How do EU Member States implement Article 7 of the Energy Efficiency Directive?

The European Parliament commissioned Dr Tina Fawcett from Oxford University and I in my capacity as Senior Research Fellow at the Science Policy Research Unit to write a report on how EU Member States have implemented Article 7 of the Energy Efficiency Directive.

Article 7 is a key provision of the 2012 Energy Efficiency Directive (2012/27/EU) which established a set of binding measures to help the EU reach its 20% energy efficiency target by 2020. Each member state (MS) has to calculate its own savings target, and demonstrate how it will deliver the target between 2014 and 2020.

Flags of EU member states at the entrance of the European Parliament in Brussels.

Flags of EU member states at the entrance of the European Parliament in Brussels. Credit: European Parliament / Pietro Naj-Oleari. (CC BY-NC-ND 2.0)

The findings in this report are based on publicly available data, including formal notifications by member states, additional information in National Energy Efficiency Action Plans and Article 7 annual reports from 2015. Article 7 is deliberately flexible; it allows MS to choose how to deliver their savings commitments. Each MS has chosen a different mix of policies to deliver savings. Further, even policies which might seem similar, such as Energy Efficiency Obligation Schemes (EEOS), can be very different in intent, design and delivery. This heterogeneity of policy responses necessarily makes any form of independent policy evaluation across MS very challenging – and the analysis can only be as good as the data provided by MS.

National savings targets for 2014-2020 must be based on a savings rate of 1.5% per year compared to the average energy consumption in the period 2010-2012. However, the final energy savings target may be lower than this headline rate for two reasons. Firstly, MS can exclude the energy consumption of particular sectors, most significantly the transport sector. Secondly, Member States can use exemptions, reducing the original target by up to 25%. The combined effect of these factors is that the notified saving targets are only about half of what they would be without those adjustments i.e. the annual saving rate of 1.5% is reduced to about 0.75%.

In total, Member States implemented or plan to implement 479 policy measures. Five Member States have notified a single policy measure for the implementation of Article 7: Denmark, Poland and Bulgaria, and Luxembourg notified only EEOS whereas Sweden exclusively uses an energy/CO2 tax. In contrast, others such as Germany or Slovakia adopted 112 and 66 policy instruments respectively.

The largest share of the overall savings is expected to be generated by Energy Efficiency Obligation Schemes (34%), financing schemes or grants (19%), and from taxes (14%) – all financial measures. The remaining savings come from regulation / voluntary agreements (11%), standards and norms (9%) with smaller contributions from training, national energy efficiency funds, energy labels and any other policy measures. In terms of sectors, most savings are expected from multi-sector ‘cross cutting’ policies (44%), followed by buildings (42%), industry (8%) and transport (6%). Analysis shows that there are considerable uncertainties around the reliability of the energy savings estimates provided by Member States.

EEOS are a key policy tool being used to deliver Article 7 savings. There are sixteen member states with existing or planned EEOS, which include five longer-established EEOS. EEOS can be a very successful policy, delivering substantial savings at low cost. However, there is a risk that new EEOS will not have sufficient time to allow for the gradual introduction, increasing of savings targets, learning by stakeholders, and re-design where necessary which were key features of the successful schemes in Denmark, France, Italy and the UK. On this basis, the following countries are risk of under-delivery: Bulgaria, Croatia, Estonia, Latvia, Lithuania and Spain. Given the problems with Phase 1 of its EEOS, that of Poland must also be at some risk. For countries where EEOSs are expected to deliver a considerable proportion of their savings, this matters.

Case studies of good and poor practice in meeting the requirements of Article 7 can help illustrate how MS can improve their reporting, compliance and policy design and implementation. A number of good practice and poor practice case studies are reported including examples relevant to additionality, double counting, monitoring and verification, and penalties.

An overarching energy efficiency target is an important part of EU policy, but ultimately the efficacy of Article 7 of the Energy Efficiency Directive will depend on the policies implemented by MS to deliver those targets. There is uncertainty about the reliability of savings expected, with the main areas concern being: the risk of non-additionality; weak or even absent monitoring and verification regimes; and methodological issues related to the calculation of energy savings. A significant share of the expected savings is at risk of not being delivered in practice. This puts into question whether the EED will achieve its aims.

A number of suggestions for policy reform were developed that would strengthen the Directive and increase the reliability of the anticipated energy savings. Overall, the lack of clarity of the requirements with regards to what is required and how it needs to be reported can be addressed by more detailed provisions, extensive guidance, and reporting templates that ensure Member States follow a more consistent approach in calculating the savings and reporting them as well as outlining their monitoring and verification regimes.

Read the full report.

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