Policy Instruments to Foster Energy Efficiency - Green Energy and Efficiency: An Economic Perspective - page 103

interactions when green certi cates and white certi cates or obligation systems are

introduced [ 16 , 62 , 66 ]. Other interactions include:

a. Increased risk for agents when reacting to one instrument or deciding on actions
in the energy area to know how the other instruments will unfold over time.
b. Rebound effects from subsidies increasing energy demand across related sectors
when instruments have been introduced to speci

cally reduce demand in those

sectors.
c. The very low price in the ETS resulting in a major reduction in emissions
allowances in the future so as to raise the price but, at the same time, with little
knowledge on how the subsidy schemes will change in the future and what
innovations they will generate.

5 Conclusions

Improving energy ef ciency has become one of the preferred options for govern-

ments to reduce energy consumption and its associated costs and emissions. In this
chapter we look at the different polices and present the general context for public
intervention in this area. Experts have identied a large number of measures that
promote energy ef ciency. Unfortunately many of them are not cost effective. This

is a fundamental requirement for energy ef ciency investment from an economic

perspective. However, the calculation of such cost effectiveness is not easy: it is not
simply a case of looking at private costs and comparing them to the reductions
achieved. There are signi

cant externalities to take into account and there are also
macroeconomic effects. For instance, at the aggregate level, improving the level of
national energy ef ciency has positive effects on macroeconomic issues such as

energy dependence, climate change, health, national competitiveness and reducing
fuel poverty. And this has direct repercussions at the individual level: households
can reduce the cost of electricity and gas bills, and improve their health and
comfort, while companies can increase their competitiveness and their productivity.
Finally, the market for energy ef ciency could contribute to the economy through

job and rms creation.

Despite all these bene ciency presents several

market failures and other market barriers that make the level of private investment
suboptimal. Incomplete information, the principal-agent problem, the dif

ts, the market for energy ef

cultness
to access to capital, bounded rationality or risk aversion, are among the important
hurdles. This situation not only justi es public intervention, but also determines the

context for such intervention. Due to the multitude of market imperfections, no
single policy is suf

ciency alone. As a result, during the
last decades governments have been implementing codes and standards to guar-
antee a minimum level of energy performance, economic instruments to give
incentives for reducing energy consumption, and more recently new market-based
instruments such as permits, obligations or energy performance certi

cient to promote energy ef

cates.