D. EU Energy Initiatives
7. The Commission's competence in energy policy
remains constrained despite the creation of the Single European
Market, requiring the unanimity of Member States in the energy
policy field, or the use of others powers (e.g., on competition
and environmental policy). However, in recent years, the European
Commission has been more active in energy policy matters. In January
1996 the Commission published a White Paper on Energy Policy which
set out three central objectives of a Community energy policy:
competitiveness, environmental protection and security of supply.
Other recent initiatives include: the Electricity Directive and
substantial progress on a similar Gas Directive allowing for a
gradual liberalisation of EU energy markets; a White Paper on
Renewable Energy; a Communication on Co-generation (or CHP); progress
in harmonising taxation of energy products; and funding of energy
research, development and demonstration. Especially through environmental
legislation (e.g., the Large Combustion Plant Directive, and the
limits on lead and sulphur content in road transport fuels), and
as a signatory to the Framework Convention on Climate Change,
the Community now exercises considerable influence upon the evolution
of the EU energy sector. Energy efficiency initiatives, such as
the SAVE Programme, have made some headway but much momentum has
been lost in this field, in my view.
E. Some Shaping and Driving Factors
8. I set out briefly some factors which have
shaped, and are likely to continue to shape, the evolution of
energy demand and hence the energy sector at large.
— For many years the energy policy
focus has been "supply-side" orientated (e.g., the North
Sea, coal, nuclear). Yet energy efficiency is widely regarded
as the most cost-effective route to reducing emissions and other
environmental impacts.
— The demand for energy is a derived
demand: i.e., energy is not required for its own sake but to facilitate
services required by final users such as space heating, light,
motive power, cooling, cooking and mobility. Energy use patterns
reflect decisions by millions of consumers. "Bottom up"
as well as "top down" signals are thus required.
— Demand is responsive to price, at
least in the longer term. However, most recent energy projections
envisage a "low energy price world" to (say) 2020. In
addition, market liberalisation is exerting further downward pressure
on energy prices. Thus prices may provide little incentive for
enhanced energy efficiency.
— The energy sector is perhaps the
most capital intensive sector of the economy. Rates of return
sought on investment in energy efficiency are usually much higher
than those for energy supply. Investment incentives also favour
supply-side investment, as many end users (e.g., households or
the non-trading public sector) do not receive investment allowances
against tax. The playing field is not very level.
— Energy efficiency initiatives have
the characteristic of a patchwork. The Energy Saving Trust; the
Home Energy Efficiency Scheme; OFFER's Standards of Performance
for Energy Efficiency; sporadic Whitehall initiatives by Green
Ministers; the capital receipts initiative, and the Environment
Task Force are individually welcome. But they still appear uncoordinated.
They also lack strategic political direction across different
Whitehall departments and economic sectors. Transport is usually
excluded from such initiatives.
— The Minister for Science, Energy
and Industry said in the Energy Report that achieving the
reduction in CO2 emissions and other measures to ensure
more sustainable development "is probably going to take some
radical change in the way we regard and its use".1
[10]I concur
fully.
— Given the spate of reviews underway
in other fields, the Committee may consider examining the coherence
of UK energy efficiency policy. This could include:
(i) the roles of different actors, such
as central Government Departments, central agencies and regulatory
bodies (the Environmental Agency, OFFER and OFGAS), local authorities
(e.g., Agenda 21, housing investment and maintenance, and the
Homes Energy Conservation Act), and others;
(ii) examination of existing and proposed
sectoral initiatives; and
(iii) the role of a range of instruments
such as taxes, levies and grants; appliance standards and Building
Regulations; voluntary agreements; emission limits; and the development
of energy services. To my certain knowledge, such an inquiry has
never been undertaken by Parliament. It could serve as a valuable
prelude to the subsequent close scrutiny of the emerging new draft
Climate Change Programme to be published next year.
July 1998
1 Note by Witness: At this point I was quoting
from the Green Paper, `A Fair Deal for Consumers', DTI, March
1998, p. 41, para. 6.6, with reference to water. Back
2
Note by Witness: The number of IPPC sites in the UK is
actually about 8,000. Back
3
The first section draws heavily upon Energy Policy, HC
471-1, June 1998 for which I served as the Specialist Adviser. Back
4
The Energy Report, Vol. 1, Shaping Change, DTI, (hereafter
Energy Report 1997). Back
5
Energy Report 1997, p. 3 para. 1.8. See also p. 6, para.
1.20. Back
6
Energy Report 1997, paras. 1.9-1.18. Back
7
Energy Report 1997, p. 206, Summary.
<lh0.5>
<jf67>The cost of printing these
Minutes of Evidence is estimated by The Stationery Office at £460. Back
8
DTI, A Fair Deal for Consumers: Modernising the Framework for
Utility Regulation, CM 3898, Stationery Office, London, March
1998. Back
9
Review of Energy Sources for Power Generation: A Consultation
Document, DTI, 25 June 1998. Back
10
The Transport White Paper is to be published on 20 July 1998. Back
