Tradable white certificate schemes: fundamental concepts

This does not necessarily imply minimization of total costs of energy-saving measures for society as a whole.

Empirical works show 20–30% rebound effect for space heating in residential building retrofits in Austria (Haas and Biermayr 2000); in the UK, Milne and Boardman (2000) found that about 30% of the potential energy savings from retrofit measures was taken as increased comfort in low-income households as of the late 1990s. Other empirical studies found rebound effect in US manufacturing of 24% (Bentzen 2004) and rebound effect for all Organization for Economic Cooperation and Development energy use of 5–15% (Schipper and Grubb 2000, cited in Binswanger 2001, and Oikonomou et al. 2004, respectively). But the magnitude of this rebound effect is declining over time due to the increasing penetration of central heating and increasing average indoor temperature (Geller and Atalli 2005). The sizes of the rebound effect differ markedly across technologies and measures: for example, for refrigerators, there has been a mere 1.7% increase in adjusted net volumes of refrigerators over the period 1994–2004 (Meli 2005). For an extended discussion of the rebound effect, see, for instance, the special issue of Energy Policy from June 2000 (Volume 28, Issues 6–7).

www.​iiiee.​lu.​se/​QuickPlace/​whiteandgreen/​Main.​nsf/​h_​Toc/​695a3dfe0be56ce1​c1256eba00356cb1​/​!OpenDocument

http://​dsm.​iea.​org/​

Externalities arise when certain actions of producers or consumers have unintended external (indirect) effects on other producers or/and consumers; in the presence of externalities, social benefits (costs) and private benefits (costs) differ. Externalities may be positive or negative. With negative externalities, social costs are higher than private costs: pollution is a negative externality. With positive externalities, social benefit is higher than private benefit, which leads to the undersupply of the activity by the market: the technological spillover of research and development is a positive externality.

In Europe, savings obligations are imposed either on grid companies (distributors, in Italy) or on energy suppliers (retailers, in France and the UK).

If a white certificate scheme is designed with suppliers’ targets independent of changes in kilowatt hour sales, then under a set of standard assumptions the only effect on energy price is decrease because the energy supply curves upward-sloping. However—as explained by Quirion (2005) based on a partial equilibrium model simulation—if suppliers must generate more certificates if they increase their sales, then certificates’ cost is a part of their marginal cost (hence of the energy price) and is passed like a tax on to consumers. While these statements are made with an assumption of perfect markets and competition, in practice, the level of the market liberalization and the possibility to increase tariffs have profound effects too.

This effect may be even stronger if schemes are developed with short-term vision and goals subject to review. Short-termism is poorly suited to stimulating innovation in the energy efficiency market because neither new nor existing market participants will have the incentives to invest in any new technologies or services, if the schemes provide insufficient time in which to obtain a return on that investment. We are indebted for this comment to David Young.

Energy savings are discounted over the lifetime of the measure and then standardized according to the carbon content of the fuel saved. These coefficients are set as: coal (0.56), electricity (0.80), gas (0.35), liquefied petroleum gas (LPG; 0.43), and oil (0.46).

The reason for the higher than 1% per annum target for the low-voltage users is because of the Flemish Parliament’s decision to provide free vouchers for the head of every family in 2004 and 2005 which can be exchanged via the electricity distributor for either an energy-saving compact fluorescent lamp (CFL) or a low-flow showerhead or an energy meter.

If the illustrative set of measures under EEC-1 were subject to the same set of assumption applied in EEC-2, the terawatt figure would fall from 81 to 66 TWh (Doughty).

No energy savings are attributed to either information or awareness raising even though these are included in the actions.

According to Faure and Skogh (2003), effective property rights have to fulfill the following criteria: (1) the owner must be able to enjoy the benefits and influence the costs generated by the resource and the owner’s effort; (2) it must be possible to enforce rights and duties privately and/or publicly; and (3) the owner needs to be able to contract with other parties involved.

Except for some measures, such as buildings thermal envelope, bioclimatic design, reduction of cooling needs, etc. that are valid for 8 years.

We are indebted for this comment to Nicola Labanca.

www.​emmy.​fr

We are indebted for these comments to Ole Langniss.

One should note however that this suggestion is rather difficult to implement in practice for two major reasons. First, it requires the monitoring and evaluation of the actual energy performance of the project in order to allow the comparison between the lifetime energy savings accredited in advance and the real savings. Second, most of the energy-saving measures have quite long lifetimes; therefore, the comparison between real savings and accredited savings could only be made many years in the future (and many years after the first compliance checks).

e.g., in the case of CHP, the plant operator has to prove that the plant has run a certain number of hours, etc.

These costs can include rebates and measure implementation costs and expenses. A key element of cost recovery is the prudence review. In contrast, lost revenue recovery is a process whereby a utility estimates the amount of energy sales that did not occur due to the end-use energy efficiency efforts. We are indebted for these clarifications to Steven Schiller. Lost revenue recovery is not a feature of white certificate systems in Europe.

Energy efficiency or renewables set-aside quotas have been developed and introduced by six states in the NO _x Allowance Trading Program in the USA.