IEA Urges Overcoming Market Barriers to Increase Energy Efficiency in Buildings

March 28, 2008 // Published as a news service by IHS

An impressive amount of energy could be saved by applying energy-efficient technologies and practices, said IEA.

Despite the proven cost-effectiveness of these technologies, a significant proportion of potential energy efficiency improvements remain untapped due to numerous market barriers.

"Energy efficiency is by far the most cost-effective way to fulfil three major energy-related challenges: increased energy security, reduced energy costs and a cleaner environment.

"With surging energy consumption, high energy prices and raising CO2 emissions, the imperative to improve energy efficiency is stronger than ever," said Nobuo Tanaka, executive director of IEA.

An IEA publication, Promoting Energy Efficiency Investments: Case Studies in the Residential Sector highlights these issues.

The publication, prepared in collaboration with the Agence Française de Développement (AFD), draws on experiences in Japan, U.S., France, Germany and the U.K. providing illustrations of policies and measures to improve energy efficiency in existing residential buildings.

Each case includes background and contextual information, as well as an evaluation of each policy according to five predefined criteria: relevance, effectiveness, flexibility, clarity and sustainability.

According to IEA, the market barriers inhibiting increased energy efficiency in residential buildings include difficulties in accessing capital, low priority of energy issues, the presence of information asymmetries and principal-agent problems - or split incentives between investors and energy end-users (e.g. between a landlord and a tenant).

The publication draws five policy lessons from these experiences:

• First, given that financial barriers in the residential building sector are numerous and complex, multi-policy packages are needed to address multiple barriers at the same time.
• Second, public-private partnerships offer the best opportunity to meet the five evaluation criteria.
• Third, the creation of a market for energy efficiency is necessary to increase sustainably energy efficiency in the building sector.
• Fourth, market transformation will require increased private sector involvement, which must be triggered by strong political will to create the necessary conditions.
• Lastly, the national context plays a determining role in the success or failure of policies.

Promoting Energy Efficiency Investments also identifies the need for more systematic data collection on programmes implemented; such data is currently scarce and renders policy analysis and comparisons between countries more difficult, said IEA.

Source: International Energy Agency (IEA).