Policy Instruments to Foster Energy Efficiency - Green Energy and Efficiency: An Economic Perspective - page 93

3 Measures to Improve Energy Ef ciency

The discussion in the previous section leads us to consider the different instruments
for improving energy ef ciency and getting as close as possible to the socially

optimal level. As noted, this requires more than getting individuals to achieve their
private optimality goals. The presence of externalities means that further increases
in ef ed.

Summaries of the research on energy efciency policies can be found in a
number of publications (see for example [ 23 , 37 , 44 , 45 , 46 , 60 ]). What this chapter
offers in addition is: (a) an update from recent publications on instruments and (b)
our interpretation of the areas where the conclusions are perhaps misleading and
where we need further work.
The policies and measures at our disposal can be put into broadly three cate-
gories. The

ciency are justi

rst consists of direct intervention through public policies that establish
minimum standard levels and mandate certain technical requirements that increase
energy ef ciency. The second are the group of instruments that work through

' nancial costs of

energy to the consumer or producer. Lastly we have schemes that seek to improve
knowledge of energy related issues, such as use of appliances, existence of ef

price ' incentives, e.g. in the form of subsidies or charges or other

cient
methods of using energy etc. Table 1 shows examples of each policy carried out by
several European countries.

3.1 Command and Control Approaches

Governments can require manufacturers to produce energy products and services
with a minimum level of energy performance. Usually these policies are imple-
mented through codes and standards. Some examples are construction codes for
building sector, minimum standards for automobiles and appliances, or small-scale
combustion plans for industrial sector. These legislative or normative measures are
characterized by their low

exibility, which in some cases can generate consider-
ably high implementation costs [ 31 ]. The rigidity originated by the absence of any
alternative in the market can make some agents, for whom the costs of applying
such measures are very high, to leave the market. Consequently, governments
should carefully determine the minimum level that achieves the maximum savings
at the lowest cost for the whole society.

3.2 Price Instruments

In contrast with command-and-control measures, price or economic instruments
have the objective to encourage or discourage certain economic decisions by