Examination of Witnesses (Questions 1-19)
Mr Jeremy Eppel, Dr Hunter Danskin, Mr Chris Baker,
Ms Marie Pender, Mr Paul Chambers and Mr Simon Barnes
3 NOVEMBER 2004
Q1Chairman: Can I welcome our guests and thank
them very much for coming to see us this afternoon. I apologise
for having kept you waiting for a few minutes while voting was
going on but I am sure we will have plenty of time to ask you
lots of questions and for you to answer them. We have all benefited
very much from being able to read your submission, which was very
helpful indeed. Thank you very much for that. One last thing to
say before we start the questions is that the acoustics in this
room are very bad so could I ask everyone when they speak please
to speak extremely loudly because everything disappears into the
ceiling and unless you speak very loudly people cannot hear. We
were very interested in what you had said particularly in Annex
1 of your submission about the link between improved energy efficiency
and reducing carbon emissions. That really led me to want to ask
you: when you say that the Energy Efficiency Action Plan puts
energy efficiency "at the heart of UK energy policy",
could you tell us exactly what you mean by energy efficiency in
that context and how does it relate to your other policy goals?
A subsidiary question is is primary energy or delivered energy
your principal focus? Before you answer, just for the record,
can you say who you are and whom you represent.
Mr Eppel: Perhaps I should introduce myself
then. I am Jeremy Eppel and I am Head of the Sustainable Energy
Policy Division in the Department of Environment, Food and Rural
Affairs.
Q2Chairman: Perhaps you would be kind enough
to introduce your colleagues.
Mr Eppel: I am happy to introduce all of them
if you like. On my right is Paul Chambers who is in the Energy
Strategy Branch of my division working particularly on the Energy
White Paper and Action Plan. On his right is Simon and I will
let Simon introduce himself.
Mr Barnes: I am Simon Barnes from the Office
of the Deputy Prime Minister. I head up a branch of the Buildings
Division principally looking after sustainability issues.
Mr Eppel: On my left is Dr Hunter Danskin who
is the Head of our Technical and Analytical Branch in my division.
On his left is Marie Pender who looks after Climate Change Agreements
in what is now a separate division called the National Climate
Change Policies Division. On her left is Mr Chris Baker who is
the leading person in charge of the Market Transformation Programme
which sits in another part of Defra as well.
Q3Chairman: Thank you very much. If you can
still remember the question!
Mr Eppel: Yes, I think I can. In putting energy
efficiency at the heart of UK energy policy what we were really
trying to underline there was the change in emphasis that the
Energy White Paper last year brought about. For many years the
emphasis has been very much on the supply side and on fuel and
power rather than on the totality of systemic energy policy, and
what we were really trying to do was to rebalance the emphasis
in the White Paper increasingly towards the uses of energy, the
demand side, and a key part of that is using energy more efficiently,
for a whole variety of reasons and benefits that it can bring
about. The emphasis therefore was energy efficiency as a contribution
to a sustainable energy policy which in itself is part of moving
towards sustainable development, which is Defra's overarching
objective, and by that we mean trying to encourage environmental
progress, economic development and social progress, particularly
in the context of fuel poverty, and also ensuring energy security.
So energy has the three dimensions of sustainable development
but it also has that energy security one. We think the evidence
is clear that energy efficiency contributes significantly to each
of those, and for that reason energy efficiency was seen as a
very important issue and a very important priority to bring much
more to the centre of overall energy policy and that is what the
White Paper did and that is what the Action Plan has further advanced.
Q4Chairman: Thank you for that. When you talk
about energy efficiency are you really talking about the amount
of energy which consumers use? Would you think that an interpretation
of what you are saying?
Mr Eppel: Put simply, we are saying that energy
efficiency is a way of measuring how much energy you need to deliver
a particular service, whether it is lighting, heating, production
of goods and services, so it is the quantity of energy needed
to do the job. If you can use less energy to do a particular job
then that is a more efficient use of that particular resource,
not only for energy but clearly energy is one of the most important
resources available to us. The focus is on final energy use more
than primary energy use. Primary energy use where it is primary
energy conversion from fuels into power and heat is clearly an
area where there are efficiency savings to be had but the new
emphasis is on end use efficiency.
Chairman: Thank you very much. I think my colleagues
will be pressing you on some of the implications of what you have
said. Lord Young?
Q5Lord Young of Graffham: On the concept of
energy efficiency, first of all, is there a single best measure?
Is there something that everybody would agree is a measure of
energy efficiency? If there is not, how can its contribution to
meeting energy objectives be measured? Is energy efficiency really
the right term to be using in the context of the Government's
other policy which is reducing carbon emissions which is quite
different in many ways policy objective.
Mr Eppel: You can certainly have a good measure
of energy efficiency in each different part of the economy. You
cannot of course have exactly the same measure because different
parts of the economy have different inputs and outputs, but energy
efficiency is a relevant and useful measure in each context, and
that is important. It is also a partial proxy for increased carbon
savings. It is not the only factor that has to be brought in when
one looks at the carbon impact but a more efficient use of energy,
all else being equal, will certainly result in relative carbon
savings. I do not know if my colleague Dr Danskin wants to add
anything on measures.
Dr Danskin: The main thing is that we can measure
changes in energy efficiency. The other thing we have to balance
this against is changes in the underlying demand for energy services
like comfort or illumination or production in industry. At the
moment in the household sector we have energy efficiency improving
at the rate of about one per cent per annum but we have the underlying
demand going up at one and a half per cent per annum so the net
effect is an increase in energy consumption. If we can double
the rate of energy efficiency then we can have the half per cent
per annum in our favour and energy consumption will then fall.
So we have to take both into account.
Q6Lord Young of Graffham: If I may, Chairman,
there is no direct connection between energy efficiency and carbon
use. For example, if you improve the efficiency of nuclear or
the efficiency of windmill generation, it would have no effect
on carbon emissions but in fact produce more power.
Mr Eppel: In those particular examples that
is true but if you are talking about a carbon free or largely
carbon free original source of energy of the kind you describe
there may still be benefits from being more efficient in the use
of energy in cost and other environmental impacts. Certainly strictly
in carbon terms it may not have much impact but the majority of
energy supply in this country is not derived from those entirely
carbon-free sources so for a very long time we envisage energy
efficiency always having some carbon benefit and depending on,
as Dr Danskin said, the rate at which consumption is growing having
a more or less significant carbon benefit.
Q7Lord Lewis of Newnham: Could I ask you to
amplify your statement about efficiency and consumption because
there seems to be an indication that as the efficiency goes up
the consumption follows it, so your remark about two per cent
and 1.5 per cent can in fact be interpreted the other way round.
If you become more efficient then people have got a) more money
to be able to spend and b) will then utilise it on other types
of energy consumption, so how do you uncouple these two particular
relationships?
Mr Eppel: Dr Danskin may want to add something
to this but in reducing relative energy consumption through efficiency
you are more likely to reduce the carbon content of the activity
than the additional carbon generated by something else which people's
money might be spent on. In other words, there are not many things
that are more carbon intensive than energy for heating homes or
lighting or powering machinery. If they were to spend it on a
whole variety of other things few of those would be as carbon
intensive, so the chances are that by improving energy efficiency
in the areas you are concentrating on you are going to have a
bigger carbon impact even with the effects you are suggesting.
Q8Lord Lewis of Newnham: Surely the Industrial
Revolution is a prime example of where by getting more efficient
what was done was to increase the number of engines rather than
actually reduce the number of engines and so we turned out a much
greater amount of product?
Mr Eppel: I am not sure the two were necessarily
a direct cause and effect. Economic growth and industrial change/the
Industrial Revolution was not just a product of a more efficient
use of the input and energy resources. The two may have occurred
simultaneously but they were not necessarily one the result of
the other. I am not sure that more efficient use of energy would
in itself necessarily generate so much additional wealth that
the consumption caused would, as a direct result of that, increase.
It might well increase for a whole variety of other reasons to
do with social and economic change but not as a result solely
of energy efficiency improvement.
Q9Baroness Sharp of Guildford: Have you got
any evidence to show that this is actually currently happening?
With the exception of a period in the 1970s when the real prices
of energy went up very substantially, we have never seen a very
substantial drop in the consumption of energy. Have you got any
evidence to support this relationship between energy efficiency
and consumption which you are projecting here?
Mr Eppel: I will ask Dr Danskin to comment here
but there is good data on the impact of previous improvements
in energy efficiency on absolute levels of consumption. Perhaps
you would like to highlight what has happened in the last decade
or two.
Dr Danskin: We do build into our projections
an allowance for a certain amount of comfort taking, for example
in households, which means that consumers may spend perhaps up
to 30 per cent of the saving on additional comfort/additional
gas.
Q10Lord Lewis of Newnham: Better central heating
and things like that?
Dr Danskin: That is correct. But the remainder
of the savings are more likely to be spent on more general purchases,
not on just energy itself but on other goods and services in economy.
There for every pound that you spend the energy of carbon intensity
is very much smaller because you are largely paying for labour
rather than energy so even if you wanted to spend it and you spent
your saving on a flight to a foreign resort, only part of that
is buying aircraft fuel, you are also paying for the depreciation
of the aircraft, the staff of the airline, hotel staff, and all
the other things associated with buying a foreign holiday. That
is the basis on which we say there is a rebound effect but it
is not 100 per cent.
Q11Lord Winston: But that depends to some extent
on the relative efficiency of the thing you buy with the money
you have got left spare. If your aircraft is very polluting, for
example, or using a lot of energy then actually you are worse
off?
Dr Danskin: I do not think you are worse off
but I think the point is that if you saved £100 on your heating
bill, there is nothing else in the economy that you can buy with
that £100 that you would have spent just on natural gas that
carries so much carbon in it.
Q12Chairman: You might decide to buy a cheap
ticket to Central Europe for £100 and use an awful lot of
energy in flying in an aeroplane.
Dr Danskin: I do not think you are spending
the whole of the money on aircraft fuel. You have a good point
that with very cheap flights it is difficult to know just how
the flight can be so cheap, but clearly they have to pay for their
fuel, they have to pay for their staff and they have to pay for
the aircraft but all these things—
Q13Chairman: Forgive me, that is really not
the point. The point is if you decide to take a trip on an aeroplane
with your £100 saving you are still going to be using far
more energy. However much of the £100 is represented by the
fuel it is far more than you would have saved in domestic usage.
Dr Danskin: You are sharing that plane with
100 or 200 other people as well. You have to bear that in mind.
Q14Lord Winston: It seems to me that in way
an aircraft is not a very good analogy. It would be better if
one talked for example about upgrading one's motor car where you
have a lot more energy expenditure in the making of the steel
and the rest of the manufacture of the car as well as fuel it
is going to use afterwards. We are still quite puzzled how you
calculate this very complex equation which seems to be fundamental
to much of the thinking.
Dr Danskin: If I can respond on the car analogy,
as it crossed my mind earlier. I would argue that the bulk of
the energy goes into producing the steel and if the car is roughly
the same mass, whether it is a high performance sports car or
a more conventional car, it will carry about the same amount of
steel, and that is the bulk of the energy. The rest of the cost
of that car, the reason you pay more, is higher quality engineering
and probably a lot more labour input to the car, and so the reason
you pay perhaps twice as much for your expensive car is much more
to do with the extra care and attention that is lavished with
extra labour rather than extra energy because the energy goes
into the primary steel-making process rather than the engineering.
Q15Chairman: On that basis there would be no
gain whatsoever in producing more efficient cars, would there?
If you are saying the majority of the energy use is in the things
which have nothing to do with the fuel—the steel, the engine
and all the rest of it—then why do we worry about producing
more efficient cars?
Dr Danskin: I am looking at first of all the
energy that goes into making the product and if your extra money
goes into just purchasing a more expensive item and not driving
it further then I think my argument holds—that you are buying
the same amount of steel but a lot more workmanship if you buy
an expensive car than if you buy a standard model. If, however,
with your saved £100 you spend £100 more in petrol then
you will clearly emit more carbon, but it is less carbon than
gas because petrol is about three times as expensive per unit
of carbon emitted than natural gas. The price of car petrol is
very high because of the tax.
Q16Lord Paul: What are we trying to get energy
efficiency for? Is it to be able to use more or it is to genuinely
reduce energy consumption? If it is to genuinely reduce consumption
I think we need a full education process because for a long time
we have been trying to promote more consumption of energy, more
than average in Europe but certainly never the idea that total
energy consumption should be reduced. When are we going to start
the process of telling people that we need to consume less energy
because that has not come in your paper or the calculation?
Mr Eppel: I think the question is a fair one.
The approach historically of governments has been to address the
degree to which energy is needed to produce particular economic
and social benefits, so it is the key efficiency, the resource
efficiency, how little energy can you use to do the good thing
that you want to do. The issue of how many in absolute terms do
you need or is appropriate is, it is fair to say, not one that
has been totally addressed, I think by this paper or any previous
ones, and it is certainly a legitimate question. I do not have
the precise answer to it because it is clearly a complex economic,
social, technical and political issue and I would not pretend
to be able to give you a satisfactory answer, but I think the
question is a legitimate one. At what point does efficiency alone
not deal with the particular challenges, whether in climate change,
energy security or fuel poverty? Those are questions that we clearly
want to keep in mind but this particular plan does not purport
to answer that question. It purports to try and set forth the
most effective current package of measures to deal with a significant
part of that issue which is how efficiently can we use the energy
that is going in and what are the policy levers and other tools
that can be used to achieve that.
Q17Lord Paul: That is exactly why I want to
ask the question: what is the motive behind the whole paper if
the idea is to make everything more efficient? This exercise of
trying to make everything more efficient, whether it is energy
consumption or usefulness, has been going on for the last 50 years.
If the purpose is environmental, if the purpose is reduced carbon
emissions then the only way that will happen is if there is less
energy consumed. There is no way you can use the same amount of
energy and reduce carbon emissions.
Mr Eppel: In absolute terms that is correct.
If consumption stays the same or goes up energy efficiency, as
my colleague has explained, will simply keep the lid on that.
If you can make energy efficiency at a higher rate, which is what
we are aiming to achieve through this programme, then you can,
all else being equal, if consumption does not otherwise increase,
reduce absolute emissions. That is true and that equation is always
there. What we are trying to deal on the energy efficiency front
is not only to deal with the carbon emissions, and that is why
sustainable development is a complex, multi-dimensional concept
because whilst trying to deal with carbon emissions we are also
recognising that there are other priorities, which are economic
costs, which are energy security, and which are social fuel poverty
objectives, so energy efficiency, nevertheless, is one of the
best ways to achieve a significant advance on each of those objectives
simultaneously. It does not completely solve any of them.
Lord Paul: You end up flying more planes
or you end up using more equipment.
Chairman: I think we shall be returning
to this question of how you change people's outlook in a few minutes'
time. Perhaps we should move on with some of the more basic questions
now and Lord Lewis?
Q18Lord Lewis of Newnham: I fully appreciate
your point about energy efficiency. It must be good to have a
more efficient energy system. Where I think I would disagree,
as Lord Paul was saying, is whether that necessarily leads to
a reduction in your carbon emissions because that presupposes
that this would automatically reduce the amount of energy that
was used. I do not think that necessarily follows but that is
a point we are going to come back to. Could I get down to the
point of what the baseline for the proposed carbon savings is?
Against what are you measuring the actual carbon savings and are
these really savings when you set these against current levels
of emissions?
Mr Eppel: They are real relative savings. They
are measured against the baseline that was projected as the business
as usual projection in the November 2000 Climate Change Programme
for 2010, so relative to that baseline, which is the standard
baseline that we use for various policies related to carbon emissions,
they are genuine reductions on what would otherwise have happened
had these policies not been put in place.
Q19Chairman: So that is a baseline of carbon
emissions that you are using?
Mr Eppel: The emissions projections contained
in the UK Climate Change Programme issued in November 2000.
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