1. National Home Energy Conference All Change for Climate Change Bournemouth, 10-11 May 2005 The Pace and the Climate: B oth Are Getting Hotter John Chesshire

2. The broad policy context Sustainable development Post-Kyoto Protocol commitments Liberalisation and competition Anticipated decline in UK self sufficiency Supply security & import dependence Economic competitiveness & resource productivity Social inclusion & fuel poverty New industrial/export markets, skills & jobs But energy efficiency not a ‘silver bullet’, difficult supply-side choices, too

3. Evolving policy imperatives Energy policy historically supply-side driven Then dominated by liberalisation & privatisation measures PIU Report (2002) & Energy White Paper (2003), response to Royal Commission Energy efficiency now much more central in strategic policy terms but is still a relatively ‘immature’ policy field Energy Efficiency & FP Action Plans, 2004 But demand side is more than energy efficiency

4. Some elements of UK energy efficiency policy Direct Government policies: building regs Product policy and standards, & procurement Energy Efficiency Commitment Fuel poverty (social) programmes CHP target for 2010 Climate Change Levy, but reluctance to tax EST & Carbon Trust Energy Efficiency Partnership & MTP Devolved functions in ee & FP

5. Some policy lacunae Demand reduction hindered by: – lower real energy prices until very recently – confusion of market v. policy messages – focus? - lower prices v. lower quantities – cut in VAT on domestic energy to 5% – reluctance to internalise external costs – low price elasticity of demand in any event – fragmented energy efficiency supply chains & no ‘one stop’ shop for energy efficiency – some (possibly severe) skill shortages

6. Energy efficiency potential Potential shaped by several major drivers: – Behaviour & life styles – New & retrofit investment: - Purchased measures - Installed & retrofitted measures – Capital stock renovation & rotation – New technology & its diffusion – Diminishing returns to ‘barriers’ analysis!

7. Some conclusions Need policy framework for at least 2015-2020 Objective: least-cost low carbon strategy Need wide range of measures Integration of several Govt. departments Widen economic instruments debate: not just sticks (taxes) but carrots (incentives) One priority is analysis of energy efficiency supply chains, to anticipate & overcome constraints