Energy Efficiency

Ece DINCASLAN

Izmir University of Economics

ABSTRACT

Today’s renewable energy sources are very important for lots of countries. Therefore, many

countries start to change and implement their policies. Especially, in Turkey and Europe the

importance of solar and wind energies influence the energy policies.

In this context, reducing energy use reduces energy costs and reducing energy use is also seen

as a key solution to the problem of reducing greenhouse gas emissions. Energy efficiency

and renewable energy are said to be the twin pillars of sustainable energy policy.1 This paper

analyzes that area of general policies, economical activities, advantages and disadvantages of

energy efficiency policies according to Climate Change and Renewable Energies, especially

in the sense of China, USA and EU.

We can create a more sustainable, cleaner and safer world by making wiser energy choices.

Robert ALAN

1. Introduction

Many countries have begun the process of implementing energy efficiency policies. Indeed,

this process in some countries has been impressive. However, more needs to be done. It has

become clear that many countries require technical assistance to understand the details of

what is required to implement energy efficiency policies. In order to address global

warming and reduce whole world’s dependence on limited fossil fuel reserves, and policies

should encourage and assist major developing countries to improve their energy efficiency.

This need for capacity building on energy efficiency policy implementation should include

the policies which shaped around by the IEA and others such as the UN Foundation. In

addition, the Kyoto Protocol which aimed at fighting global warming and have many effects

on energy prices and trends, need to be evaluated because of this agreement was to reduce

greenhouse gas emissions by 5.2 per cent below 1990 levels by between 2008 to 2012. Most

countries were dealt with individually, except those in the European Union. Thus, it can be

seen that somehow EU is more focused on environmental issues and renewable energy.1 "The Twin Pillars of Sustainable Energy: Synergies between Energy Efficiency and Renewable Energy Technology and Policy". Aceee.org.

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Energy efficiency is attractive in all nations and especially in developing countries because

it allows existing energy sources to serve a larger population and facilitates universal access

to modern energy services are needed for poverty reduction and sustainable development.

Energy efficiency is also cost-effective opportunity to reduce global greenhouse gas

emissions. Meeting global energy demand is a complex and expensive task. Achievable gains

in energy efficiency, renewable energy, forest conservation, and sustainable land use

worldwide could achieve up to 75 percent of needed global emissions reductions in 2020 at a

net savings of $14 billion.2

Developed countries have more obligations to cut greenhouse gas, at the same time

increasing energy efficiency rates, changing the structures of energy consumption and

reducing energy demands. China, for instance, has a rapidly growing economy and is both a

major consumer of energy and a major supplier of energy consuming products on the world

market. China is now the world's largest emitter of greenhouse gases and the second largest

consumer of energy in the world, behind only the United States. Thus, concerns about climate

change and energy security are against the rising costs of energy and the need to power the

global economic order. However, some developed nations such as members of the European

Union hope that developing countries will mitigate greenhouse gas emissions by raising

environmental criteria. The EU is moving rapidly towards cleaner and renewable energy. It is

possible that all renewable energy sources, wind, solar, hydropower and biomass will play a

crucial role in the EU’s energy security challenges, and making a contribution to efforts in

areas of climate change and the environment. According to Joint Research Center (JRC)’s

report on renewable energy in the EU, if the current rates are maintained, approximately 35-

40 per cent of the overall electricity consumed in the EU would come from renewable

sources.

1.1. Greenhouse Gas (GHG) Emissions and Environmental Policies1.2. The Kyoto Protocol

The Kyoto Protocol is an international treaty which has been in force since 2005, in order

to reduce greenhouse gas (GHG) emission for global warming. The key feature of the

Kyoto Protocol is that it commits developed countries that have signed the protocol to limit

their emissions to specific levels as compared to their emissions in 1990. Importantly,

carbon taxes are the main instrument in order to achieve carbon emission targets as

mentioned in the Kyoto Protocol. The Kyoto Protocol binds economically developed

2 UN Foundation, Climate Change Report, Oct. 2009

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countries or nations to a cap and trade system for the greenhouse gasses. Also, under this

Protocol, for the 5 year term from 2008 until 2012, nations that emit less than their limit will

be able to sell surplus to nations that exceed their limit, which is called Carbon Trade.

Moreover, environmental policies, in the Kyoto Protocol, occur about these effects. Some

countries, especially developing countries, don’t want to undertake the costs of

environmental policies in order to achieve their development targets. Environmental policies

seem a deadlock for them. Some developed countries like USA, and China also don’t desire

to undertake strict environmental policies in order not to slow down their economic growth.

1.3. Economic Concerns Towards Environmental Policies

It tried to be analyzed that whether environmental policies are harmful for economic

development or not. At a first glance, there are those who predict a slowdown and even the

economic collapse if the societies do not change their capitalist-style economic system and if

they do not prohibit the emission of stock pollutants and the consumption of natural resources.

According to them, environmental policies would be an option to reduce future losses from

environmental degradations and policies would bring some positive growth. On the other side,

there are some people who think that, at least in the developing countries, the environmental

policies tend to inhibit economic growth and thus, it is better to wait (Cordero et all, 2005).

1.4. Environmental Kuznets Curve

There is an argument based on the assumption that at the beginning of a growth path in a

country increase in GDP corresponds with high environmental degradation but after a turning

point increase in GDP corresponds with low environmental degradation. This relationship can

be shown in an inverted U-shaped curve. This relationship is sometimes called as the

‘Environmental Kuznets Curve’ (EKC), following the observation of Kuznets (1955).3

3 Kuznets (1955) illustrated that the shape of the relationship between income per capita and income inequality is inverted-U.

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Figure 1. Environmental Kuznets Curve, Panayotou, 2003, p.3

The composition of economic activity influences environmental quality because of the

differential pollution intensity of different sectors of the economy. As income grows, the

structure of economy tends to change and gradually increases cleaner activities that produce

less pollution. Since the share of industry in GDP first rises with economic growth and then

declines as the country moves from the pre-industrial to the post-industrial stage of

development, an inverted U shaped relationship between environmental pollution and GDP

expected to be. On the one hand, some scholars suggest that the burden of environmental

policies is harmful for economic growth. Their main finding is that increased production costs

that result forming compliance with environmental policies reduces output, increases prices

and reduces income growth (Christiansen and Haveman, 1982; Siegel and Johson, 1993 as

citied in Feiock and Stream, 2001). Since technological innovations and the rise in

productivity are a major driving force for economic development of countries, environmental

policies can also be a win-win-process for developing countries to the extent that they provide

the opportunity to develop new export markets and involve improved resource efficiency,

reduced pollution intensity and improved public health, thereby also contributing to

sustainable development (Hesse, 2007).

2. Sustainable Energy

Country’s strategies must be developed concurrently in order to stabilize and

reduce carbon dioxide emissions. Efficient energy use is essential to slowing the energy

demand growth so that rising clean energy supplies decrease the consumption in fossil fuel.

If energy use grows too rapidly, renewable energy development will chase a receding target.

Likewise, unless clean energy supplies come online rapidly, slowing demand growth will

only begin to reduce total carbon emissions; a reduction in the carbon content of energy

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sources is also needed.4 A sustainable energy economy thus requires major commitments to

both efficiency and renewables. It is including all renewable energy sources, such as

hydroelectricity, solar energy, wind energy, wave power, geothermal energy, bioenergy, and

tidal power.

3. Carbon Capture and Storage

Carbon sequestration is the process of removing carbon from the atmosphere and depositing

it in a reservoir.5 The emissions avoidance can also be achieved by improving energy

efficiency or shifting to nonfossil energy sources (renewables and nuclear). Carbon capture

and sequestration complement these traditional areas of research, particularly because the

United States relies on fossil fuels for more than 85% of its energy needs, and trillions of

dollars are invested in the current energy infrastructure.6 Transitioning away from fossil fuels

use will be difficult. By reducing CO2 emissions, however, carbon capture and sequestration

allow the use of fossil energy to continue, while buying time to make the transition to other

energy sources in an orderly fashion.

3.1. Geological and Oceanic Storage

If more technological options are available, there will be less difficulty in addressing

climate change. Although the need for carbon capture and storage technologies is evident, the

importance of their role is hard to predict. However, they are extremely compatible with

today’s fossil energy infrastructure and can help smooth the transition from today’s fossil-

based energy system to a more climate-friendly future energy system. These and other

advanced, innovative technologies are becoming increasingly important to achieve reductions

in greenhouse gas emissions at an affordable price.

Although not providing perfect containment, initial analysis suggests that both geologic and

oceanic storage of CO2 can be very effective. Because the ocean and atmosphere are

permanently exchanging CO2, some fraction of that which is injected into the ocean will

eventually find its way back to the atmosphere—about 15–20% will escape over a period of

hundreds of years, with the rest remaining in the ocean indefinitely.7 For geologic reservoirs,

expected residence times are long—at least thousands of years. If the CO2 reacts underground

to form carbonate minerals, storage could be even more effective. Environmental impacts

may be the most significant factor in determining the acceptability of ocean storage. 4 The Twin Pillars of Sustainable Energy: Synergies between Energy Efficiency and Renewable Energy Technology and Policy (American Council for an Energy-Efficient Economy)5 Glossary of climate change acronyms". UNFCCC, Retrieved 2010-07-15.6 The High Cost of Fossil Fuels: Why America Can’t Afford to Depend on Dirty Energy?, Emily Figdor, Environment America, Research & Policy Center, June 20097 Peter Dietze, Carbon Model Calculations, March 2001

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3.2. Protecting The Environment Vs. Promoting Economic Growth

It is clear that environmental policies’ main aim is to change consumption and production

patterns. Thus they increase the costs of production. According to some scholars, this extra

cost reduces output, increases prices and then reduces income growth and employment. They

suggest that policies usually increase the price of goods whose share in the low income

households’ consumption basket are high, thus environmental policies, especially taxes and

charges worsen income distribution. They also suggest that tradable permits and voluntary

approaches cause windfall profits for firms and thus they also deteriorate income distribution.

It is also underlined that removing environmentally harmful subsidies will hurt poor people.

Because removing agricultural subsidies cut farmer’s income and removing energy subsidies

increase the electricity and fuel bills of poor people. Thus governments fear that removing

environmentally subsidies will hurt people and this will increase social tension. Thus

governments are on the horns of a dilemma between protecting the environment through

environmental policies and promoting economic development. Consequently, these scholars

state that environmental policies will be harmful for economic development in a roundabout

way and there is a trade-off between protecting the environment and promoting economic

growth.

Improved energy efficiency is an important part of making renewables, which are difficult

to introduce at a large scale, more viable. But many other technological options have

significant drawbacks that make renewable energy relatively attractive. Nuclear power poses

the risk of accidents and creates security and waste disposal issues. Carbon capture and

storage may have potential, at least for addressing part of the problem, but it leaves many

environmental problems associated with burning coal unaddressed and may not provide a

long-term solution to climate change.8 Advances in renewable energy then are important to

our future and sustainable development, even though they are not the sole means we have of

addressing climate change.9 The literature on trading suggests that it encourages innovation,

which might lead one to suspect that the trading of carbon credits will stimulate large

increases in the production of renewable energy. So far, trading does not seem to have done

so. China and India add significant amounts of coal powered-generating capacity to their

power grids every year.10 At the same time, China will maintain its increasing demand for oil,

8 Renewable Energy under the Kyoto Protocol: The Case for Mixing Instruments, David M. Driesen Syracuse University. College of Law9Intergovernmental Panel on Climate Change, Special Report on Carbon Dioxide Capture and Storage (New York:

Cambridge University Press, 2005) at 24, 60–6. 10 See K. Bradsher, ‘China to Pass U.S. in 2009 in Emissions,’ The New York Times (7 November 2006) C1 (discussing new

coal-fired power plants in China, India, Germany, and Britain).

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coal and gas, and faces a number of structural challenges in improving its energy efficiency

levels. Furthermore, China has announced an intention to fund renewable energy.11 It is at

least possible that some of the funds for the renewables will come from taxes on less desirable

CDM projects. There are positive signs ahead that, recent developments in US-China clean

energy diplomacy being expected for future enhancement of EU-China dialogue on climate

change. China, then, has created incentives that favor renewable energy, which makes sense

for the climate and economic development. It would be even better policy to tax the

generation of carbon, rather than carbon reductions, to fund renewable energy.

4. Conclusion

In conclusion, policy actions around energy efficiency concerns are vital. Thus, large

investment in renewable energy is necessary and predictable policy regime is required. At a

first glance, it needs to be established programs in order to develop and enforce national

measurement, reporting and verification, set efficiency standards. Secondly, establish a fund

or set of funds with adequate resources to support specific new technologies. What’s more,

nuclear power utilization should be secured and power plants have to be built in safer

standards. Also, clean coal technologies and renewables should be supported by the

developed technologies. Large investment in renewable energy is necessary and predictable

policy regime is required and importantly general understanding of the world energy situation

needs to be promoted.

REFERENCES

11 See BBC News, ‘China Accelerates Construction of Renewable Energy Projects’ (31 July 2006) (reporting that the Chinese government will ‘set up special fund to support renewable energy projects, giving assistance to their research and development as well as favorable tax policies to relevant enterprises’); see also ‘China Sets Up Special Fund for Renewable Energy,’ People’s Daily Online (14 June 2006), online, http://english.people.com.cn/200606/14/eng20060614_273831.html.

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Christiansen and Haveman, 1982; Siegel and Johson, 1993 As Citied In Feiock And Stream,

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McKinsey & Company (2009). Pathway to a Low-Carbon Economy : Version 3 of the Global

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Renewable Energy under the Kyoto Protocol: The Case for Mixing Instruments, David M.

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