James5

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I recently had a look at the Senate Committee Report on the National Market Driven Energy Efficiency Target Bill 2007 - a private members bill introduced by the Democrats.

It provides some interesting reading, summarising a variety of submissions on the topic of a “national energy efficiency trading system”. In a nutshell, the Bill would require electricity companies would be required to buy a certain number of energy efficiency certificates (EEC). EECs are created by energy efficiency increasing measures. So for example, if the minimum energy standard for fridges is 3.5 stars but a manufacturer sells one that is rated at 5 stars EECs are created and given to the manufacturer who can then sell it on to the electricity company. The idea is that this acts as an incentive for people to make/buy efficient products or to build efficient buildings and thus reduce their environmental impact.

It’s an interesting idea, which basically boils down to paying people to help themselves - or in this instance making power companies pay people to help themselves. But I’m not entirely convinced (the Committee recommended against passing the bill).

First, it’s not clear that an efficiency trading scheme is really required to spur these efficiency savings. As the Committee found, increasing the price of carbon emissions alone is likely spur people on to increase their energy efficiency. Why do we need an added layer of bureaucracy to achieve the same goal? And there’s a whole raft of problems in designed in the system properly, setting standards, monitoring etc, which is just asking for trouble.

Second, the problem with a baseline-and-credit scheme such as this efficiency trading one is that it is a lot less reliable in terms of figuring out how much this is really helping the environment. Buying a TV that uses less electricity is now guarantee that you will actually use less electricity - you may just run the TV for longer. Or you may just buy two TV’s.

Mr Matt Brazier drew the committee’s attention to the role of affluence and population growth as drivers of consumption growth and he believes that currently these drivers are open-ended and exponential whereas the opportunities for energy efficiency are limited. He pointed out that improving efficiencies will make a permanent difference if demand growth is zero:

So long as basic demand continues to grow, efforts aimed at addressing environmental issues through efficiency improvements are like feeding a crocodile lean meat in the hope that it won’t grow bigger.

Even though the national scheme is on hold for a while, that’s not to say Australia won’t have a few state schemes in operation, for example, the New South Wales scheme. And these “White Tag” trading schemes are slowly being initiated overseas too. It will be interesting to see what part they play in fighting climate change.

I recognise that reducing our emissions will require a combination of interesting, unique and sometimes out there techniques. And people a lot smarter than me think efficiency trading is a pretty good idea, so I’m not entirely opposed to the idea, but wonder if there aren’t better ways to encourage energy efficiency?

See also Negawatts.

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