EE and human nature: an interview with Nils Borg of eceee
Toulon, 30.06.2011 - REEEP International Secretariat
The European Council for an Energy Efficient Economy (eceee) is a non-profit, membership-based European NGO aiming to stimulate energy efficiency through information exchange and co-operation. Its secretariat is based in Stockholm and is led by Nils Borg, the Executive Director of eceee. Mr Borg also works as a consultant specializing in product efficiency, lighting and public procurement.
REEEP caught up with him at the Summer Study event held in Toulon from 6-10 June. This gathering of European energy efficiency stakeholders examined the EE issue from several perspectives:
- Europe's efficiency challenges
- The EE dilemmas that won't go away
- International energy efficiency and climate issues
At this event, Dr. Marianne Osterkorn gave an overview of energy efficiency in the international context, and later had the chance to pose Mr. Borg a few questions on energy efficiency:
Why do you think energy efficiency is so hard to explain to people?
The problem is that energy efficiency is essentially invisible.
It’s something important and huge that comes wrapped in a thousand small packages; many different decisions taken by many different people. It can be as small as the decision to change a lightbulb, or as big as insulating a home or renovating an office building. Even though the savings are there, when you compare the decision to making an investment in something physical like a power plant, it’s much harder to convince people that if they make an investment up front – no matter how big or small - that they will indeed get their money back. And very often the person investing isn’t the person who actually benefits. The landlord/tenant situation is a classic here.
The other main issue is that we’re talking about both human nature and consumption, where energy efficiency is usually just a secondary consideration. For example, if people go out to buy a game console or a television, they’re interested in its functionality first. If it’s energy efficient too that’s great, but for most people energy efficiency still falls in the “nice to have” category. This is why minimum energy performance standards are so important.
On the issue of split incentives (where one person needs to make the investment to improve efficiency, but another person benefits financially), do you see any workable solutions?
Well, first, the whole split incentive problem is just one factor – and I’m not at all sure that it is the defining issue, because it assumes people are purely rational. But to answer the question, yes there are ways to transfer the costs to those who have the benefit.
The most common split incentive happens in buildings where the owner/investor is not the occupier – and in most cases doesn’t pay the energy bill either. So looking specifically at buildings, it seems to me the best solution is to put building energy standards in place that are rigorous in demanding the most efficient technologies. Now in the end, the owner will pass these on to the tenant in one form or another, so the beneficiary does indirectly end up paying for the investment.
If energy costs are included in the rent, model contracts can be structured so that there is a threshold or a band for consumption, where there is a financial reward for falling below a certain band, and a penalty for landing above it.
Even so, again we should remember we’re talking about human nature here. The common assumption is that if people have their heating included in their rent, they will heat more. But a recent study in Gothenburg here in Sweden actually showed the opposite – that people who pay their own fuel bill actually consumed more energy. So in some cases the financial dimension isn’t enough. Money does talk, but we also need to make efficiency the socially preferable option.
You personally specialize in technology and public procurement. Do you see governments leading the energy efficiency trend, and if so, how?
There are already a number of regulations in Europe that mandate public organisations to take the lead in increasing energy efficiency. Purchasing guidelines and best practice examples are the levers that work best in these kinds of situations. A rule that says “we will buy only if . . .” might be a blunt instrument, but it will help ensure that governments at all levels – municipal, state/province, and national, will take the lead.
What’s your view on the likelihood of Europe meeting its 2020 target of a 20% increase in energy efficiency?
Well, I don’t see policies in place in most countries that are going to lead to hitting this target, and unfortunately the draft energy efficiency directive that was published recently seems vague and leaves a lot of leeway. So there’s a big risk that the target won’t be achieved.
Given your experience in promoting energy efficiency through eceee, what advice would you have for developing country policy-makers? Are there one or two mechanisms you might recommend above others?
I’d say to them that energy efficiency demands a host of complementary policies. Phasing out fossil fuel subsidies and using the money to introduce energy-saving technology is one action, and setting minimum energy performance standards would be another. The specifics of course will depend on a country’s stage of development. In developing areas of Africa, energy standards for lighting, transport and machinery might be more important than for buildings, while in a booming construction market like China, building energy efficiency standards are going to be critical. There’s no universal solution, but the problem requires a well-rounded approach.