient
and low-CO2 goods and services. We recommend that the Minister of
Infrastructure and the Environment continue to execute a sustainable
procurement policy.
2.3.3
Stricter EU policy
National binding targets for energy saving
The EU energy saving targets are not currently binding on the member
states. The European Commission has announced, however, that it will
consider setting binding national savings targets if it is thought in 2013
that the EU energy saving goal will probably not be met by means of the
member states' energy efficiency measures. We recommend that the
government clarify the energy saving goals it has set. It should also call
in Brussels for binding national goals for all member states. Binding
national goals would level the playing field between the member states as
they would prevent some countries doing little and benefiting from the
steps taken by the others.
Active implementation of EU directives
New and stricter directives on energy efficiency in the various energy
sectors will be negotiated in the EU in the coming years. 15 The
13
The effect of the second generation of multiyear agreements is also due to their influence on two
other key factors: the expected consequences of energy saving and the perceived feasibility.
14
Such a threat must be credible and the instrument must be effective. An international
comparative study by Dijkgraaf et al. shows that energy taxes are the most effective instrumen t,
especially in combination with a mechanism to return the tax income back to industry so as not to
distort competition.
15
The new European energy efficiency plan was issued in 2011. It includes new directives and a
tightening up of existing directives in the years ahead. A white paper was issued for the transport
sector in March 2011. It, too, provides for new directives.
21
Netherlands should support the strictest possible formulation of the
directives and their revised efficiency requirements. Furthermore, the
Netherlands should implement and enforce the European directives
promptly and unconditionally. Only then can the Netherlands profit in full
from EU policy.
22
3
Response of the minister and
the Netherlands Court of Audit's
afterword
3.1
Response of the minister
The Minister of EL&I responded to our audit on 6 September 2011.
He wrote on behalf of the Ministers of the Interior and Kingdom Relations
(BZK), Finance and I&M. His response is summarised below; the full text
can be read at www.rekenkamer.nl.
The Minister of EL&I noted that some of our recommendations were
consistent with policy developments launched by the government. The
House of Representatives would be informed of some of the initiatives
soon. They include the Green Deal, the Local Climate Agenda and the
Sustainability Agenda. The minister also referred to the Minister of BZK's
Built Environment Energy Saving Action Plan that was recently submitted
to the House (BZK, 2011).
The minister confirmed that the binding European goals on CO 2 reduction
and the share of renewable energy were the guiding principles of the
government's energy and climate policy. Energy savings were a means to
achieve these goals. The energy saving instruments applied by the
previous government would be continued and refined where necessary to
strengthen their effectiveness.
The minister wrote that the Netherlands did not support separate binding
national energy saving goals in addition to the renewable energy and CO 2
reduction goals. Such goals might require non-cost effective measures
that would make the policy unnecessarily expensive. In this light, the
minister also responded to our recommendation that energy saving policy
instruments should be selected so that their reasonably estimated impact
is adequate to achieve the policy goals and the instruments should be
adapted if policy execution or impact is below expectations. Since the
government no longer sets a separate energy saving target, the minister
thinks this recommendation is no longer appropriate.
23
The minister will partially adopt our recommendation that policy for the
manufacturing sector be revised and potential improvements be
identified. A study will be conducted of the consequences for the
competitiveness of Dutch industry of the further greening of the tax
system. The government believes there are openings to increase the
minimum European tax rate on energy products and electricity. The
minister expects the ETS companies 'to take a step' in the field of energy
efficiency through the Multiyear Energy Efficiency Agreement for ETS
Companies (MEE Agreement) and through the conclusion of Green Deals.
The Green Deal, according to the minister, should better match
entrepreneurs' reasons for investing in energy savings. The minister
would consult the participating companies regarding our recommendation
to increase the social pressure of voluntary agreements by informing
them of each other's performance. The sustainable procurement policy
will be continued and the government will scale up innovative projects
and act as a launch customer for new products. An action plan is being
prepared to improve both compliance with and enforcement of the
Environmental Management Act. The minister thought our
recommendation to study the cost benefit ratio of good enforcement was
unnecessary because studies have shown that investments that recover
their costs within five years are among the most cost effective options in
the climate policy.
The minister agreed with two of the options we gave to overcome the
negative interaction between national energy saving policy and the ETS:
directing energy saving policy at sectors not participating in the emissions
trading system and supporting long-term innovation. Existing energy
saving measures in non-ETS sectors will be continued. But the minister
will not continue to support the ETS sectors. The MEE Agreement and the
Green Deal, he wrote, were necessary to overcome barriers to profitable
energy saving investments in energy intensive industries.
The government will take extra steps to promote innovation, especially in
the energy sector, so that there are more alternatives to fossil fuels.
The expensive option of buying up emission allowances with other
European countries in order to force up the cost of emissions trading is
not thought appropriate. The government will not intervene actively in
the system. However, it will implement the Van Tongeren/Van Veldhoven
motion. This motion asks the government to work on improving the
emissions trading system at European level (House of Representatives,
2011).
24
The minister does not think it necessary to strengthen the form or
intensity of energy and climate policy. The minister does not share our
conclusion that the 2020 CO 2 target will probably not be achieved; recent
data suggest that the policy the new government has introduced and
proposed will achieve the CO 2 reduction target in 2020. The minister
briefly considered our recommendation to formulate a government vision
of the coherence, priorities and route to the energy and climate policy
targets and of the interaction between national policy and the European
emissions trading system. The minister noted that the government had
already set out its vision in the coalition agreement. The government will
ask the European Commission to analyse the relationship between
reducing greenhouse gas emissions and renewable energy on the one
hand and the Commission's proposals for compulsory energy efficiency
measures on the other. This might prevent the compulsory energy
efficiency measures having a negative impact on the CO 2 emissions
trading system.
3.2
Netherlands Court of Audit's afterword
The minister does not disagree with our conclusion that previous
governments' energy saving policies were too weak to achieve the targets
and that this was often known on their introduction. He writes that the
problem has been resolved because the Rutte/Verhagen government no
longer treats energy saving as a separate goal. Energy saving is still an
integral part of most policy measures to reduce CO 2 emissions. It is
therefore important to clarify the relationship between goals and
resources, to periodically monitor the results and to inform the House of
Representatives of them. The importance of energy saving is self-evident.
Specific goals provide clarity to parliament and the public.
The minister refers to the coalition agreement in his response to our
recommendation to develop a vision to clarify the relationship, priorities
and route to the policy goals. We would draw attention in this respect to
the following points.
Achieving the CO 2 reduction target in 2020
In his letter of June 2011, the State Secretary for I&M wrote that the
Netherlands would achieve the CO 2 reduction target set by the European
Commission (I&M, 2011). We would refer to the warning in the underlying
documents (especially PBL & ECN, 2011) that the results should be
treated with caution. Furthermore, significant benefits are expected from
the standardisation of EU car emissions. Experience shows that European
25
decision-making often takes longer than foreseen and leads to less potent
results than the Netherlands had anticipated.
Energy saving by energy intensive industries
The Minister of EL&I wrote that energy intensive industries were
particularly slow at investing in energy savings and that the MEE would
help overcome the barriers. This raises questions because the results of
the Benchmarking Agreement (the predecessor to the MEE) have not
been satisfactory. The minister will submit the monitoring results for the
first year of the MEE to the House of Representatives shortly.
We recommend that the minister use the results to explain what he
expects from the MEE.
Costs and benefits of enforcing the Environmental Management Act
The Environmental Management Act requires entrepreneurs to invest in
energy saving measures that recover their costs within five years. Since
most entrepreneurs set considerably stricter conditions on cost recovery,
enforcement is expected to be difficult and expensive. The study report
the minister refers to does not mention the cost of enforcement.
The costs and benefits of enforcing the energy clause in the
Environmental Management Act should still be studied.
Limiting the negative interaction between national energy saving policy
and the European emissions trading system
The minister said he agreed in part with two of the three options we gave
to reduce the negative interaction. We assume that he will follow them up
appropriately and mobilise funds so that more are targeted at non-ETS
companies and/or long-term innovation.
Clarity for the House of Representatives
The minister's response again shows that policy and its implementation
require many activities with many ministers being responsible for them.
This makes it difficult for the House of Representatives to follow the
results and effectiveness of policy. We recommend that all ministers
concerned prepare clear reports highlighting the relationship between the
various aspects of the policy.
26
Main conclusions, recommendations and undertakings
Place in
Conclusions
Recommendations
Undertakings
Fewer and weaker policy
Policy instruments must be selected so
Since there is no energy saving goal,
instruments have been applied
that reasonably estimated effects will
the minister of EL&I does not think this
than thought necessary in advance
achieve the policy goals. If the policy or
is relevant.
to achieve the energy saving goal.
its impact is inadequate it must be
27
part I
2.1
revised.
2.2
Policy instruments had little effect
Policy for energy intensive industries
The Minister of EL&I will support the
in the manufacturing sector in
must be revised:
increase in European minimum rates of
1995-2008. The reasons include:
 study options to improve the cost
energy tax.
energy saving agreements in
benefit ratio by spreading energy tax
The government will work at European
energy intensive industries have
more evenly among user groups;
level to improve the operation of
become increasingly less strict and
2.3
 strengthen the CO 2 emissions trading
emissions trading.
the CO 2 emissions trading system
system by supporting calls to lower the
MEE will encourage energy intensive
has had little effect so far.
ceiling in 2020.
industries to invest in energy savings.
Policy instruments for the
Policy for the manufacturing sector must
The Green Deal will improve the
manufacturing sector are more
be strengthened through better
agreement.
effective if they agree with the
agreement with the companies' reasons
Disclosing each other's performance
reasons why companies take
to save energy:
will be discussed with the participants.
energy saving measures. Many
 higher priority for knowledge;
Sustainable procurement will be
policy instruments only partially
 stricter multiyear agreements;
continued. A plan will be drawn up to
recognise these reasons.
 increased market for energy efficient
strengthen compliance with and
and low carbon goods and services
enforcement of the Environmental
through public procurement of
Management Act. Studies show that the
sustainable goods and services.
Act is a cost effective option; additional
The costs and benefits of environmental
study is not necessary.
permits should be studied further.
2.4
Part of the energy saving is
Three options (not mutually exclusive) to The Minister of EL&I says that, despite
negated by the interaction between overcome the negative interaction with
the emissions trading system, targeted
CO 2 emissions trade and other
CO 2 emissions trade:
policy efforts are still required to
energy saving instruments.
1. focus energy saving policy on sectors
promote profitable savings options for
not participating in emissions trade;
2. target policy for ETS sectors on longterm benefits;
3. strengthen the operation of emissions
energy intensive industries.
Innovations that produce alternatives
to fossil fuels will be promoted.
Buying up emission allowances is
trade by lowering emissions ceiling as
inappropriate. The government prefers
from 2020 or by having the Dutch
an extension of emissions trading to
government buy up emission
other sectors. The government will
allowances.
support the better operation of the
trading system at European level.
2.5
Continued implementation of the
A new vision of energy and climate
According to the Minister of EL&I the
Balkenende IV energy saving policy policy is required that clarifies the
vision is set out in the coalition
will not bring about the stronger
relationship, priorities and route to the
agreement. Existing instruments
approach as promised by
goals, with particular attention for the
complemented with such plans as the
Rutte/Verhagen. The binding EU
relationship between national energy
Green Deal, Local Climate Agenda and
CO 2 emission reduction target will
saving policy and CO 2 emissions trade.
Sustainability Agenda will be adequate
probably also not be achieved.
to achieve the European CO 2 reduction
targets by 2020.
Part II Audit findings
28
1
Introduction
1.1
Organisation of part II
We presented our audit conclusions in part I of this report. In part II we
provide background information and further reasoning for the conclusions
presented in part I. We begin by providing background information in
chapter 2 on energy saving policy and the results achieved. Chapter 3
contains an evaluation of the policy. We explain the expected results of
the proposed policy and consider the extent to which that policy was
actually implemented. In chapter 4 we look at the interaction with the
CO2 emissions trading system and describe the options available to refine
policy. The findings of our in-depth audit of the manufacturing sector are
presented in chapter 5. We discuss the main motives and obstacles
revealed by a survey we held among companies in the manufacturing
sector. We also look at the costs and benefits of the policy instruments
the government has introduced to save energy in the manufacturing
sector in recent years. In chapter 6, we describe the relationship between
the individual goals of Dutch climate policy and the impact that failure to
achieve energy savings would have on the other goals of national and
European climate and energy policy.
1.2
Terminology
Terms are frequently used in part II to refer to energy and CO 2 emissions.
Joule is the unit of energy. As one joule is a very small quantity of
energy, national figures are expressed in petajoules (PJ). One petajoule is
equal to
1,000,000,000,000,000
joules. The Netherlands used 3,349 PJ of
energy in 2008 (Daniëls et al., 2010, p. 30). The energy consumed as
stated on domestic energy bills is expressed in cubic metres of gas (m 3)
and kilowatt hours of electricity (kWh). One PJ is equal to 278 million
kWh or 31.6 million m 3. By way of comparison, an average household
consumes 3,500 kWh and 1,600 m 3 per annum (Milieu Centraal, 2010).
CO2 emissions are measured in megatonnes. One megatonne is equal to
one million tonnes.
29
Feedstocks are energy carriers that are not used to produce energy but
serve as a raw material to make products, such as oil for plastic and gas
for fertiliser.
30
2
Results of energy saving policy
Monitoring data released by the Ministry of Economic Affairs (EZ) in
recent years show that energy savings in the Netherlands have been
systematically lower than the government's ambitions. The ambitions
have been raised and lowered on several occasions since 1995 but the
targeted energy saving has not been achieved in any single year.
Feasibility studies of the energy saving targets indicate that they can be
achieved but only at very high national cost and with the broad support of
the public and enterprises. Ex ante studies indicate that the goal for 2020
is not feasible. This chapter outlines the development of the policy goals
in the period 1999–2007 and the actual energy saving achieved each
year.
2.1
Energy saving targets
2.1.1
European targets
The European Commission adopted a new energy policy at the end of
2006 (European Commission, 2007, p. 46). The European Commission is
seeking an economy that runs on sustainable, competitive and secure
energy and low energy consumption.
Energy saving
The EU member states have committed themselves to reducing energy
consumption of 20% by 2020, compared to the level reached in a
situation of unaltered growth from 2005. At first sight, this target seems
straightforward but it is open to several interpretations because a fixed
measurement method has not been agreed. Furthermore, the European
energy saving target is not binding. The two other European climate
targets are binding. They relate to a reduction in CO 2 emissions and an
increase in the share of renewable energy (see below).
The European Parliament and the Council require the EU member states
to prepare a National Energy Efficiency Action Plan (NEEAP) (Directive
2006/32/EC, 2006). In its NEEAP, each member state must set an energy
saving target of 9% by 2016 (relative to average consumption in
31
2001-2005). This target, too, is indicative in nature and entails no legally
enforceable obligation on member states (Directive 2006/32/EC, p. 2).
The Netherlands has adopted the target proposed by the European
Commission in its NEEAP. This means that the Netherlands must have
saved 189 PJ in 2016 relative to its average consumption in 2001-2005
(EZ, 2007).
CO2 emissions
The Netherlands must reduce its greenhouse gas emissions that are not
subject to the European CO 2 emissions trading system by 16% by 2020
relative to 2005.
Share of renewable energy
Renewable energy must account for 14% of the Netherlands' total energy
consumption by 2020 (Daniëls et al., 2010, p. 14).
2.1.2
National targets
There have been several national energy saving targets and definitions in
the period between 1995 and 2010. Table 1 presents the targets set since
1995. The Clean and Efficient working programme set an energy saving
target in 2007 of 2% per annum as from 2010. At the end of 2010, the
Rutte/Verhagen government decided not to set a national energy saving
target but to 'continue and strengthen the national approach to energy
saving'. To this end, the government will make a 'green deal with society'
(Informateur, 2010).
Since the successive targets have been based on different definitions and
measurement methods, for comparative purposes we have restated all
the targets in accordance with the PME definition 16 (third column). Since
the energy saving target in the Clean and Efficient working programme
was again based on a new definition, the targets have also been restated
in accordance with that definition (fourth column).
16
The method used to measure energy saving was set in the Energy Saving Monitoring Protocol
(PME) in 2010. According to the PME an energy saving is 'the performance of the same activities or
the fulfilment of the same functions with less energy'. In this definition, therefore, an energy
saving is an increase in energy efficiency.
32
33
Table 1. National energy saving targets since 1995
Source
Target as originally
Target
Target according to
formulated
according to
Clean and Efficient
PME
working programme
1.5% per annum
Third Energy Memorandum
33% in 1995-2020
1.3%
(EZ, 1995)
(1.6% per annum)
per annum
Energy Saving Memorandum
2% per annum in 1998-
1.8%
1998 (EZ, 1998); Energy
2010
per annum
Energy Report 2002 (EZ,
1.3% per annum or as
1.3%
2002a) and EZ Budget 2003
much as necessary to
per annum
(EZ, 2002b)
fulfil Kyoto agreements
Clean and Efficient (VROM,
Increase to 2% per
1.6%
2007)
annum in 2011-2020
per annum
Coalition Agreement 2010
No national target,
-
2.0% per annum
Saving Action Plan 1999-2002
(EZ, 1999); Climate Policy
Implementation Memorandum
(VROM, 1999)
1.5% per annum
2.0% per annum
-
continuation and
strengthening of policy
Table 1 shows that the ambitions for energy saving policy have fluctuated
over the years. In 1999, the target was raised to 2% per annum (EZ,
1999). In 2002 it was lowered to 1.5% per annum, or as much as
necessary to meet the Kyoto target 17 (EZ, 2002a; 2002b). In 2005 the
House of Representatives passed the Van der Ham/Spies motion (House
of Representatives, 2005). The motion claimed that the ambition was too
low and asked the government to raise it to 2% per annum, to be
achieved as from 2010. The motion was implemented in the Clean and
Efficient working programme.
2.1.3
Targets by sector
The Clean and Efficient working programme set a national energy saving
target of 2% per annum as from 2010. The ministries concerned did not
make formal agreements on targets for individual sectors. According to
the Ministry of Housing, Spatial Planning and the Environment (VROM),
which was responsible for coordinating climate policy until the end of
2010, the Clean and Efficient working programme was based implicitly on
the allocation shown in table 2.
17
Pursuant to the Kyoto Agreement, the Netherlands must reduce its greenhouse gas emissions by
an average of 6% per annum in the period 2008–2012 relative to 1990.
34
Table 2. Targets by sector
Sector
Responsible ministry
Energy saving target
Built environment
Housing, Communities and Integration
2.4%
Manufacturing
Economic Affairs
1.7%
Agriculture
Agriculture, Nature and Food Quality
2.4%
Transport
Transport, Public Works and Water
1.7%
per annum
Management
Source: official comment by the Ministry of VROM, 28 June 2010
As expectations and responsibilities were not specifically agreed and
documented, it has been unclear in recent years which ministry was
responsible for taking additional measures to make up for the
disappointing results. According to the then Clean and Efficient
programme managers at the Ministry of VROM, the line ministries were
responsible for proposing and costing additional policy. The policy officers
at the line ministries thought that the coordinator at the Ministry of VROM
was responsible for initiating new policy and that they themselves could
decide on its implementation and funding. Owing to this uncertainty, not
all line ministries took appropriate action when the savings in 'their'
sector were below target.
2.1.4
Feasibility of the 2% target
Feasibility studies carried out for the Ministers of VROM and EZ in recent
years show that an energy saving rate of about 1.6% per annum 18 could
be achieved at relatively low cost to society (Daniëls & Farla, 2006b, pp.
6-7 and p. 35). They concluded that achieving the 'last little bit' (the
remaining 0.4%) would be disproportionately expensive (Daniëls & Farla,
2006a). One of the studies found that a package of technical measures
could reduce energy consumption by up to 720 PJ (Daniëls & Farla,
2006a, p. 53). This potential is equal to about 2.3% per annum. However,
the cost of the final 60 PJ would exceed €200 million per PJ while the cost
of the first 660 PJ would be €25 million or less per PJ. For the calculation,
the researchers assumed that 80% of the total technical potential energy
saving would actually be achieved (Daniëls & Farla, 2006b, p. 46). This
means, for example, that double glazing would be placed in 80% of all
houses where it was technically possible. This would require very broad
support throughout society. Later calculations also found that the 2% per
annum energy saving target as from 2010 would be just about feasible
but would be far more expensive and difficult than a slightly lower saving
of 1.8%, possibly as much as €3 billion for a 2% saving against €0.3
18
This percentage does not include the use of feedstocks (see also section 2.3.2).
billion for a 1.8% saving (Menkveld & Wijngaart, 2007, p. 20). According
to the researchers themselves, however, these calculations are very
sensitive to the assumptions made on the saving potential. 19
2.2
Results in 1995-2007
Actual annual energy saving rate
In 1995-2007 the average energy saving achieved in the Netherlands was
1.1% per annum. In 2000-2007 the average energy saving was 0.8% per
annum (Gerdes & Boonekamp, 2009; Netherlands Environmental
Assessment Agency, 2009). In the preceding period (1995–2000) the rate
had been higher: about 1.4% on average per annum (Boonekamp et al.,
2004a). As can be seen from figure 3, the actual saving rate throughout
the entire 1995-2007 period (with the exception of 1999) was lower than
the policy target applicable at the time.
Figure 3 National targets and actual savings, 1995-2007
The Energy Research Centre of the Netherlands (ECN) calculates the
actual energy saving each year on behalf of the Ministry of EZ under the
auspices of the Energy Saving Monitoring Platform. 20 For methodological
reasons, the saving is calculated and presented in two ways: as an
average over an increasing number of years since a reference date and a s
19
According to the report cited, a slightly more generous estimate of the saving potential in the
transport sector would reduce the estimated cost to €2 billion.
20
This platform is made up of ECN, NL Agency, the Netherlands Environmental Assessment Agency
and Statistics Netherlands.
35
a moving average over the previous three years. 21 The latter provides
more insight into recent fluctuations in annual savings. A margin of
uncertainty is assumed in the national saving figure of about 0.3
percentage point per annum (Gerdes & Boonekamp, 2009).
The three-year average (figure 3, light grey bars) shows that the
calculated savings differ from year to year (Gerdes & Boonekamp, 2009).
The fluctuations are due in part to the margin of uncertainty and in part
to actual differences in the saving rate (explained orally by ECN, February
2010).
Absolute volume of energy saved
In the period 1995-2007 energy consumption increased by 400 PJ less
than it would have done without the energy saving measures (Gerdes,
2010). Figure 4 shows that temperature-adjusted energy consumption 22
increased by 307 PJ in 1995-2007. This represents an increase of more
than 11% (Gerdes & Boonekamp, 2009).
Figure 4 National energy consumption
In comparison with consumption without saving measures and
with energy saving according to the policy targets, 1995-2007
21
At the close of data collection (May 2010) the most recent monitoring data related to 2007.
22
Annual energy consumption is influenced by chance weather conditions. Less heating is needed
in a warm winter and more cooling in a hot summer. Since chance events influence the
interpretation and explanation of the trends, the data are corrected for temperature. Feedstocks
(see section 2.3.2) are not included in the calculation of corrected energy consumption (ECN,
2010).
36
Figure 4 shows that if no savings had been made after 1995, energy
consumption would have risen by more than 700 PJ by 2007, i.e. by more
than 25%. The energy saving is about 400 PJ, as shown in figure 5
(Gerdes, 2010). The volume of energy saved is nearly as great as all the
domestic energy consumed in the Netherlands in 2008 (CBS et al.,
2010a).
Figure 5 Energy consumption in the Netherlands and energy saved
in PJ
If the energy targets set for 1995-2007 had been achieved, energy
consumption in 2007 would have been just 100 PJ higher than in 1995,
an increase of 4%. The consumption avoided would have been about 600
PJ. Since the saving targets were not achieved in 1995-2007, actual
energy consumption was 307 PJ higher in 2007, an increase of 11% on
1995.
2.2.1
Energy saved as a result of policy
The actual saving is due in part to autonomous developments and in part
to the government's energy saving policy. Autonomous savings are those
that are achieved regardless of policy, for example when old machinery is
replaced with new, more efficient machinery or because old, poorly
insulated homes and offices are demolished and replaced with new ones.
An increase in fuel prices is also an incentive to cut energy consumption.
It cannot be said with certainty what part of the energy saving is due to
government policy. There have been many forms of energy saving policy
over many years and their effects can feed through for quite some time.
In studies by ECN, more than half the energy saving achieved in 19902003 is due to government policy (Boonekamp et al., 2005, p. 15;
37
Harmsen & Menkveld, 2005, p. 18). In 2006 the Ministry of EZ estimated
the autonomous saving at 0.7% per annum (EZ, 2006). Since 2000 the
average saving rate in the Netherlands has been 0.8% per annum. It can
be concluded from the literature that the long-term autonomous saving
lies between 0.8 and 1% (for a summary, see Davidson et al., 2011).
The total saving is only marginally higher than the assumed autonomous
saving. This means that the policy has had only marginal impact at
national level since 2000. 23
2.2.2
Influence of feedstocks on the actual saving rate
Energy carriers such as oil are used not only to produce energy. They are
also used as raw materials to make products, such as oil for plastic and
gas for fertiliser. Energy carriers that are used as raw materials are
known as feedstocks. Until 2007, the use of feedstocks was included in
the energy saving targets. The energy consumption target in the Clean
and Efficient working programme did not include feedstocks. If feedstocks
are not included in the calculations, the energy saving is slightly higher
and closer to the 2% target. The calculation of the actual energy saving
was also adapted in 2010. The Energy Saving Monitoring Protocol (PME)
was revised so as to exclude feedstocks. This is more in keeping with the
measurement method used in other countries.
In the period 1995-2007, the use of energy carriers as feedstocks
increased from just over 400 PJ to more than 600 PJ per annum (Gerdes,
2010). Since most feedstocks are fossil fuels, they must be used
economically to prevent their exhaustion. This touches directly on the
Dutch government's responsibility to ensure a secure and affordable
energy supply. The Dutch government's policy ambitions include the
development of alternatives to feedstocks. 'Energy transition' policy has
been launched to combine existing and evolving knowledge in all sectors
to add 'green raw materials' to the energy supply. The structure and
results of this policy are outside the scope of this audit.
23
If the energy saving between 1995 and 2007 were at the bottom of the margin (1.1% minus 0.3
percentage point, i.e. 0.8%) and the autonomous growth at the top end (1%), policy would have
had a negative impact. It is very improbable, however, that the total energy saving is at the
bottom end of the margin and the lion's share, the autonomous saving, at the top end. Policy has
probably contributed to energy saving but to only a limited degree. The fact that policy might have
had a negative impact underlines the importance of this audit of policy shortcomings,
consequences and opportunities for improvement.
38
2.3
Energy saving per sector
The average energy saving differs significantly by sector (figure 6).
Since 1995, the agriculture and horticulture sector has achieved the
highest saving: 2.6% on average per annum. The transport sector
achieved the lowest: 0.1% per annum. The rate of savings since 2000 has
increased only in the agriculture and horticulture sector. In the
households sector it remained stable and in the other sectors it declined.
In the transport sector there has even been a 'dissaving', i.e. energy
efficiency has declined. 24
Figure 6 Average annual energy saving per sector
Measured over two periods: 1995-2007 and 2000-2007
The agriculture and horticulture sector accounts for only a small
proportion of national energy consumption. The high saving rate therefore
has less impact on total energy consumption than, for example, the lower
rate in the transport sector. Expressed in absolute volume of energy (PJ),
24
The cause of this negative outcome is unknown. There might be a real dissaving, for exampl e
through higher energy consumption per kilometre travelled, a larger proportion of less economical
cars, lower occupancy rate per car or increased congestion. But it might also be due to
discrepancies caused by inaccurate data because the 0.3% margin of u ncertainty is greater than
the saving rate in this sector.
39
most energy has been saved in the manufacturing and households
sectors, see figure 7. The manufacturing sector is considered in detail in
chapter 5.
Figure 7 Energy saving by sector
Total consumption in 2007 and the saving in 1995-2007
40
3
We noted in chapter 2 that the national energy saving targets applicable
until the end of 2010 had not been achieved. We investigated whether the
cause lay in the policy conducted. We commenced by looking at the latest
policy programmes, the Climate Policy Implementation Memorandum
(VROM, 1999), the Energy Saving Action Plan based on it (EZ, 1999) and
the Clean and Efficient working programme (VROM, 2007). We
determined whether it was known when the policy programmes were
prepared whether the instruments would be adequate to achieve the
goals (ex ante evaluations), whether the proposed instruments were
actually applied and what information was available on the impact of the
policy executed (ex post evaluations).
Our audit found that successive governments had known in advance that
their ambitions were not backed up by appropriate policy instruments.
Time and again, studies carried out for the responsible ministers found
that the policy would not achieve the goals. These signals were not used
to adapt policy or reconsider the goals. A number of key policy
instruments, moreover, were applied much later than foreseen or in a
much diluted form, if at all. We consider these findings in the following
sections.
3.1
Policy instruments
A wide and diverse palette of policy instruments was applied to achieve
the energy saving goal. The Dutch government has opted for a specific
combination of instruments tailored to the individual characteristics of
each sector. They are summarised below with a brief description of their
assumed effect.
Statutory obligations and binding standards
Energy savings can be imposed by means of statutory obligations and
minimum energy efficiency requirements on, for example, electrical
appliances and houses. Adequate enforcement is a key condition.
41
Market forces
An important and unique policy instrument is the CO 2 emissions trading
system. The system is designed principally to reduce CO 2 emissions.
Emissions trade is based on market forces. Through the creation of supply
and demand, it is thought that companies that are obliged to participate
in the system will take measures to meet their obligations at the lowest
cost. At present, the cheapest way for a company to reduce its CO 2
emissions is to increase its energy efficiency.
Voluntary agreements
Every sector has entered into voluntary energy saving agreements with
the government. The underlying idea is that agreements reached through
mutual consent will be more effective than agreements that are imposed
unilaterally. The effectiveness of voluntary agreements sometimes lies in
the threat of a 'big stick': if the agreements are not kept, the government
may introduce other instruments that are more expensive to the parties
in the sector (Dijkgraaf et al., 2009).
Financial arrangements (energy tax, tax schemes, grants)
Taxing the use of energy increases the price of energy. A higher energy
bill, it is assumed, is a financial incentive to use less energy. Tax schemes
and grants can also be used to lower investment costs and thus cut the
payback time of energy saving measures. Under certain conditions,
companies can deduct the cost of specific energy saving investments from
their taxable profits or write off the investments against tax. Companies
and consumers can apply for grants or subsidies to buy low-energy
products or invest in energy savings.
Communication and information
Information on the energy consumed by, for example, electrical
appliances and houses helps consumers choose energy efficient products.
Specific advice on energy efficient alternatives is more likely to be
followed up than general advice. In the built environment sector, for
example, grants encourage house owners to seek specific advice on how
to make their homes more energy efficient. In the manufacturing sector,
participants in the Multiyear Energy Efficiency Agreement receive advice
on energy saving options for their companies.
3.2
Reasons for selecting specific instruments
In 1999 the government drew up the Energy Saving Action Programme.
It made a distinction between sectors that competed on international
42
markets and sectors that faced little if any international competition
(EZ, 1999, p. 12). For the former, the government opted for selfregulation and for the latter for government policy in the form of energy
tax, standard setting and regulation.
In 2004 the government decided that energy saving would no longer be
compulsory for companies participating in the CO2 emissions trade.
In effect, this meant that the Netherlands decided not to impose energy
efficiency standards for the greater part of manufacturing energy
consumption. We return to this in section 3.4.1.
The Clean and Efficient working programme was introduced in 2007. In it,
the government declared that the European CO 2 emissions trading system
was the 'cornerstone' of its mix of instruments (VROM, 2007, p. 49).
In addition, where feasible and relevant, the government supports the
introduction of energy efficiency and CO 2 emission standards. It would
prefer worldwide and European standards to national standards in order
not to distort the international market.
3.3
Policy impact known in advance
In both 1999 and 2007, studies carried out for the Ministries of VROM and
EZ found that the intended policy measures would probably not achieve
the set goals.
ECN and the National Institute for Public Health and the Environment
(RIVM) (Beeldman et al., 1999) extrapolated the effects expected from
the instruments introduced in the Climate Policy Implementation
Memorandum (VROM, 1999). Their main conclusion was that the
proposed policy package might be sufficient to achieve the goals set for
2010 but not all the expected effects would be equally 'hard'. They
thought 40% of the expected policy effect was 'uncertain'. The main
uncertainties related to weakness in the implementation of the
Benchmarking Agreement in the manufacturing sector, the voluntary
agreements still to be reached with energy companies, the significant
overlap of instruments in the transport sector and the voluntary nature of
the instruments in the built environment sector (Beeldman et al., 1999).
ECN and the RIVM (Menkveld et al., 2007) also calculated the effects
expected of the instruments in the Clean and Efficient working
programme. They concluded that successful implementation of the
working programme's measures would have a significant impact on
43
energy saving but the intended target of 2% per annum could be
achieved only if 'everything fell into place': high economic growth, a strict
European energy saving policy (including a high price for CO 2 emission
allowances and strict standards on cars and electrical appliances) and the
implementation of high-intensity measures to achieve a very high
proportion (at least 80%) of the technical saving potential would actually
be realised. If European policy were not so strict, the maximum saving
per annum would be between 1.6% and 1.9%.
3.4
Policy effects by sector
This section looks at the combinations of instruments that have
contributed to energy saving in each sector and the known effects of the
instruments used.
3.4.1
Manufacturing
A significant proportion of the instruments used in the manufacturing
sector have not had a significant policy impact. The exact impact of some
of the other instruments cannot be quantified.
Emissions trading system
Although the European CO 2 emissions trading system has become the
government's main policy instrument to save energy in the energy
intensive manufacturing sector, its effectiveness so far has been very
limited. The system's impact relies heavily on the price of a CO 2 emission
allowance and the extent to which entrepreneurs regard the system as
permanent. It did not result in substantial savings in the Netherlands
between 2005 and 2007. We consider this further in section 5.5.7.
Voluntary agreements play an important role in the policy for medium sized and large manufacturing companies. So far, the impact of voluntary
agreements in the manufacturing sector has been mixed. In the first
multiyear agreement the participants together accounted for 75% of
energy consumption in the manufacturing sector and all relatively
inexpensive and simple measures could still be taken. It is therefore
assumed that this agreement improved energy efficiency in the sector.
The impact of the second multiyear agreement, for the period 2000 -2008,
was probably limited. Since wholesale consumers were exempt from the
multiyear agreements upon the introduction of the CO 2 emissions trading,
the participants in the second agreement accounted for just 15% of
44
manufacturing energy consumption. Furthermore, most of the relatively
simple measures had already been taken under the first agreement.
25
The effects of the Benchmarking Agreement, the successor to the first
multiyear agreement for energy intensive industries, were virtually wiped
out on the introduction of the European CO 2 emissions trading system in
2005. Participants in the system no longer needed to prepare energy
efficiency plans and the goal of ranking among the best in the world for
energy efficient process installations by 2011 was abandoned
(Verificatiebureau Benchmarking, 2004; 2006). The Benchmarking
Agreement has since been terminated. Its successor is the Multiyear
Energy Efficiency Agreement for ETS companies (MEE Agreement), 26
which came into effect in October 2009. The effects of this agreement are
not yet known.
Environmental Management Act
The Environmental Management Act has had a limited influence on energy
savings. Pursuant to the Act, licensed companies have had to use energy
efficient techniques since 1993 if they had the financial resources to do
so. Municipalities and provinces are responsible for implementing the Act.
A study of the Act's implementation found that municipalities and
provinces did not give priority to energy savings when granting licences
and, moreover, the regulations on licence issuers were difficult to
implement (De Buck et al., 2007; Haskoning, 2009; Majoor & De Buck,
2010).
Tax schemes and grants
Tax schemes and grants have had an impact in the manufacturing sector
(Davidson et al., 2011). It has been largely restrained, however, by the
large number of free riders, companies that use a scheme but would have
invested in energy savings anyway. 27
We consider the impact of government policy on the manufacturing sector
in more detail in chapter 5 of this part.
25
The actual effects of the second multiyear agreement cannot be quantified precisely. Owing to
differences in definitions, it cannot be said whether participants were more energy efficient than
non-participants.
26
ETS: emisisons trading system.
27
There are reasons not to use the term free riders as it usually refers to those who benefit from a
scheme but contribute little if anything. The term 'deadweight loss', the loss of economic efficiency
due to unnecessarily high prices or costs, might be more appropriate. We use the term free riders
here as it is frequently used in evaluations of grants (e.g. Aalbers et al., 2007; IBO, 2001).
45
3.4.2
Built environment
The built environment sector comprises a large and heterogeneous group
of energy consumers. Individually, their consumption is limited and there
is little incentive to save energy: households, the trade and service sector
and the public sector. An evaluation found that compulsory elements in
the policy had the most effect.
Energy tax produced the greatest energy saving. Consumer response to
the change in energy prices is limited but since energy tax is the only
instrument that affects all households it produces a high saving (Joosen
et al., 2004). The combination of grants and European minimum
efficiency standards for domestic appliances and products was so
successful in the period 1995-2002 that most white goods are now energy
efficient (A label) (Joosen et al., 2004).
A third compulsory instrument is the minimum energy performance
standard for buildings. The Energy Performance Coefficient (EPC) was
first adopted in the Building Decree in 1995 and has since been tightened
up on several occasions. In consequence, new houses and office buildings
are designed considerably more energy efficiently that before 1995
(Joosen et al., 2004). Nearly all Dutch grant schemes for the built
environment ended in about 2002. The European Commission did not
increase the number of appliances subject to energy efficiency standards
until 2005. The introduction of the standards made slow progress.
The Clean and Efficient working programme proposed options for more
compulsory policy in the built environment. An example is the
requirement introduced in 2008 that when a house or other building is
sold the owner must provide the buyer or tenant with an energy efficiency
label. At present, energy efficiency labels do not play a significant role in
the housing market. In 2008, just 10% of house sellers provided new
owners with an energy label (VROM & CBS, 2010).
The More with Less Agreement introduced for the built environment in
2008 was expected to make a significant contribution to energy saving.
It has since become clear, however, that it will produce far fewer savings
than the government had estimated. The target was to save 100 PJ but
the maximum feasible saving is 44 PJ (Daniëls et al., 2010, p. 52).
46
3.4.3
Transport
The transport sector includes road traffic, railways, inland shipping and
domestic flights. In this sector, cars and heavy goods vehicles are
responsible for 75% of energy consumption. Agreements made at
European level with manufacturers regarding the energy efficiency of new
vehicles will have a significant impact on the achievement of the Dutch
goals.
A national instrument of which a great deal was expected was 'road
pricing'. 28 This instrument has been discussed since 1999 but has never
resulted in a concrete measure. In the coalition agreement of September
2010, the current government stated that it would not introduce road
pricing but would study whether an increase in duties could turn fixed
costs into variable costs. It was subsequently decided in November 2010
that duties would not be increased.
According to the European Commission, voluntary agreements with car
manufacturers have not had the desired effect. An EU regulation was
therefore passed in 2008 with a proposal to set a ceiling on the CO 2
emissions of new cars (European Commission, Regulation no. 443/2009,
2009). The ceiling was set at 130 grams of CO 2 per kilometre in 2015.
When preparing the Clean and Efficient working programme in 2007, the
Dutch government had anticipated the European standard being tightened
up to 80 grams of CO 2 per kilometre in 2020. The proposed EU target for
2020 is 95 grams of CO 2 per kilometre. The European voluntary
agreement on the maximum CO 2 emissions by light commercial vehicles
will also be incorporated into a European regulation.
Sales of energy efficient cars are being encouraged by a range of fiscal
measures. An evaluation of the incentive scheme for energy efficient cars
in 2002 and 2003 found that the incentive in combination with car energy
labels had had an effect (PriceWaterhouseCoopers, 2005). No instruments
were applied between 2003 and 2006 to encourage the purchase of
energy efficient cars. In 2006, the tax on buying a new car was adjusted
so that a lower rate was paid on more economical cars. A CO 2 surcharge
on car and motorcycle tax, known as the 'gas guzzler tax', was introduced
in 2008 for very uneconomical cars. Furthermore, the tax on benefit in
kind was significantly reduced for very economical company cars and
increased for other company cars (CBS et al., 2010c).
28
This instrument is also known as 'road usage charging' or congestion charging'.
47
Interestingly, some of the 'technical gains' made on vehicles, such as the
development of more efficient engines and improved aerodynamics, have
been offset by other characteristics of new vehicles, such as greater
weight, engine power and cylinder capacity, which have increased fuel
consumption and thus CO 2 emissions. The average power of a new car in
the Netherlands increased by about 20% and the average weight by
about 11% between 1998 and 2006.
Instruments were also introduced to influence transport behaviour.
Alternatives to cars have been encouraged by tax schemes for
commuters, such as an additional tax liability for the private use of a
company car. The 'New Driving' information campaign to encourage more
economical driving was introduced in 1999 and handed over to industry
associations, consumer organisations and market parties, united in
The New Driving Network, in 2010.
Flight tax was introduced in 2008 but was abolished a year later owing to
opposition from Dutch airports, airlines and travel organisations.
In March 2009, we issued a report entitled The Environmental Impact of
Road Transport. In it, we concluded that the impact of Dutch climate
policy in the transport sector had been disappointing as the intended CO 2
reductions had not been achieved (Netherlands Court of Audit, 2009b).
Since 2009, the average CO 2 emission of new cars has declined, partly
because of the greater availability of more efficient vehicles and partly
because of the higher demand for smaller more economical cars. The
latter was due in part to Dutch tax measures to promote the sale of
economical cars but the economic crisis and high fuel prices in the first
half of 2008 will also have been a factor in the increased demand (CBS et
al., 2010c).
3.4.4
Agriculture and horticulture sector
In the agriculture and horticulture sector, a large number of businesses
are together responsible for a small proportion of total energy
consumption in the Netherlands. There is a concentration of energy
consumption within the sector: greenhouse horticulture is responsible for
80% of consumption in the sector. In greenhouse horticulture, energy
costs represent a relatively large proportion of total production costs.
Energy savings are attractive to these businesses because they result in
direct and substantial cost savings.
48
Evaluations have found that the 1997 Horticulture and Environment
Agreement (GLAMI) together with a variety of fiscal schemes has been
effective. Greenhouse growers agreed in the GLAMI to improve their
energy efficiency per unit of production by 65% by 2010 relative to 1980.
This target had almost been reached by 2009. The GLAMI had a clear,
quantified target and, moreover, a statutory basis in an Integrated
Environmental Target in the Greenhouse Horticulture Decree.
Other important contributions to achieving the target include the priority
given to energy saving in the restructuring of greenhouse horticulture
areas (Netherlands Court of Audit, 2003) and schemes to retain small scale cogeneration plants when low electricity prices made them
unprofitable (EZ, 2008).
The Clean and Efficient Agriculture Agreement concluded with various
agricultural and horticultural sectors in 2008 included targets for CO 2
emissions, renewable energy and energy savings. Annual working
programmes explain the progress made in each sector and set out the
plans – transition pathways – for the coming year. The programmes
provide an annual insight into whether implementation is on schedule
to achieve the goals set for 2020.
3.5
Implementation of European policy
European policy influences the Netherlands' achievement of its saving
potential. The Netherlands relies on EU policy and has little freedom to
take measures that might affect competition or relations with the single
market. We found that the Netherlands had not complied with a number
of EU obligations on time.
Slow implementation of IPPC Directive
An important instrument for the manufacturing sector is the European
framework for environmental permits: the Integrated Pollution Preventi on
and Control Directive (Directive 96/61/EC, 1996; Directive 2008/1/EC,
2008). The IPPC Directive requires EU member states to control emissions
of environmentally polluting substances from industrial plants and from
intensive livestock farming by means of environmental permits. It has
been applicable to new plants since 1999 and to existing plants since
2007. At the heart of the IPPC Directive is the principle that companies
subject to the Directive must use the best available technology provided
it does not entail excessively high costs. These measures take account of
technological and economic circumstances to provide the best possible
49
environmental protection. The IPPC Directive also lays down that the
plant's operation must be energy efficient.
The Netherlands has transposed the IPPC Directive into the Environmental
Management Act. Environmental permits are awarded and assessed by
provinces and municipalities. The government issued the underlying
Energy in Environmental Permits Guidelines (1999) and the Roads to
Prevention at Enterprises Manual (2005) in order to inform local
authorities about how to regulate energy savings. Nevertheless, the
European Commission formally notified the Netherlands in 2007 that it
had not implemented the IPPC Directive adequately. 29 According to the
European Commission, too many permits had not been checked against
the Directive's requirements and revised where necessary.
Energy Services Directive
The European Energy Services Directive (Directive 2006/32/EC, 2006)
came into force in 2006. It requires member states to inform end users
about their energy consumption. It also requires the end users' energy
bills to include a comparison with their energy consumption in the
previous year. These requirements had to be satisfied by May 2008 at the
latest.
The Dutch government included the requirements in a Bill obliging every
household to fit a smart meter. The Bill was submitted in June 2008 and
passed by the House of Representatives in July 2008 but rejected by the
Senate in April 2009. The Senate objected to the compulsory fitting of
smart meters and the penalties on refusal. The House debated an
amended Bill in November 2010. The Bills to transpose the European
Directive into Dutch law were passed by the Senate as a formality in
February 2011 (Electricity Act 1998 and Gas Act 2011 Amending Act;
Amendment of the Electricity Act 1998 and Gas Act 2011 Amending Act).
The European Commission had sent the Netherlands an official reminder
in July 2008 and in January 2009 it sent the Netherlands a 'reasoned
opinion'. 30
29
As well as the Netherlands five other member states were summoned to appear before the
European Court of Justice. Three others received a final warning.
30
Another 19 countries also received such an opinion. The issuance of a reasoned opi nion is an
introductory procedure with no binding legal effect. It can result in legal action at the European
Court of Justice.
50
4
The European CO 2 emissions
trading system
In this chapter we look at the negative interaction between the European
CO2 emissions trading system and the national energy saving policy. We
also propose options to mitigate the negative interaction.
4.1
Interaction between CO 2 emissions trade and other
policy instruments
If several policy instruments are directed at the same goal, they interact
with each other. Within energy and climate policy, there is a negative
interaction between the European CO 2 emissions trading system and all
other policy instruments to reduce the CO 2 emissions or increase the
energy efficiency of energy intensive industries. This phenomenon is
discussed in several studies (Aalbers et al., 2007; Court of Audit, 2007;
Daniëls et al., 2010). In an audit of 2007 we pointed out that the
introduction of the emissions trading system had weakened the
effectiveness of renewable energy policy (clean energy and energy
savings) (Netherlands Court of Audit, 2007).
Organisation of emissions trading
The CO 2 emissions trading system is designed to reduce CO 2 emissions
without prescribing when and how companies must do so. The system
allows companies to opt for the most cost effective measures for their
own business. A company can satisfy the emissions trading requirements
in a variety of ways: by buying more emission allowances and/or by
reducing its own CO 2 emissions. CO2 emissions can be reduced through
energy savings (more efficient energy management), by using less
energy, by switching to low-emission energy generation (renewable
energy), by capturing and storing CO 2, and/or through fuel substitution
(e.g. gas instead of coal). The government has introduced other, usually
financial, incentives for nearly all these options.
51
Effect of grants in the manufacturing sector
In many cases, the use of these options frees up emission allowances.
Sooner or later, the companies and power stations that buy these
allowances will use them. The CO 2 emissions that were initially avoided
thanks to Dutch energy saving measures are thus produced at another
time and probably in another EU country. Owing to this interaction, all
government instruments and measures to reduce CO 2 emissions in
sectors participating in the emissions trading system have only limited
effect at European level. The initial energy saving and associated CO 2
reduction is largely negated. In this light, the use of grants to encourage
energy savings at companies participating in the CO 2 emissions trading
system is inefficient. Their only effect is to make energy savings more
attractive than other CO 2 reduction measures, such as the use of
renewable energy and innovative techniques. There is little point in
providing grants to encourage energy savings in the manufacturing sector
unless there are compelling reasons in favour of energy savings rather
than other ways to reduce CO 2 emissions.
The efficiency of grants to encourage the use of renewable energy in
sectors not participating in the CO 2 emissions trading system is also open
to question. If the policy reduces electricity consumption, power stations
will generate less electricity and CO 2 allowances will become available
that other participants can buy. CO 2 reductions in the non-participating
sectors are negated by extra CO 2 emissions in the participating sectors.
From this angle, too, it is inefficient to use grants to encourage renewable
energy unless there is a 'compelling reason' to do so, e.g. the European
obligation to increase the share of renewable energy.
In practice, the situation is more complicated. Until 2008 the allowances
had been so generous that the intended market forces did not influence
the trading system. If specific energy saving policy had not been
introduced, the Netherlands' energy savings and CO 2 emissions would
have been worse than they are now. Owing to the economic recession
since the end of 2008 and the resultant decline in manufacturing output,
the emissions ceiling has been too high and the price of a CO 2 allowance
too low to serve as a strong incentive for innovation. With the price of a
CO2 allowance being so low, there is little incentive for the energy
intensive sector to cut its consumption or use cleaner fuels.
A second uncertainty regarding the instrument's effectiveness is whether
participants in the CO 2 emissions trading system have the knowledge to
benefit from all the options available to reduce their emissions or comply
with the obligations of the trading system in another way. Our company
52
survey (see chapter 5) found that only the largest companies (more than
3,000 employees) thought they had the necessary knowledge.
4.2
Ways to mitigate the negative interaction
In our 2007 audit report on the implementation of the CO 2 emissions
trading system, we recommended that the government review the cost
benefit ratio of each instrument to reduce CO 2 emissions and reconsider
its use (Netherlands Court of Audit, 2007). In 2009 we investigated the
follow-up to this recommendation (Netherlands Court of Audit, 2009a).
Although the Ministries of EZ and VROM recognise the interaction and its
consequences, the government has not reconsidered the policy. Yet
measures can be taken, separately or jointly, to resolve this problem.
1. Focus energy saving policy on energy consumption outside the
emissions trading system
A first option is to sharpen the policy focus on energy consumption not
subject to the emissions trading system. This consumption comprises (a)
the gas consumption of manufacturers that are not subject to the CO 2
emissions trading system, (b) the gas consumption of the household,
trade, services and public sectors, and (c) the energy consumption of the
transport sector.
2. Focus energy saving policy on long-term effects (innovations)
A second option is to apply the policy instruments used in the sectors
participating in the CO 2 emissions trading system to develop innovations
that are viable in the long term, for example in the biobased economy or
alternatives to fossil fuels. At present, CO 2 emissions trade encourages
measures that are viable in the short term.
3. Lower the CO 2 emissions ceiling
A third option is to strengthen the operation of the trading system to
make emission allowances so expensive that companies invest in
meaningful energy efficiency improvements and in renewable clean
energy. This can be achieved by lowering the emissions ceiling before the
next trading period (after 2012) or by significantly cutting it for the
period after 2020. This option would require a decision at European level.
As a member state, the Netherlands can seek support for this option. If
a decision is not taken at European level, the government could buy up
emission allowances and take them (temporarily) out of the market.
This expensive option would require cooperation among several European
countries.
53
54
Finally, the additional effect of Joint Implementation and the Clean
Development Mechanism (CDM) should be studied. The schemes enable
companies to invest in clean technologies abroad and use or sell the
allowances awarded for the greenhouse gases saved abroad. There is
some doubt about whether the projects facilitated by these schemes are
really additional or not. The University of Stanford studied the CDM's
potential to the United States. The authors advised against introducing
a similar mechanism, partly because the current CDM market did not
produce a real reduction in CO 2 emissions (Wara & Victor, 2008).
5
Energy saving opportunities in
the manufacturing sector
This chapter presents the main findings of our in-depth audit of the
manufacturing sector. The in-depth audit asked three questions:

What reasons, objections and preconditions encourage one
manufacturer to invest in energy savings and another not to?

What are the cost benefit ratios of the government's policy
instruments to save energy in the manufacturing sector?

To what extent do policy instruments agree with the company's
energy saving reasons and do those that agree more work better?
5.1
Characteristics and policy instruments in the
manufacturing sector
The distinction between energy intensive industries and other industries
in the manufacturing sector is very important. Energy intensive
industries, such as refineries and chemical and base metal companies,
together accounted for 28% of national energy consumption in 2008 (CBS
et al., 2010a). The manufacturing sector as a whole was responsible for
42% of national energy consumption in 2008 (CBS et al., 2010b).
The key instruments in the fourth Balkenende government's energy and
climate policy for the manufacturing sector were the CO 2 emissions
trading system and the voluntary and multiyear agreements. The key
instrument for companies not participating in the voluntary agreements
or the trading system was the Environmental Management Act. The
instruments were backed up with financial schemes such as grants and
fiscal instruments.
Below, we look at the assumed operation of the policy instruments.
The audit is based on the adopted policy and did not consider whether the
underlying policy assumptions were correct.
Although the trading system is designed primarily to reduce CO 2
emissions, we included it in our audit as an energy saving instrument
55
because (a) it is the most important instrument the government can use
to influence energy consumption in the energy intensive manufacturing
sector, and (b) energy savings are an important yet relatively inexpensive
way to reduce CO 2 emissions. Alternative ways to reduce CO 2, such as
increasing the share of renewables or carbon capture and storage,
currently do not make a significant contribution to CO 2 reduction.
The European Commission is responsible for the design of the emissions
trading system. In the system, companies must pay for the CO 2 they emit
into the atmosphere. The instrument is a cap and trade system. The
European Commission places a ceiling (‘cap’) on CO 2 emissions in the EU
and companies are awarded or must purchase emission allowances that
they can buy and sell (‘trade’). This creates a price for CO 2 emission
allowances. All emission allowances together form the emissions cap.
Lowering the emissions cap encourages companies to reduce their CO 2
emissions.
Following an initial period with a high cap, the emission allowances will be
reduced by more than 35 million tonnes per annum from 2010. The
European Commission has calculated that lowering the cap in this way will
achieve the goal of reducing the participants' CO 2 emissions by 21% by
2020 relative to 2005. Furthermore, it believes this is roughly equivalent
to the target of cutting CO 2 emissions as a whole by 20% by 2020
relative to 1990. These calculations will be reviewed if the trading system
is extended to include new industries or if the overall reduction target is
raised (European Commission, 2010). Participation in the trading system
is not voluntary. All companies in the manufacturing sector that emit
more than a given volume of CO 2 must have CO 2 emission allowances.
To date, the allowances have been awarded free of charge.
The Dutch government has concluded voluntary energy saving
agreements with individual companies for successive periods. Participants
in these multiyear agreements receive support to prepare energy saving
plans. Industry organisations are also engaged to investigate energy
saving options relevant to their industries. This is in keeping with the
government's ambition of sharing energy saving techniques. By allowing
companies to use their energy saving plans to comply with the energy
clause of their environmental permits they are more likely to implement
them.
The first multiyear agreements ran from 1989 to 1999. During this period
the participants were responsible for about 75% of energy consumption in
56
the manufacturing sector. The second period ran from 2000 to 2008.
Since the energy intensive manufacturing industry switched to the
Benchmarking Agreement (see below) at the end of the first period, the
second multiyear agreements represented just 15% of manufacturing
energy consumption. The third period of multiyear agreements began in
2008.
A voluntary agreement was introduced for the energy intensive
manufacturing sector in 1999: the Benchmarking Agreement. The
participants undertook to have their plants rank amongst the most energy
efficient in the world by 2012 at the latest. The Benchmarking Agreement
was succeeded in 2009 by the MEE Agreement, 31 which was concluded
with a large number of participants in the CO 2 emissions trading system.
Unlike the Benchmarking Agreement, the MEE Agreement requires a duty
of best efforts to achieve the energy saving target and an obligation to
prepare an energy efficiency plan.
The Environmental Management Act 32 requires companies to invest in
energy efficient technology provided their financial situation permits.
Provinces and municipalities are responsible for implementing the Act and
they can impose energy saving measures with a payback time of five
years if a company consumes a certain amount of energy. 33 This provision
in the Environmental Management Act does not apply to companies
participating in the CO2 emissions trading system (VROM & EZ, 1999).
The Act requires companies to study energy saving opportunities.
Effective enforcement of the Act would mean that companies take all
energy saving measures that pay back their costs within five years. 34
The Energy Investment Allowance (EIA) was introduced in 1997 for
companies that invest in innovative energy saving measures. They can
deduct part of their investment costs from taxable profit. A new list of
measures is drawn up every year with innovative techniques and
equipment that qualify for the EIA. If a measure is invested in frequently
and becomes more viable, it is removed from the list so that only those
31
MEE: Multiyear Energy Efficiency Agreement for ETS companies (ETS: emissions trading system).
32
Since 1 October 2010, the Environmental Law (General Provisions) Act has formed the legal
basis for environmental permits.
33
More than 50,000 kWh of electricity or 25,000 m 3 of gas per annum.
34
As noted in section 2.3.2 of part 1 of this report, the assumption that municipalities and
provinces are capable of determining a company's financial position in such detail is curious.
57
that would not be viable without the EIA are supported. The list of eligible
measures is also a source of information on energy savings options.
Other tax schemes for energy savings measures are the VAMIL
accelerated depreciation scheme for environmental investments and the
MIA environmental investment allowance. These tax incentives are
designed to encourage investment in environmentally-friendly assets and
are similar in nature to the EIA.
Since 1990 the government has used a variety of grant schemes to
encourage companies to save energy. Examples include grants for
cogeneration plants, the tendering scheme for the CO 2 reduction plan and
the Environmental Action Plan.
Energy tax
The Netherlands introduced a tax on energy in 1996. The tax increases
the price of energy and is thus an incentive to reduce energy costs and
energy consumption. The higher price of energy makes investments in
low-energy products viable more quickly. The energy tax has a regressive
rate structure, i.e. smaller consumers pay the highest rate. Without the
European Commission's authorisation, Dutch energy tax may not be lower
than the minimum rate laid down in the European directive on the
taxation of energy products and electricity (Directive 2003/96/EC, 2003).
An exemption has been obtained for energy intensive manufacturers in
the Netherlands for electricity consumption in excess of 10,000,000 kWh
in so far as the companies participate in the emissions trading system or
a voluntary agreement with a best-efforts undertaking to increase their
energy efficiency. The use of feedstocks (see section 2.2.2) is also
exempt from energy tax.
5.2
Familiarity with and appreciation of policy
instruments
The in-depth audit of the manufacturing sector found that companies did
not know about all the schemes available. Some 23% of the companies
were not aware of any schemes whatsoever (see table 3). No scheme was
used by more than a quarter of the companies. More than half the
companies made no use of the schemes available to them.
A striking result from our survey was that only 40% of the companies
were aware that energy clauses in the environmental permit were
applicable to them. Furthermore, just 24% of the companies that were
58
aware of the energy clauses said they applied them. Small companies in
particular were not aware of the energy clauses while policymakers had
assumed that this instrument would be the main incentive for small
companies, which cannot take part in the voluntary agreements, to invest
in energy saving measures. We return to this in section 5.5.6.
Table 3. Familiarity with policy instruments, by company size (% of all respondents)
Company size
Small
Policy instrument
Familiar with no instrument
Medium-
Large
All companies
sized
26%
11%
6%
23%
Benchmarking Agreement
14%*
32%*
60%
18%
MEE Agreement
13%*
29%*
50%
17%
CO 2 emissions trading system
43%*
75%*
82%
50%
Multiyear agreements
28%*
49%
75%
33%
44%
71%
80%
50%
Tax scheme: VAMIL
53%
62%
69%
55%
Tax scheme: MIA
55%
70%
75%
58%
Tax scheme: EIA
58%
77%
82%
62%
Innovation grants
59%
69%
74%
61%
227
165
160
602
Number of respondents (= 100%)
Source: Netherlands Court of Audit survey
*
Most companies in this category are not eligible for the instrument concerned.
Appreciation of certain policy instruments is closely related to the size of
the company. Across the board, large companies are more positive about
the various instruments. Small companies are the least positive about the
effect of the instruments.
59
Figure 8 Percentage of companies that found an instrument to be
an incentive or a significant incentive
By size of company
Medium-sized and large companies thought multiyear agreements
provided the greatest incentive. Small companies that are not eligible for
the multiyear agreements thought grants and tax schemes provided the
greatest incentive (see figure 8). Remarkably, there was little
appreciation of the instruments across the board. The only instrument
that enjoyed the approval of all companies was the multiyear agreement.
If the scores are broken down by company size, this is particularly true of
large and medium-sized companies. The CO 2 emissions trading system,
which is targeted chiefly at large companies, is perceived as being th e
least effective energy saving instrument.
5.3
Reasons for and against energy saving behaviour
A possible explanation of the underachievement of the government's
energy saving targets is that the policy instruments do not agree with the
target group's reasons to save energy (or with the target group’s
negative expectations deterring them from saving energy). A better
understanding of the target group's reasons might improve the
effectiveness of policy instruments.
Only small-scale, qualitative studies have been made of why companies
decide to invest in energy savings or not (Masselink, 2008; Muthulingam
et al., 2008; Rohdin & Thollander, 2005; Sandberg & Söderström, 2003).
60
They found that other factors influence the decision-making process apart
from the direct investment cost. It is not clear which reasons, or
combinations of reasons, determine the ultimate investment decision.
To gain an insight, our audit drew on the Theory of Planned Behaviour
(TPB). This theory and the related research method offer a
comprehensive and tried and tested framework to analyse the various
'layers' of reasons quantitatively and in such a way as to provide
opportunities to influence behaviour. 35 The method requires information
from a large number of respondents. We collected the necessary
information by means of a survey of manufacturing companies. More
information on the survey can be found in the section on audit
methodology.
To obtain useful results, the behaviour studied must be defined as
precisely as possible. It is not enough to ask for energy saving reasons in
general. Our audit looked at two forms of behaviour:
1.
The acquisition of technologies, components and machinery that
improve the energy efficiency of production; these investment
decisions require a modification of the production line.
2.
The development of low-energy products; this requires investments
in time and knowledge to modify the products the company makes.
According to the TPB, there are three variables that together can predict
or explain behaviour.
1.
The first variable is attitude, the positive or negative appreciation of
the behaviour studied. We considered the factors that determined a
company's ultimate attitude. To this end, we asked the companies to
estimate the consequences of the two forms of behaviour studied.
2.
The second variable is social pressure. This is the pressure exerted by
people or organisations that influence a company’s decisions to invest
in energy efficient technologies or develop low-energy products.
We studied who exerted the social pressure that influenced a
company's decision to take energy saving measures.
3.
The third variable is perceived feasibility. This is the extent to which
a company thinks it has the resources, knowledge and skills
necessary to take energy saving measures and the extent to which it
expects problems in the production process. We studied which factors
determined whether a company considered itself capable of investing
in energy saving behaviour.
35
For an accessible summary of the theory, see Staats (2003). Lokhorst (2009) provides a recent
study of a Dutch environmental problem.
61
According to the TPB, each of these three variables is determined by the
many assumptions people make at a very basic level. The attitude
towards a particular behaviour depends on the consequences expected of
that behaviour, the social pressure of assumptions of what others expect
and the perceived feasibility of all manner of assumptions on what is
needed for a particular behaviour and whether it is feasible. For the
behaviour studied, the survey included a large number of items on
assumed financial consequences, for example 'make more profit', 'run
large financial risks' and 'unable to invest in something else'. We also
asked about image-related issues such as 'being an industry leader' and
'stronger green image'.
To study the assumptions relating to social pressure, we asked how
important banks, customers, industry organisations, shareholders and
employees thought it was for a company to acquire energy efficient
technology or develop low-energy products. To determine perceived
feasibility, we asked about the role of available knowledge, capital and
ability to apply new technologies and the consequences for relations with
suppliers and maintenance contractors.
Apart from these 'classical' behavioural aspects of the TPB, we also asked
about the corporate culture with regard to energy saving. This is the
extent to which a company sees investing in energy efficient technology
or low-energy products as a moral duty or appropriate to its operations.
5.3.1
Reasons for and against acquiring energy efficient technologies
Attitude is a decisive factor in acquiring energy efficient technology.
Our survey found that social pressure and perceived feasibility were not
significant (see figure 9). Attitude is determined by an assumption that
the behaviour will strengthen market position or industry leadership.
Negative attitude is determined chiefly by an assumption that an
investment in energy efficient technology will cause the company to break
existing relations with maintenance contractors. Two other small-scale
studies found that fear of disruptions to the production process deter
entrepreneurs from acquiring energy efficient technology (Masselink,
2008; Rohdin & Thollander, 2005). Our survey found no significant
relationship between the two.
Apart from attitude, corporate culture is also an important explanatory
factor in a company's acquisition of energy efficient technology. Energy
intensity also plays a role. The higher a company's energy costs as a
62
proportion of its production costs, the more likely it is to acquire energy
efficient technology.
Perceived feasibility is not a decisive influence on the acquisition of
energy efficient technology. The survey did make clear which
preconditions determine perceived feasibility, chiefly the presence of
sufficient knowledge of the opportunities. Other factors that influence
perceived feasibility are the availability of investment capital, whether
existing technology is due for replacement and reliance on suppliers and
maintenance contractors.
Figure 9 Reasons for and against the acquisition of energy efficient
technology
5.3.2
Reasons for and against developing low-energy products
Attitude is decisive to the development of low-energy products. Social
pressure by itself has little decisive influence on behaviour but being
expected to comply with agreements with the industry organisation
influences the attitude (see figure 10). Other expectations that influence
attitude are a stronger market position and industry leadership. An
expectation that developing low-energy products will put the production
process at risk has a negative impact on attitude.
63
The development of low-energy products depends amongst other things
on perceived feasibility. And that perception is in turn determined by the
presence of knowledge of the opportunities to develop low-energy
products and by the priority the company places on the development of
energy efficient technology rather than other business processes. Apart
from attitude, corporate culture is an important explanatory factor for a
company's willingness to develop low-energy products.
Figure 10 Reasons for and against the development of low -energy
products
5.4
Agreement between policy instruments and reasons
for and against energy savings
In this section we describe the extent to which the government's policy
instruments to save energy in manufacturing agree with the reasons and
conditions that influence a company's decisions. 36 We also consider
whether lack of agreement can explain the underachievement of the
energy saving targets.
36
The survey did not ask about energy tax because companies cannot opt in or out.
64
65
Multiyear energy efficiency agreements
The multiyear energy efficiency agreements agree most with the reasons
and conditions that determine a manufacturing company's decisionmaking processes. They offer the prospect of cost savings and inform
participants of potential grants and tax schemes. Participants receive
advice on how to save energy that is tailored to their business and on
how to share energy saving information and experiences within the
industry. Furthermore, the compulsory introduction of energy
management and energy saving reports increases the companies'
knowledge of their own energy consumption. Our survey found that
companies thought they did not have enough knowledge. More than a
quarter (27%) said they did not have enough knowledge. This was true
of 29% of the small companies, 24% of the medium-sized companies and
11% of the large companies. A breakdown of the large companies shows
that those with between 250 and 1,000 employees, in particular, do not
have enough knowledge. Only companies with more than 3,000
employees said they had enough knowledge.
It is assumed that voluntary agreements create social pressure to save
energy. However, the social pressure of the current agreements in the
manufacturing industry does not seem to have a decisive influence on the
companies' behaviour. The effect of the second generation of multiyear
agreements is due to their influence on the expected consequences of
energy savings and the extent to which companies think they can make
energy savings. Our audit revealed that companies thought multiyear
agreements provided the greatest incentive and that participants acquired
energy efficient technology and worked on energy savings in the
production chain more often than non-participants. The final (selfreported) percentage energy saving, however, did not differ from that
of non-participants.
The Benchmarking Agreement only partially agrees with the relevant
reasons and conditions. Furthermore, its effect was weakened when the
target for 2012 and the agreement's obligations were largely abandoned
upon the introduction of the CO 2 emissions trading system.
Small and medium-sized companies found tax schemes and grants to be
the most effective instruments. The schemes and grants used by the
government to encourage energy savings agree with the financial aspects
of a company's economic rationalism. Financial incentives influence the
calculation of a potential investment's payback period. Companies that
use financial schemes acquire energy–efficient technologies more often.
The idea that companies do not use financial schemes because the
administrative burden is too heavy was not confirmed by our survey. Most
companies expect more paperwork but it does not stop them using a
financial scheme. There were strong indications, however, that a decision
to invest in energy saving is often taken regardless of the schemes and
grants if a company has a strong culture of energy savings.
Companies do not see the Environmental Management Act as an incentive
to take energy saving measures. It requires companies take all energy
saving measures that pay themselves back within five years provided
their financial situation permits. Our audit found that many companies
used a shorter payback time: 41% invest in energy saving only if the
payback time is less than four years, for 33% the criterion is three y ears
or less. Since the prescribed behaviour differs so much from the
'spontaneous' behaviour, a great deal of enforcement is needed to ensure
companies comply with the statutory obligation. The potential
consequences of non-compliance with statutory obligations (risk of
sanctions or fines) did not prompt the companies we surveyed to invest in
energy efficiency.
CO2 emissions trading system
As noted above, the CO 2 emissions trading system was named in our
survey as the least effective instrument. It does not directly agree with
the reasons and conditions that influence energy saving decisions.
Reasons such as a stronger market position and industry leadership,
however, can reinforce its effect. The instrument is not concerned
primarily with energy savings but at reducing CO 2 emissions. Within the
trading system, a company is free to opt for other CO 2 reducing measures
or to buy emission allowances. With the current low price of emission
allowances, there is little incentive to save energy.
The instruments that agree most with the energy saving reasons
(multiyear agreements and tax schemes) are appreciated more and have
more effect than other instruments. It is therefore likely that poor
agreement between policy instruments and the target group's reasons
contributes to the underachievement of the targets.
66
5.5
Costs and benefits of policy instruments
5.5.1
Cost effectiveness
The final section of this chapter considers the costs and benefits of the
instruments. For the benefits (the instruments' contribution to energy
saving), the survey results have been combined in so far as possible with
an economic analysis. 37 The survey reveals the extent to which
participants in an instrument take more energy saving measures than
non-participants. After correction for potential self-selection (for example
because the most enthusiastic companies participate), this is indicative of
an instruments' effect. The economic analysis reveals the saving
attributable to each instrument and the cost of each instrument per
gigajoule of energy saving. The cost benefit ratio should not be regarded
as fixed. The cost per unit of energy saved is higher if a measure is
refined to encourage more savings. A small grant, for example,
encourages entrepreneurs to take inexpensive measures. Higher grants
will be needed to achieve more savings. The ratio between the cost and
the energy saving will therefore be less favourable.
The true reasons for an investment cannot be stated with certainty.
A number of assumptions therefore have to be made to estimate the cost
per gigajoule. The main assumption is that entrepreneurs act rationally,
that they understand the savings opportunities and select those that best
match their economic situation. The assumptions used in the economic
analysis are considered in appendix 2.
The study of cost effectiveness was confined to the direct costs borne by
the government and manufacturing companies and the direct saving
attributable to the policy instruments. Cost effectiveness can be
calculated from several angles. In this report we calculated it on the basis
of national cost: both the cost to government and the cost to companies.
Companies must usually first invest in measures before they can save
energy. They must, for example, acquire low-energy lighting or energy
efficient production techniques. 38
In this chapter, each policy measure is analysed in four steps:

Does the instrument work? Using the survey results, we determine
whether the instrument has contributed to the target. Where
37
The analysis was carried out by CE Delft on behalf of the Netherlands Court of Audit.
38
The cost to the government and end users cannot be simply aggregated. A grant, for example, is
a cost to the government but an income item to the energy user.
67
meaningful, we consider differences by company size or other
important characteristics.

How much energy has the instrument saved? We determine the total
saving attributable to each instrument based on the price elasticity
of energy. Price elasticity provides an indication of how strongly
companies respond to an increase in energy prices by making more
efficient use of energy. In the very short term, the response is
virtually nil: companies do not change their energy consumption
overnight if fuel becomes more or less expensive. The response is
stronger in the longer term if the change in price is permanent. 39

What are the costs? The costs consist of overhead costs borne by the
government, administrative costs borne by companies and the
investment costs to implement the energy saving measures. Owing
to lack of data on the precise investments and related cost per
company, we have assumed that entrepreneurs will in general incur
additional costs up to the point at which an additional investment
costs as much per unit of energy saved as the additional energy
saved. We also assume that, on the whole, the average additional
investment cost will lie halfway between zero and this maximum, i.e.
half of the marginal price incentive provided by the policy instrument
(per unit of energy). 40

5.5.2
What is the cost/saving ratio (cost effectiveness)?
Context: total saving in 2008 relative to 1995
In the manufacturing sector as a whole (including energy generation)
energy consumption in 2008 was about 260 PJ below the level that would
have been consumed if no measures had been taken. After deduction of
the autonomous effect and a number of other changes that are not
attributable to government policy, the saving induced by government
policy in 1995–2008 is between 56 and 88 PJ. This is equal to an energy
saving of 5%-8% over the entire period from 1995 to the end of 2008, an
average of 0.4% to 0.7% per annum (Davidson et al., 2011, based on
data provided by ECN specifically for this audit). 41
39
Using figures from the Netherlands Bureau for Economic Policy Analysis, we applied a price
elasticity rising over 20 years from zero to between –0.1 and –0.2, i.e. between -0.005 and –0.01
for each year that a measure is in force. For a summary of the literature on the price elasticity of
energy consumption in the Netherlands and an account of the above choice, see the separate
report to be issued by CE Delft shortly after the publication of this report (Davidson et al., 2011).
40
This assumption is also made by the OECD and the International Panel on Climate Change of the
United Nations (Burniaux et al., 2009, p. 193; Burniaux et al., 2008, p. 116; OECD, 2000, p. 28).
41
In principle, the same margin of uncertainty applies to this calculation as to the national policy.
The effects of the EIA, energy tax and CO 2 emissions trading, however, were calculated
independently of the estimates of the autonomous growth and the national saving. The uncertainty
68
69
5.5.3
Auditability
To determine whether the various energy saving instruments worked, we
have to know whether energy savings were greater at companies that
used a particular instrument than at companies that did not use that
instrument. Our survey was a snapshot. Differences it found between
companies that used a particular instrument and companies that did not
cannot be put down simply to the use of that instrument. The differences
might be due to companies or industries that were already saving energy,
or were intending to, using the policy instruments (positive selfselection). We therefore studied whether there were differences between
'users' and 'non-users' within the group of companies with a positive
corporate culture towards energy saving and within the group with a
negative corporate culture.
5.5.4
Costs and benefits of tax schemes and grants
Do tax schemes and grants work?
Companies that used a tax scheme or grant acquired energy efficient
technology for their production processes more often than companies that
did not. At small companies, the use of such schemes also had a positive
impact on attitude and perceived feasibility. This is entirely in line with
the government's intentions for these instruments although the
relationship for medium-sized companies is not significant. Corporate
culture, however, seems to make a big difference.
Table 4. Acquisition of energy efficient technology: differences between users and
non-users of financial schemes, broken down by corporate culture
Total
Saving culture
Non-saving culture
User
Non-user
User
Non-user
User
Non-user
Small (acquired)
70%
45%
77%
67%
63%
37%
Medium-sized
77%
70%
83%
82%
71%
51%
89%
76%
88%
83%
90%
67%
(acquired)
Large (acquired)
Bold: Significant, less than 5% probability that the relationship is chance
Within the group of companies with a positive corporate culture towards
energy saving, there is no significant difference. Companies that received
regarding the overall saving in the manufacturing sector has consequences for the 'remainder'
category, particularly the multiyear agreements. We accordingly consider the benefits of these
measures to be unknown (and not as the difference between the uncertain total saving and the
sum of the savings induced by other instruments).
a grant did not score markedly higher than companies that did not
receive a grant (see table 4). This is probably an indication of a free rider
effect: this category of company would probably have acquired energy
efficient technology or improved their production processes without a
grant. Within the group that does not have a positive corporate culture
towards energy saving, grants have a perceptible effect: more small and
large companies in this group acquire energy efficient technology if they
can benefit from a scheme than if they cannot.
Energy saving attributable to the EIA
During the period audited, the EIA lowered investment costs by about
10%-20%. If we make the optimistic assumption that the long-term price
elasticity is applicable (-0.1 to –0.2), such an investment grant over
several years (the depreciation term of the equipment and machinery)
would produce an energy saving of between 1% and 4%. 42 On 900 PJ in
2008, this is equal to between 9 and 36 PJ. A comparison with existing
data and studies suggests that the upper limit of this margin is the most
likely, i.e. 36 PJ. This is related to the percentage of free riders (see audit
methodology). We therefore estimate the energy saving attributable to
the EIA from the beginning of 1997 to the end of 2008 to be 36 PJ.
Cost of the EIA
The EIA cost the government €499 million in lost tax income in the period
from 1997 to 2008. 43 Given the percentage of free riders, some €350
million (70%) of this cost may not have had an effect. 44 In total, €149
million of the EIA's cost to the government may have been effective, just
over €14 million per annum. The implementation costs borne by the
government are so low as to be negligible.
Assuming that entrepreneurs generally act rationally, it could be said that
they will usually not spend more than the benefit provided by the
investment allowance. For entrepreneurs, the EIA makes measures
profitable up to a price of just over €0.80 per gigajoule saved. 45 If we
42
Price incentive times price elasticity, i.e. at least 10% times 0.1 and at m ost 20% times 0.2.
43
Calculated by CE Delft on the basis of an evaluation of the EIA by Aalbers et al. (Aalbers et al.,
2007) and data from SenterNovem (SenterNovem, 2009) by applying the percentage of amounts
approved for all EIA applications to the percentage of applications in the manufacturing sector
relating to energy efficiency. For a more detailed explanation, see the separate report to be issued
by CE Delft shortly after the publication of this report (Davidson et al., 2011).
44
From a national perspective (not only the government but the government, companies and
individual citizens), this is not a cost: what the government spends is received by the companies.
45
The maximum benefit of the EIA is approximately 11% (44% allowance on 25.5% corporation
tax), which is roughly equal to an 11% increase in the price of energy. With a natural gas price of
70
ignore the cost to entrepreneurs of applying for the EIA, entrepreneurs
can take a package of measures costing between nil and just over €0.80
per gigajoule saved. If we assume that the average investment cost for
all companies is in the middle, the investment cost is €0.40 per GJ.
Cost effectiveness of the EIA
Since there are no other costs of any significance apart from the cost of
investment, the cost effectiveness is equal to the investment cost per unit
of energy saved: €0.40 per GJ – subject to the assumptions made above.
As we will see, this is less expensive than most other measures.
Comments
However undesirable the existence of free riders in a financial scheme
may seem, it is not always possible to prevent them. To start with, the
payback times entrepreneurs seek to recover their investment costs differ
widely. A strict limit therefore cannot be set to 'exclude' free riders. In
general, the lower the grant or tax allowance, the higher the proportion
of free riders. If the financial benefit is low, the receipt of a financial
incentive will not be a decisive factor in any investment decision. This is
true of both entrepreneurs and private individuals.
To give a fictional example, if double glazing costs €20,000 and a grant is
available of €200, few people will make the investment if they weren't
already planning to do so. If the €200 can be received relatively easily,
people who were planning to fit double glazing will apply for the grant.
However, if half the investment cost is refunded, i.e. €10,000, many
more people will decide to fit double glazing. Moreover, the actual reason
why an entrepreneur decides to make an investment cannot be said with
certainty.
The cost effectiveness of the EIA is reduced by companies using it to pay
for measures required under the Environmental Management Act. If the
Environmental Management Act were enforced more effectively, this
would not occur. It is far from certain, however, that the Act can be
enforced properly.
€0.25 per m 3 the increase is €27.50 per 1,000 m 3. Every m 3 is equal to 1/31.6 gigajoules, i.e. the
increase is equal to €0.87 per gigajoule.
71
The negative interaction between energy saving and the European CO 2
emissions trade has grown stronger since 2008, as discussed in chapter
4. As soon as the EIA is used by companies participating in the trading
system or reduces the electricity offtake from power stations (which
participate in the system) its benefits alleviate the pressure exerted by
the emissions cap and thus the extent to which the system encourages
energy saving or other ways to emit less CO 2.
5.5.5
Costs and benefits of voluntary agreements with the
manufacturing sector
Do multiyear agreements work?
Medium-sized and large companies are more likely to acquire energy
efficient technology for their production processes if they participate in
multiyear energy saving agreements than if they do not (see table 5).
In all size categories, participants in a multiyear agreement took more
energy saving measures in their production chain than non-participants.
Energy savings in the supply chain are therefore a priority in the second
generation of multiyear agreements. 46 Participants in multiyear
agreements show more energy saving behaviour than non-participants,
with the exception of the development of low-energy products. The
differences are the clearest among medium-sized companies. Participants
have a more positive attitude to the necessary investments and more
companies think they have sufficient knowledge to acquire energy
efficient technology. Furthermore, participants often have more insight
into their own energy consumption than non-participants.
The corporate culture towards energy saving does not seem to make a
difference to participation in a multiyear agreement. The differences
between participants and non-participants are therefore not attributable
to corporate culture. Companies with relatively high energy costs,
however, are more inclined to participate in multiyear agreements (21%)
than those with relatively low energy costs (5%). Nevertheless, it
remains true that participants in multiyear agreements are more active in
important areas of energy saving than non-participants, even if we make
a split between high and low levels of energy costs compared to turnover.
46
Energy
savings in the supply chain are savings throughout a product's lifecycle, from raw
material to disposal. The savings are usually made outside the factory gates .
72
The operation of the multiyear agreements is based in part on industry
73
organisations exerting social pressure on companies to fulfil the
agreements. 47 Our audit found that participants in multiyear agreements
experience more pressure from industry organisations, industry members
and permit issuers but it ultimately makes no difference for the total
perceived social pressure. Social pressure from other parties, such as
employees, counts for far more than that from other participants in the
multiyear agreements. That social pressure does not have a decisive
influence on a company's behaviour could mean that companies are not
very sensitive to external pressure or that social pressure in its present
form is too weak.
On the whole, our survey found that multiyear agreements have a
positive influence on the acquisition of energy efficient technology. There
are also important explanatory factors at play at the participants: the
presence of an energy management officer and knowledge of the
company's own energy consumption.
Table 5. Differences between participants and non-participants in multiyear agreements, by size of company
Company size
Small
Participant
Medium-sized
Non-
Participant
participant
Energy efficient technology acquired
Energy saving measures in the supply chain
Large
Non-
Participant
participant
Nonparticipant
55%
50%
97%
65%
91%
77%
32%
16%
62%
32%
61%
38%
Office equipment and building measures
45%
56%
51%
78%
70%
70%
Positive attitude
61%
44%
74%
50%
67%
79%
Positive social pressure
26%
22%
50%
45%
70%
63%
 Industry organisation
61%
50%
84%
62%
87%
73%
 Industry members
39%
39%
79%
55%
85%
69%
 Permit issuer
54%
51%
97%
80%
96%
80%
66%
Feasibility
50%
29%
66%
51%
68%
 Sufficient knowledge
54%
30%
71%
53%
80%
73%
 Insight into own energy consumption
54%
31%
87%
51%
84%
66%
Bold: significant, less than 5% probability that the relationship is due to chance
Has the Benchmarking Agreement worked?
The Benchmarking Agreement, which covers most energy consumption
in the manufacturing sector, has not saved energy. The participating
companies improved their energy efficiency by 0.5% per annum in the
period 1999-2007; this is less than the autonomous saving
(Verificatiebureau Benchmarking, 2008). The costs of the Agreement are
47
In consultation with the Ministries of VROM and of EZ and NL Agency, we have identified the
policy assumptions behind the multiyear agreements. One of the assumptions is that industry
organisations are important influences on companies and companies want to live up to their
expectations.
not known but costs were certainly incurred by the participating
companies, if only to show where they stood in the world ranking. The
government incurred costs for the establishment of the Benchmarking
Verification Bureau. Since the instrument did not achieve the policy
target, the cost benefit ratio is very unfavourable.
How much energy did multiyear agreements save?
The policy impact of the second generation of multiyear agreements can
only be estimated and is shrouded in uncertainty. Despite the great
uncertainty, one thing is known for a fact: the impact of the multiyear
agreements can never be more than the total non-autonomous energy
saving induced by government policy. This saving amounts to between
11 and 16 PJ. 48 Attributing all this saving to the multiyear agreements is
a deliberately and unrealistically favourable assumption. The total impact
calculated for the EIA here is attributed to the second generation of
multiyear agreements.
Cost of multiyear agreements
The cost of the first multiyear agreements can no longer be determined.
In 2008, NL Agency, the implementer, put the cost of the second
multiyear agreements in 2008 at approximately €20 million. This amount
consists of NL Agency's overhead costs and an estimate of the
implementation costs borne by the companies. As the investment costs
companies incurred for the energy saving cannot be estimated, the actual
total cost is not known. However, it cannot be significantly lower than the
€20 million per annum given above. 49
Cost effectiveness of multiyear agreements
Even if we attribute all the non-autonomous energy saving to the second
multiyear agreements, the total overhead and administrative cost of €20
million per annum would be exceedingly high per unit of energy saved:
€1.25 to €1.80 per GJ. As will be seen, the cost per unit of energy saved
in these unrealistically favourable assumptions is higher than the cost of
the CO 2 emissions trade (in the long term, see section 5.5.7).
48
The participants in the second multiyear agreements consume about 150 PJ in total e very year.
The non-autonomous saving is between 0.5% and 0.7%, i.e. 0.75 PJ to 1.05 PJ per annum. Every
investment has an impact for about 15 years.
49
Multiyear agreements were also concluded with non-manufacturing industries. Some of the
overhead costs therefore could be left out of account here. NL Agency, however, could not break
down the costs. This relatively small potential discrepancy is negligible compared with the
'optimistic' discrepancy we have deliberately built in by assuming that there were no investment
costs and the very generous attribution of the effects.
74
5.5.6
Costs and benefits of the Environmental Management Act
Does the Environmental Management Act work?
Several studies have shown that municipalities and provinces give litt le
priority to enforcing the energy clause of the Environmental Management
Act (De Buck et al., 2007; Haskoning, 2009; Majoor & De Buck, 2010).
Furthermore, the Act's scope was severely curtailed in September 2004
when the Dutch government decided the energy clause would no longer
apply to companies participating in the CO 2 emissions trading system.
The limited percentage of respondents to our survey that said they were
directly affected by the energy clause of the Environmental Management
Act (38.9% of the companies that were not exempt from it) suggested
that they had little effect.
Energy saved, costs and cost effectiveness
No data are available to quantify the limited impact of the Act.
Comments
The payback time assumed in the Act for compulsory measures (five
years) is longer and thus stricter than the period companies actually use
for energy related investments. Our survey found that 33% of the
companies made investments only if they can recover the costs within
three years. This means that stricter enforcement could increase the
instrument's effect. In view of the large difference between the statutory
and actual payback time, enforcement must not be directed at only a
handful of 'laggards' but at a large proportion of the companies. This will
require a great deal of effort and money. It can also be asked how
realistic it is to assume that municipalities or provinces can accurately
assess the financial situation of every company. There is an obligation to
invest only in so far as a company's financial situation permits.
5.5.7
Costs and benefits of the CO 2 emissions trading system
Does the CO 2 emissions trading system produce energy savings?
The CO 2 emissions trading system is not concerned principally with
energy savings but with reducing CO 2 emissions. For the foreseeable
future, however, energy savings are the most affordable and most readily
available means to reduce CO 2 emissions. The impact on CO 2 emissions
will therefore be achieved through energy savings. Highly divergent
estimates can be found of the impact of the CO 2 emissions trading
system: from 'a reduction' because there is in any event a price (Ellerman
& Buchner, 2008), via ‘no effect' because the price of an emission
allowance is negligible given the fluctuations in oil and gas prices (Kettner
et al., 2008), to 'an increase in emissions' because the allowances are
75
based in part on historical emissions and it was in the companies'
interests to step up their production and emissions (Anderson & Di Maria,
2009).
Our audit found that the CO 2 emissions trading system had probably not
led to energy savings in the Netherlands in the period 2005-2007. The
allocated emission allowances were comfortably higher than the actual
emissions. Furthermore, a large proportion of the participants in the CO 2
emissions trading system also took part in the Benchmarking Agreement.
Participants in this Agreement saved less energy during this period than
the autonomous saving (as discussed in section 5.5.5).
Companies had to buy allowances in 2008 and it is more likely that there
has been some effect since then.
Amount of energy saved by the CO 2 emissions trading system
The manufacturing companies that participated in the emissions trading
system consumed 900 PJ in 2008 (including the energy generated for
them but excluding feedstocks). 50 At the time, CO 2 emissions trade would
have had an effect for between one and four years at the most. 51 The
price elasticity in 2008 thus lay between –0.005 and –0.04 (increasing
every year by between –0.005 and –0.01). The price incentive in 2008
was approximately 20% ($10 per $50 barrel). The estimated energy
saving can be estimated at between 0.1% and 1%: in 2008 the
manufacturing sector therefore consumed between 1 and 9 PJ less energy
than it would have done without the CO 2 emissions trading system. 52
Cost of the CO 2 emissions trading system
The direct cost to the government consists of the overhead costs of the
Dutch Emissions Authority (NEA). The NEA supervises the trade in
emission allowances for CO 2 and NO x (nitrogen oxides). Since it is not
known what part of the overhead cost should be attributed to supervision
of the trade in CO 2 emission allowances, half the overhead cost, €11
million, on average approximately €3 million per annum, has been
attributed. The administrative cost to companies is about €6 million per
50
According to data collected by CE Delft from a variety of sources, the companies participating in
the trading system consumed approximately 790 PJ in 2008 and purchased 25 to 30 million kWh of
electricity with an estimated calorific value of 110 PJ.
51
The system was introduced in 2005 but probably had little if any effect before the end of 2007
owing to the generous allocation of emission allowances. For the sake of completeness, our
calculations take account of the possibility that the system also work ed in the initial years.
52
The product of price elasticity and price incentive is between 0.1% and 0.8%, the latter is
rounded to 1%.
76
annum (SIRA Consulting, 2004). The ‘fixed cost' therefore totals €9
million per annum.
Both the cost to the government and the administrative cost are
estimated for all Dutch companies participating in the European CO 2
emissions trading system. This includes energy not generated for the
manufacturing sector (for example energy consumed by households).
To estimate the cost to the manufacturing sector only, the figures above
should be multiplied by 0.70. 53 This produces a cost of €6.3 million per
annum. In addition, the companies incur investment costs: the net annual
cost of investing in energy saving measures for the CO 2 emissions trading
system. These investments are the 'active ingredient': the higher they are
relative to the overhead cost, the better the system does what it is
intended to do.
Assuming that entrepreneurs act rationally, at the current price of an
emission allowance, about €20 per tonne, they will take a package of
measures that costs between virtually nil and €20 per tonne of CO 2
saved. Averaged across all the companies and all the additional measures
taken as a result of the emission allowances, the investment cost will lie
in the middle between €0 and the amount above which investments are
loss-making, i.e. the investment cost is equal to €10 per tonne of CO 2
saved. The manufacturing sector emits about 56 Mtonnes of CO 2 per
annum.54 The calculated decline in demand lies between 0.1% and 1%,
equal to between 0.06 and 0.6 Mtonnes of CO 2. The annual investment
cost on account of CO2 emissions trading is therefore between €0.6 and
€6 million. Added to the fixed cost to the government and the
administrative cost to industry (together €6.3 million), this brings the
total to between €6.9 million and €12.3 million.
Since the system is intended to remain in operation for a long period of
time, it is necessary to calculate the cost of the notional situation in
which the CO 2 emissions trading system had already been in existence for
20 years or so in 2008. The reduction in energy consumption and thus in
emissions would then amount to between 2% and 4% (price elasticity of
0.1 to 0.2 with a price incentive of 20%). With an emission of 56 Mtonnes
per annum, this represents a CO 2 reduction of 1 to 2 Mtonnes. If the price
53
The verified emission of all the Dutch participants in the trading system amounted to 80 Mtonnes
in 2008. The manufacturing sector accounted for half, power stations for the other half. Of the
electricity generated, 40% was consumed by the manufacturing sector. The manufacturing sector's
total share of the emission was therefore 70% (the direct half plus 40% of the other half of
electricity generation).
54
This is the verified emission of all Dutch participants in the emissions trading system, 80 Mtonnes
times 0.70.
77
of an emission allowance remains unchanged (€20 per tonne), the
average annual investment cost would still be about €10 per tonne and
thus come to between €10 million and €20 million. Added to the fixed
cost to the government and the administrative cost to the industry
(together €6.3 million), the cost then comes to between €16.3 million
(if energy consumption and emissions are 2% less than without the CO 2
emissions trading system, i.e. 18 PJ lower) and €26.3 million (if energy
consumption and emissions are 4% less than without the CO 2 emissions
trading system, i.e. 36 PJ less).
Cost effectiveness of the CO 2 emissions trading system
In the short term, the cost benefit ratio is between €1.4/GJ and €6.9/GJ
(in the most favourable scenario €12.3 million for 9 PJ, in the least
favourable scenario €6.9 million for 1 PJ). As already noted, this gives a
distorted picture if we do not take account of the instrument's long-term
operation. In the most favourable scenario, as noted, the cost amounts to
€26.3 million for a saving of 36 PJ, equal to €0.70 per GJ. In the least
favourable scenario the cost is €16.3 million for a saving of 18 PJ, equal
to €0.90 per GJ. A calculation using the long-term price elasticity also
shows that the European CO 2 emissions trading system is about twice as
expensive as the Energy Investment Allowance (EIA), which is also far
simpler to implement. This conclusion is valid only as long as the price of
an emission allowance remains low relative to the price of fuel (a s noted
above, about 20% of the price of oil).
Comments
We noted in chapter 4 that emissions trading had a negative interaction
with other instruments to reduce CO 2 emissions and that policy was
consequently less effective. These consequences are not included in the
calculation of the impact of emissions trading or of the other instruments.
The relatively substantial transfer of money in the CO 2 emissions trading
system from citizens to the manufacturing sector is not important to cost
effectiveness but is important to the allocation of costs. Since the
manufacturing sector received by far the majority of the allowances free
of charge and their value has often been factored into the prices, the
sector receives money when it has not actually incurred costs 55 (Sijm &
Van Dril, 2003). In the cost benefit analysis conducted on our behalf
(Davidson et al., 2011), this cost is estimated at €800 million per annum
(80 Mtonnes freely received CO 2 allowances with a market value of
approximately €20 per tonne, half of which is factored into prices).
This transfer of costs can be limited in part by auctioning the allowances
55
The free allowances have a market value.
78
where possible. In an auction, companies must pay for the allowances
and thus incur costs. This is one of the reasons why the government
decided in 2007 that the allowances would be auctioned wherever
possible (House of Representatives, 2008a).
5.5.8
Costs and benefits of energy tax
Does energy tax work?
Our survey found no direct indications that energy tax encouraged energy
savings. No comparison can be made between participants and nonparticipants. No taxpayer is fully exempt from energy tax; only partial
exemption is available but a comparison would be pointless because the
companies that enjoy a partial exemption (in brief, the very large energy
consumers) are not comparable with those without an exemption.
We found no study that had considered this issue. As long as
entrepreneurs act rationally, however, it can be assumed that an increase
in prices due to energy tax will encourage energy savings.
How much energy has energy tax saved?
The average price increase to the manufacturing sector due to energy tax
(in comparison with the situation without energy tax) is about 8%. 56
Energy tax has been in existence long enough and is stable enough for
the long-term price elasticity for energy saving to be applicable: 0.1 to
0.2. This results in an energy saving of 0.8% to 1.6%. The manufacturing
sector consumed 900 PJ (excluding feedstocks) in 2008. Without energy
tax, therefore, its consumption would have been 7 to 14 PJ higher.
Cost of energy savings
Energy tax generates income for the government and costs companies
about the same amount. In 2008 there was a transfer of €425 million.
The collection cost to the government and the administrative cost to
industry are thought to be negligible and are not taken into account here.
The direct cost incurred by companies to invest in energy saving and thus
avoid energy tax can be estimated for all companies on average at half of
the additional price incentive (see section 5.5.1). Since this price
incentive (the marginal rate of energy tax) differs widely between the
various categories of wholesale and retail consumers, a rough estimate
must be based on the total energy tax. In 2008, this cost to the
manufacturing sector was €425 million, after an estimated saving of
56
Calculated for this audit by CE Delft using data from the CBS (Statline): the fuel levies charged
by power stations plus energy tax relative to total energy costs in the period 1995 -2008. For the
complete calculation, see (Davidson et al., 2011).
79
between 0.8% and 1.6%. With a saving of 0.8%, the manufacturing
sector would have avoided approximately €3.4 million in energy tax and
with a saving of 1.6% approximately €6.8 million. If the companies
calculate rationally, the annual cost they incur for these investments will
not be higher than the energy tax avoided. On average, the companies
incur an annual investment cost just in-between nil and the tax avoided,
i.e. a cost of between €1.7 million (for a saving of 7 PJ) and €3.4 million
(for a saving of 14 PJ).
Our survey prompted us to question the assumption that small companies
actually take the viable saving measures in response to energy tax. In the
survey, small companies indicated more often than large companies that
they did not have enough information to acquire energy efficient
technology. Small companies were also less actively involved in energy
saving. This means that small companies probably do not invest up to
half of their tax rate in energy saving measures. The effect and also the
cost per unit of energy saved would then be lower than assumed above.
Cost effectiveness of energy tax
By means of this rough calculation and ignoring the cost of collecting the
tax, cost effectiveness comes to about €0.24 per GJ: the net annual cost
of the induced investments is the only significant item and, as noted
above, amounts to between €1.7 million for a saving of 7 PJ and €3.4
million for a saving of 14 PJ. Taken over all the tariff groups, this is an
inexpensive instrument, cheaper than the EIA, but it also has less effect.
To increase the effect, the tax rates should be raised so that companies
also take more expensive measures. The cost benefit ratio of the
instrument, however, would then be less favourable.
Comment
The estimate above is based on the total energy tax the manufacturing
sector pays and on the assumption that it is shared evenly. In reality,
however, energy tax has many different tax brackets, like income tax but
in reverse: the higher the consumption, the lower the marginal rate. This
is true of both gas and electricity. Small and medium-sized enterprises,
for example, usually consume no more than 50,000 kWh of electricity per
annum, on which they pay €3.70 in energy tax per GJ. Very big
companies consume more than 10 million kWh per annum and pay €0.06
per GJ in the top bracket. Energy intensive companies participating in the
Benchmarking Agreement actually paid no tax on their consumption in
excess of 10 million kWh. The same is true of participants in its
successor, the MEE Agreement. The cost effectiveness of each bracket
can be approximated as being half the rate. Since wholesale consumers
80
pay little energy tax in the highest bracket, the tax encourages them to
take only relatively inexpensive measures. Companies that consume more
than 10 million m 3 of natural gas per annum, for example, pay €0.20 per
GJ (in 2008). Saving measures that reduce gas consumption but cost
more than €0.20 per GJ are not financially interesting. Retail consumers,
by contrast, are encouraged to take more expensive measures because
they pay far more energy tax per unit of consumption. Companies that
consume between 5,000 and 170,000 m 3 of gas per annum, for example,
pay €4.30 per GJ in energy tax. Whereas wholesale consumers will not
take gas saving measures that cost, for instance, €1 per GJ saved, retail
consumers will consider measures costing as much as €3 or €4 per GJ
saved. Large consumers therefore do not take many relatively
inexpensive measures while the high rates prompt retail consumers to
take expensive measures. With a view to national costs, this means that
energy tax leads to unnecessarily expensive measures. The cost benefit
ratio is therefore less favourable than the estimated €0.24 per GJ and
would be more favourable if the tax were distributed more evenly.
5.6
Synthesis of costs and benefits
Government policy has not prompted the manufacturing sector to make a
large saving in its energy consumption during the period audited. We
investigated how much energy the individual policy instruments had
saved and at what national cost. In view of the inevitable uncertainties
inherent in the assumptions, only relative indications are given here (see
table 6).
Table 6. Saving and the cost benefit ratio per GJ by instrument investigated in the
period 1995-2008
Saving (PJ) relative
Cost benefit ratio
to other instruments
Energy Investment Allowance (EIA)
High
Moderate
Energy tax
Moderate
Favourable
CO 2 emissions trading system
Low
Unfavourable
Limited
Unknown
0
Very unfavourable
Multiyear Agreements (MJA2)
Unknown
Very unfavourable
Source: Study conducted by CE Delft for the Netherlands Court of Audit. For underlying
figures, see audit methodology.
81
The EIA has made the greatest contribution to energy saving. This
instrument also has a high percentage of free riders. The relatively low
cost of the saving per GJ is directly related to the relatively low fiscal
advantage of the EIA.
In comparison with the other instruments, energy tax has the lowest cost
per GJ saved. The high marginal rates for lower consumption brackets
and the low marginal rates for higher consumption brackets, however,
make the cost unnecessarily high. Wholesale consumers in particular are
not encouraged to take relatively inexpensive measures.
The effect of the CO 2 emissions trading system depends largely on the
price of a CO 2 emission allowance and the extent to which entrepreneurs
consider the system to be permanent. In the period 2005-2007 the
system probably did not contribute to energy savings in the Netherlands.
In the period that followed the system did produce energy savings but at
a higher cost than the EIA and energy tax. The longer the system is in
operation, the more favourable the cost benefit ratio is expected to be.
Implementation of the Environmental Management Act has had an
unknown but limited effect. The instrument's costs are unknown.
The first generation of multiyear agreements covered the greater part of
manufacturing energy consumption. Energy savings were certainly
achieved in this period but the costs cannot be determined. For a large
number of the participating companies these multiyear agreements were
succeeded in 1999 by the Benchmarking Agreement. There is no
convincing evidence that this agreement resulted in energy savings. Costs
were incurred, however. The agreement's conditions were relaxed upon
the introduction of the emissions trading system in 2005. The second
generation of multiyear agreements (since 1999) apply to a far smaller
proportion of manufacturing energy consumption. The participants,
especially medium-sized companies, found the instrument to be an
incentive that contributed to energy saving investments. The instrument's
effects are difficult to determine but our audit indicates there was a
relatively small additional saving in comparison with the other
instruments. The cost of the multiyear agreements can only be partially
determined: the investment costs incurred by the companies are not
known; the overhead and implementation costs came to €20 million.
82
6
Consequences for climate and
energy policy
In this chapter we consider the implications of the underachievement of
the energy saving target for the other national and EU goals of climate
and energy policy.
6.1
Relationship between climate goals
In the period covered by this audit, Dutch climate policy had three targets
for 2020: 20% improvement in energy efficiency, 30% reduction in CO 2
emissions relative to 1990 and 20% share of renewable energy. These
targets are closely related to each other. Both energy efficiency (energy
saving) and renewable energy will reduce the need for fossil fuel. This will
in turn lead to a reduction in emissions of CO 2 and other substances.
Additional measures for the cleanest possible combustion or storage of
CO2 will reduce emissions further. This sequence is shown in figure 11.
83
Figure 11 Relationship between climate goals
Energy saving plays a role in two steps in the transition, in reducing
demand for energy and in using scarce energy resources as economically
and cleanly as possible.
6.2
Feasibility of the Dutch goals
The most recent study of the development of energy consumption and
greenhouse gas emissions in the Netherlands until 2020 was issued in
April 2010 (Daniëls et al., 2010). This study takes account of the
economic and financial crisis since 2008. None of the scenarios
considered in this study leads to the achievement of a single climate
target by 2020 – not even the most favourable scenario in which all
proposed policy is implemented.
The government has not set a target for the reduction of absolute energy
demand. Absolute energy consumption in 2020 is important because the
energy saving and renewable energy targets are set as a percentage of
energy consumption in 2020. The targets are easier to achieve if absolute
84
energy consumption is lower. According to the study above, the adopted
policy will lead to primary energy consumption in 2020 of approximately
3,394 PJ. This is about 50 PJ higher than in 2008.
CO2 reduction
It is virtually certain that most energy in 2020 will be generated from
fossil fuels. Yet it is unlikely that carbon capture and storage will be
widespread by then. This means that a high level of energy consumption
in 2020 will still be accompanied by a high level of CO 2 emissions.
Energy saving has been an important 'driver' to reduce CO 2 emissions.
Energy savings are considered internationally to be the most cost
effective means to reduce fossil energy consumption and thus CO 2
emissions
(IEA, 2009; McKinsey & Company, 2009; VROM Council & General Energy
Council, 2004, p. 13). Calculations by the ECN indicate that CO 2
emissions in the Netherlands in the period 1990-2003 were reduced by
33 Mtonnes (Boonekamp et al., 2005). Of these 33 Mtonnes, 30 Mtonnes
were due to energy savings. The remaining 3 Mtonnes were due to the
use of renewable energy.
In the period 1995–2007, energy savings cut the increase in energy
consumption by nearly 400 PJ. This 400 PJ is equal to the emission of
approximately 25 Mtonnes less CO 2. 57 In this scenario, the national
greenhouse gas emission in 2004 would have been lower than the Kyoto
target. 58 The actual emission in 2007 was slightly higher (see figure 12).
57
Different energy sources have different CO 2 emissions. The figures on avoided consumption
presented here are calculated on the national mix of 42% natural gas, 40% oil and 11% coal.
58
Under the Kyoto Treaty, the Netherlands is required to reduce its greenhouse gas emissions by
an average of 6% per annum in the period 2008-2012 relative to 1990.
85
Figure 12 Greenhouse gas emission, 1999-2008
Until the end of 2010, the national target for the reduction of CO 2
emissions was 30% of the 1990 emission. Part of the greenhouse gas
emission in the Netherlands is produced by sectors that are subject to the
EU CO 2 emissions trading system. These sectors include power stations,
refineries and the greater part of the manufacturing sector. The main
sectors that are not subject to the emissions trading system are
transport, the built environment and a large proportion of the agriculture
sector.
Since additional emission reductions in the sectors participating in the
trading system in the Netherlands do not contribute to the European
target, the government decided to 'recognise' a 21% reduction as avoided
emission and required no further reductions from those sectors. The
difference between the Dutch and the European targets must be made up
by the sectors that are not subject to the emissions trading system.
To achieve the 30% target, these sectors (smaller companies,
households, trade, services, the public sector and transport) will have to
reduce their CO 2 emissions by more than 30%, namely by 39.7%.
This will not be easy. Firstly, these sectors are not expected to achieve
the 30% reduction target. Secondly, the interaction between the
participating and non-participating sectors will negate a large part of the
actual saving (see chapter 4).
86
Renewable energy
Achievement of the renewable energy target will also depend on the
absolute energy consumption in 2020. If primary energy consumption in
2020 is indeed 3,394 PJ, 678 PJ of renewable energy will be required in
2020 to achieve the original target of 20% renewables. The lower
European target will require 475 PJ. By way of comparison, 123 PJ of
renewable energy was generated in 2008, about 4% of national demand
(CBS, 2009).
Most renewable energy options, however, are not yet viable without
financial support. The share of renewable energy in 2020 will therefore
depend largely on the policy and availability of funding to back up the
investments (Daniëls et al., 2010).
6.3
Feasibility of the European obligations
Under the policies adopted, the probability of the Netherlands fulfilling its
European obligations to reduce CO 2 emissions is less than 50% (Daniëls
et al., 2010, p. 132).
Only emissions by sectors not participating in the trading system count
towards the European CO 2 reduction target. Emissions that are subject to
the trading system are subject to the emission cap, which is not allocated
to the member states. To achieve the European target, non-participating
sectors in the Netherlands must reduce their CO 2 emissions by 16%
relative to 2005 (Daniëls et al., 2010, p. 132). The probability of the
Netherlands achieving this European target is less than 50% even if the
proposed policy is successfully carried out.
Implementation of all proposed policy will be necessary to approach the
European renewable energy target but the margin of uncertainty is so
great that there is no guarantee (Daniëls et al., 2010, p. 132).
6.4
Conflicts between policy goals
There are also conflicts between climate and energy policy goals. We
provide examples below.
87
Replacing coal with natural gas reduces CO 2 emissions and is cleaner but
reduces supply security. Since coal reserves are far larger and distributed
differently across the world than gas reserves, replacing coal with natural
gas does not contribute to supply security (Daniëls et al., 2006).
A second example relates to the liberalisation of the energy market.
Liberalisation is not a climate policy instrument but is intended to
increase competition between energy companies and give more freedom
of choice to consumers. Liberalisation is directed at the affordability of
energy but it has led to dissavings, i.e. to lower energy efficiency in the
energy sector. Previous energy yields are no longer being achieved
(Harmsen & Menkveld, 2005; Seebregts, 2009; Seebregts & Volkers,
2005). Before liberalisation, economic optimisation was concerned chiefly
with the efficient use of energy. Since liberalisation, producers have made
investments and used their power stations to achieve economic
optimisation at group level, giving priority to investment costs and
availability.
A final example relates to the use of CO 2 storage. If CO 2 can be stored in
the ground, there is less urgency to use energy more efficiently. CO 2
storage is even contrary to the energy saving target. The CO 2 storage
process itself costs energy. A power station fitted with a CO 2 storage
system uses roughly 10% to 40% more energy than a power station
without a CO 2 storage system (IPCC, 2005, p. 4).
Inconsistent targets might be the underlying reason for contradictory
policies. An example of a contradictory policy was addressed at the G20
summit in Pittsburgh. In the final declaration, the participants stated that
subsidies for fossil fuels distorted the market and held back investments
in clean energy. At the summit, the participants had called for the ending
of fossil fuel subsidies in the medium term and their replacement with
other forms of income support if necessary (G20, 2009). The Netherlands
was present at this G20 meeting and signed the declaration of intent.
88
Appendix 1 Terms and definitions
Autonomous saving
A saving that is not induced by policy, for example because outdated
machinery is replaced with newer, more efficient machinery or because
old and poorly insulated houses and offices are demolished and replaced
with new ones. The increase in fuel prices also provides an incentive to
use less energy. It can be concluded from the literature that the
autonomous saving is between 0.8% and 1% per annum.
CO2 emissions trading system
A system for companies in the EU to buy and sell allowances to emit
greenhouse gases. The allowances held by the companies form the cap on
the total emission. If a participating company emits less CO 2 it can sell its
unused allowances to other participants; if a company wants to emit more
CO2 it must buy additional allowances. The total emissions by all
companies participating in the system therefore cannot be higher than
the cap. Emission allowances will increasingly be allocated to companies
on the basis of supply and demand (after an initial period in which they
were allocated free of charge). Not all companies participate in the
system. Those that do are responsible for 40% of total CO 2 emissions in
Europe.
Cost effectiveness
The ratio between the benefits attributable to an instrument and the costs
incurred to achieve those benefits. We use the generally accepted method
of expressing cost effectiveness in money per unit of energy saved, which
means that the higher the cost effectiveness the less favourable an
instrument is. In this report, cost effectiveness is calculated on the basis
of national costs, not only the costs incurred by the government but also
those incurred by energy consumers.
Dissaving
A negative energy saving.
Energy efficiency
An energy saving due to the more efficient use of energy per unit of
production, per kilometre driven or per square metre of office space. This
is the definition used in the Energy Saving Monitoring Protocol. In the
Protocol, an energy saving is the performance of the same activities or
the fulfilment of the same functions with less energy. Since an energy
89
saving cannot be measured or observed directly, an indirect method is
used. A calculation is first made of how much energy would have been
consumed if energy efficiency had remained unchanged (for office space,
for example, the change in energy consumption would depend only on the
change in floor space). The saving is the difference between this
reference consumption and the actual energy consumption (Boonekamp
et al., 2001).
Energy intensive manufacturing
That part of the manufacturing sector that uses the most energy. This
category includes power stations, oil refineries and steel producers. The
total manufacturing sector consumes approximately 900 PJ per annum.
The largest 154 companies consume 504 PJ (56% of the total).
Energy saving
See energy efficiency.
Energy saving in a broader sense
An energy saving not defined in the Energy Saving Monitoring Protocol,
for example a volume effect (see volume effect).
Feedstocks
Energy carriers that are not used to produce energy but are used as raw
materials for other products, such as oil for plastic and gas for fertiliser.
Free riders
Companies that benefit from financial schemes but would have made the
investments concerned even if the scheme had not existed.
Joule (petajoule, gigajoule)
A unit of energy. One joule is the energy needed to lift a small apple one
metre. Calculations at national level use petajoules (PJ). One petajoule is
equal to
10 15
joules (a million billion joules). A gigajoule is a billion (10 9)
joules.
Mtonne
Abbreviation for megatonne, the unit commonly used for CO 2 emissions.
A Mtonne is a million tonnes, i.e. a billion kilos.
Reference consumption
See energy efficiency.
90
Volume effect
A reduction in energy brought about by a decline in an activity, for
example by a decline in car use or the production of less steel (and
therefore not through the more efficient use of energy). A volume effect
due to a reduction in the production of steel, for example, will usually
lead to production moving to other countries if demand remains constant,
which will not necessarily lead to lower energy consumption worldwide.
If disposable incomes remain unchanged, a volume effect due to a change
in behaviour, such as a reduction in car use, can lead to a shift in so
many directions that the net effect is difficult to predict (more
train/aeroplane journeys or perhaps totally different changes such as the
purchase of more tumble dryers/furniture or going out more often).
91
Appendix 2 Audit methodology
Potential explanations
From the literature, we formulated two possible explanations for the
underachievement of the government's energy saving targets in the
Netherlands. The first is that fewer and less effective policy measures
were taken than ex ante studies had thought necessary. The second is
that the energy saving policy measures did not optimally agree with the
main actors' reasons to save energy.
Combination of general and sector-specific
We were able to investigate the validity of the first potential explanation
for the entire energy policy by relying on studies conducted by others, in
particular the Netherlands Environmental Assessment Agency and ECN.
To determine whether the second potential explanation was correct, we
collected our own data. This was possible in a limited area only.
Moreover, we had the ambition to consider not only the operation of
various instruments but also the relationship between costs and savings.
We quickly found that this could not be determined from existing studies
and that in-depth knowledge was required of the energy market and the
various calculation methods. We therefore decided to contract out this
part of the audit. 59
Sector-wide audit questions
The policy results are based on calculations derived from the Energy
Saving Monitoring Protocol (PME). To gain an insight into policy
developments and the results achieved, we held interviews and studied
policy papers, monitoring reports and policy evaluations. To determine
the available saving potential, we used ex ante studies prepared over
several years. These included calculations of the expected impact of
policy programmes and surveys of the available saving potential. We
derived the consequences for the achievement of the targets by 2020
from third-party studies. Some of these studies were conducted in
parallel with our audit. Here, too, we had frequent contact with the
researchers regarding the methods used. We are deeply grateful for the
openness of the ECN.
59
Following a careful tendering procedure, the engagement was awarded to CE Delft. We had
frequent and extensive contact with its researchers. The Netherlands Court of Audit endorses their
approach.
92
93
Audit questions on the manufacturing sector
Reasons for and against energy savings
Part of the audit was restricted to the manufacturing sector, a major
energy consumer. Existing investigations of the behavioural aspect of
energy saving in the manufacturing sector were conducted in a restricted
and mainly qualitative way. Furthermore, a major European study of
behavioural change among households, schools and offices was started at
the same time as our audit (Changing Behaviour).
Part of the audit was based on the hypothesis that policy could have more
effect if it was consistent with the existing academic knowledge of
behavioural change. To gain an insight into companies' reasons for and
against saving energy, we held an internet-based survey. For both the
questions and the analysis of the answers, we drew on the concepts of
the Theory of Planned Behaviour (TPB). This is an empirically tested
socio-psychological method to predict behaviour. The TPB's approach
consists of an initial measurement of planned behaviour followed by a
second measurement of actual behaviour. We did not have time to carry
out this method. Instead we used an analytical model to explain current
behaviour (see the figure below). We paid particular attention to two
important aspects: the acquisition of energy efficient technology and the
development of low-energy products. We benefited from the knowledge
and experience of an external adviser for this part of the audit, Mr Henk
Staats of the Faculty of Social and Behavioural Sciences of Leiden
University.
Schematic representation of the Theory of Planned Behaviour (terminology adapted for the
audit)
Expected
Attitude
consequences of the
behaviour
Importance others
Social pressure
attach to the
behaviour
Estimates of the
Perceived
potential and problems
feasibility
of the behaviour
Intention
Behaviour
The questionnaire for the internet-based survey was tested chiefly during
visits to six manufacturing companies. Further to these visits, we clarified
a number of questions and shortened the questionnaire. The
questionnaire consisted of three parts: A. general, B. questions on the
acquisition of energy efficient technologies and components in the
production process, and C. questions on the development of low-energy
products. Parts A and B were submitted to all companies. Part C was
submitted only to those that make products that can be redesigned to
become more energy efficient.
To take a representative sample, we used the Chamber of Commerce's
address database. Companies registered with an SBI code (Standard
Industrial Classification) of between 10 and 34 are classified as
manufacturing companies for the purpose of this audit (CBS, 2008). Only
manufacturing companies with more than ten employees were included in
the audit. This population totalled 10,387 companies. The Dutch
manufacturing sector consists of many small and a few large companies.
To make reliable comparisons of large and small companies, a stratified
sample was taken with relatively more large companies than small ones.
The sample was made up of all companies with more than 250
employees, a random sample of 20% of the medium-sized companies
(50 to 250 employees) and a random sample of 10% of the small
companies (10 to 49 employees). The total population of the sample was
1,499 companies.
The companies were invited to take part in the audit in December 2009.
The letter provided a user name and access code to log into the internet
in order to complete the questionnaire. Of the companies we invited, 25
no longer existed, were no longer active or were not part of the
manufacturing sector and were accordingly removed from the sample to
leave a population of 1,474 companies.
We received completed questionnaires from 602 companies, a response
rate of 41%. The response from large companies was higher than that
from small companies. Enough companies responded within each size
class for us to make comparisons between the groups. To analyse the
manufacturing sector as a whole, we weighted the results by company
size so that they were representative of the Dutch manufacturing sector.
The analyses of individual size classes (tables presenting small, mediumsized and large companies separately) used unweighted results so that
every company had the same significance. The population, sample,
weighting and response are summarised in the table below.
94
95
Population, sample, weighting and response in the survey of Dutch manufacturing companies
Company size
Population,
Sample,
Response,
Response,
abs
abs
abs
%
Weighting
Weighted
Weighted
response,
response,
abs.
%
Small (10-49)
8,152
816
277
35
1,70
471
78
Medium-sized (50-250
1,940
388
163
42
0,70
113
19
295
295
162
55
0,11
17
3
10,387
1,499
602
40
n.a.
602
100
Large (250+)
Total
(1,474)
The statistical analyses were conducted by means of the SPSS program.
The most frequently used techniques were frequency tables, crosstabulation tables with Chi 2 test, factor analysis and multiple regression
analysis.
Estimate of costs and benefits
CE Delft calculated the costs and benefits of various energy saving
instruments for the Netherlands Court of Audit. It made the following
assumptions:
a.
Entrepreneurs act rationally.
b.
The saving induced by a particular price incentive can still be
estimated with reasonable reliability using the price elasticity for
energy savings estimated by the CPB in 1994. In the very short term
the price elasticity is 0, rising to between –0.1 and –0.2 over about
20 years. Per annum, therefore it increases by –0.005 to –0.01.
In other words, if the price of energy increases by 1% and companies
think the increase will not last longer than a year, they will respond
with a small reduction in their energy consumption of between 0 and
0.01%. If the price of energy increases by 1% for a longer period of
time, the response will be more marked: between 0.1 and 0.2%.
c.
An entrepreneur's annual investments will on average be equal to half
the price incentive in that year.
d.
Investments will continue to produce savings throughout their entire
physical life; for the manufacturing sector, the life can be set at 15
years.
These assumptions are based on a study of the literature. The
calculations were put to external referees, who agreed with them.
We briefly explain the assumptions below. The report CE Deft will publish
shortly after this audit report will consider the calculations in detail
(Davidson et al., 2011).
a. Companies will not always take the most rational energy saving
measure, if only because they are not aware of all the options. It can be
assumed, however, that companies that consume a lot of energy (139
companies consume 80% of all the energy consumed in the
manufacturing sector) find savings on this cost item so important that
they generally know what options are available and use them. The
calculations based on this assumption are probably reliable.
b. This price elasticity was originally calculated by the CPB. It agrees well
with figures used in other and more recent studies and has the great
advantage that it was calculated specifically for the Netherlands and for
energy saving.
c. As a direct consequence of the assumption that entrepreneurs act
rationally, they will gladly take measures that cost virtually nothing but
produce a saving. Measures that cost precisely the same as the resultant
saving form the upper limit. On average, the cost will lie between these
two extremes.
d. Although the physical life will differ according to the type of
investment, 15 years is a reasonable approximation for manufacturing
production processes (Boonekamp et al., 2004b).
The EIA, the CO 2 emissions trading system and energy tax are all
considered price incentives. In the case of the EIA, an average decline in
investment costs is assumed of between 10% and 20%, which provides
roughly the same incentive as an increase in the price of energy of
between 10% and 20%. In view of the long life of the EIA, the highest
level of price elasticity is applicable (-0.1 to –0.2). This produces a saving
of between 1% and 4%. With energy consumption of 900 PJ in 2008, this
is equal to between 9 and 36 PJ. A comparison with other data indicates
that the upper limit of 36 PJ is the best estimate. It can be concluded
from SenterNovem's annual reports that the EIA would have induced a
total energy saving of 119 PJ in the manufacturing sector since 1997 (the
first year) if there had been no free riders. An energy saving of 36 PJ is
30% of this figure and suggests that 70% of the population were free
riders. Lower savings can only be explained by the presence of more free
riders. Studies in this area reveal significant variations in the percentage
of free riders. In 2001, a survey carried out for an interministerial policy
study put the percentage at between 52% and 64% (IBO, 2001). After
the rules on the eligibility for schemes were tightened up on several
occasions, a new study found a lower percentage: 38%, again based on a
survey (Aalbers et al., 2007). A calculation has also been made based on
characteristics of the eligible techniques and the time in which companies
wish to recover their costs. This calculation puts the percentage of free
riders at between 49% and 72% (Aalbers et al., 2004). A figure of 70% is
96
consistent with these study data, partly because surveys tend to
underestimate (entrepreneurs know they should not say that they would
have made an investment even without tax relief). Even higher
percentages, however, are unlikely.
For the CO 2 emissions trading system, the price increase was set at 20%
($10 per $50 barrel of oil). For energy tax the increase was put at 8%
(the total tax from the manufacturing sector as a proportion of total
energy costs excluding feedstocks). The total saving induced by the
emissions trading system and energy tax can be calculated directly as the
price elasticity multiplied by the price incentives, as explained in the main
body of the report.
The costs incurred by entrepreneurs under assumption C amount to half
the marginal rate, expressed in euros per GJ. Government overhead costs
and the administrative burden on companies were estimated from other
sources (budgets, data from implementing agencies, research literature).
Such an approach was not possible for the multiyear agreements as they
do not include clear price incentives. An estimate of the benefits of the
multiyear agreements was possible subject only to extremely uncertain
assumptions, which is why we have not published them. Instead we
provide an overly favourable estimate by attributing the total nonautonomous energy saving to the companies participating in the
multiyear agreements. We therefore attributed the total benefits of
energy tax and the EIA to the multiyear agreements. Furthermore,
we took no account of the unknown costs companies incur to make
an investment. The cost per unit of energy saved under the multiyear
agreements is therefore in any event higher than the cost presented.
We do not provide a table with apparently precise figures on the savings
and the relative costs of the various instruments in the main body of the
report because the calculations are based on so many assumptions and
uncertainties. They are presented below to explain the significance of the
qualifications 'high', 'moderate', 'low' and the exceptional 'very high':
97
98
Table 7. Saving and the cost benefit ratio per GJ of the policy instruments investigated
Saving (PJ)
Total policy effect
Cost benefit ratio
56-88
Of which:
- Energy Efficiency Allowance (EIA)
- Energy tax
- CO 2 emissions trading system
- Environmental Management Act + IPPC
- Benchmarking Agreement
- Multiyear energy efficiency agreements
36
€0.4 per GJ saved
7-14
Average €0.24 per GJ saved
1-9
(Long term:) €0.7 to €0.9 per GJ saved
limited
Unknown
0
Very unfavourable
unknown
Considerably more than €1.20 per GJ saved
Source: Study conducted by CE Delft for the Netherlands Court of Audit
Appendix 3 Standards
The main standard applied in this audit is that the set policy goals should
be achieved or reconsidered. There should be as few negative secondary
effects as possible. The number of free riders benefiting from grants and
tax schemes should also be minimised. For targets lying in the future, the
government should use up-to-date and carefully compiled information to
indicate their feasibility and whether adaptation of the policy or targets is
necessary.
99
Literature
Regulations
Council Directive 96/61/EC of 24 September 1996 concerning integrated
pollution prevention and control, Official Journal no. L 257 of 10 October
1996, pp. 26 - 40.
Council Directive 2003/96/EC of 27 October 2003 restructuring the
Community framework for the taxation of energy products and electricity,
Official Journal, no. L 283, pp. 51 - 70.
Directive 2006/32/EC of the European Parliament and of the Council of
5 April 2006 on energy end-use efficiency and energy services and
repealing Council Directive 93/76/EEC, Offical Journal no. L 114/64 of
27 April 2006.
15 January 2008 concerning integrated pollution prevention and control,
Official Journal no. L 24, p. 8 - 29 Brussels, European Commission.
23 April 2009 on the promotion of the use of energy from renewable
sources, Official Journal L 140 5 June 2009 pp. 16-62.
Regulation (EC) No 443/2009 of the European Parliament and of the
Council of 23 April 2009 setting emission performance standards for new
passenger cars as part of the Community's integrated approach to reduce
CO 2 emissions from light-duty vehicles.
Other literature
Aalbers, A., H.L.F. de Groot, I. Ossokina & H. Vollebergh (2004),
Subsidizing the Adoption of Energy efficient Technologies, an Empirical
Analysis of the Free-rider Effect, in K. Blok, H.L.F. de Groot, E.E.M. Luiten
& M.G. Rietbergen, The Effectiveness of Policy Instruments for Energy
Efficiency Improvement in Firms pp. 31-50, Dordrecht, Kluwer Academic
Publishers.
Aalbers, R. et al. (2007), Ex-post evaluatie Energie Investeringsaftrek
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109
Audit team
Marcoen Roelofs (Project Manager)
Algemene Rekenkamer
(Netherlands Court of Audit)
Sylvia van Leeuwen (Deputy Project Manager)
Lange Voorhout 8
Cora Kreft
P.O. Box 20015
Bas Bussink
2500 EA The Hague
Jeanine Strijk
phone + 31 70 342 43 00
Jort Verhulst
e-mail: [email protected]
Daniëlle de Wit
internet: www.rekenkamer.nl
Marjolijn van Zeeland
Print
Netherlands Court of Audit
Cover
Design: Corps Ontwerpers, The Hague
Photo: Michiel Wijnbergh / Hollandse Hoogte
Graphics
Joris Fiselier Infographics
The Hague
November 2011

Energy saving: ambitions and results

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