Select Committee on Science and Technology Second Report


CHAPTER 12: Conclusions and Recommendations

12.1.  Below is a summary of our conclusions and recommendations. References to the paragraphs of the report where these paragraphs can be found in context are given in brackets.

Definitions and measures

BACKGROUND

12.2.  Energy efficiency has been drafted into the service of a wide range of policy objectives since the 1970s, but the way it has been understood and measured has been elusive and variable. We have been dismayed in the course of our inquiry by the inconsistency and muddle of much current thinking about energy efficiency. (Paragraph 2.7)

12.3.  This muddle is not the sole responsibility of Government, but only Government can resolve it. However, the current attempt to present energy efficiency as "the most cost-effective way to meet all [four] energy policy goals" only adds to the confusion. At the very least, careful oversight will be needed to ensure that the targets set for energy efficiency are defined, that conflict between them is avoided, and that progress is measured. We urge the Government to bring greater clarity and intellectual rigour to its presentation of energy efficiency. (Paragraph 2.8)

MEASURING ENERGY EFFICIENCY

12.4.  In September 2004 the Prime Minister identified climate change as "the world's greatest environmental challenge". We agree, and believe that the fundamental objective of policies in favour of energy efficiency at the present time must be the absolute reduction of carbon emissions. This objective must be reflected in the setting of targets for and the measurement of energy efficiency. While the targets in the White Paper have been expressed in terms of reductions in carbon equivalent emissions, the confusion of measures that is found elsewhere in Government policy statements undermines their credibility. We recommend that the Government henceforth adopt a more rigorous approach to the measurement of energy efficiency in terms of carbon. (Paragraph 2.17)

ESTABLISHING A BASELINE

12.5.  Levels of carbon emissions should be grounded in clear historical data, not hypothetical projections. Insofar as projections are necessary, the methodology on which they are based should be explicit, transparent and consistent. None of these requirements is being met at present. The "baseline" for the White Paper targets, which is derived from the projections contained in the 2001 Climate Change Programme (which itself took into account the impact of policies introduced by the Government after the signing of the Kyoto Protocol in 1990) is obscure. We recommend that the Government ground its targets more firmly in reality, making it clear how they are derived and expressing them in absolute year-on-year carbon equivalent emissions. (Paragraph 2.30)

ENERGY EFFICIENCY AND CARBON

12.6.  In order to be able to measure the contribution of energy efficiency to emissions targets, the Government should develop and publicise an explicit and transparent methodology for calculating the relationship between use of delivered energy and greenhouse gas emissions. We have commissioned research which provides one such methodology, which we believe provides the basis for developing a reliable tool for measuring the contribution of energy efficiency to reductions in greenhouse gas emissions. We draw it to the attention of Government. (Paragraph 2.43)

THE FUEL MIX

12.7.  We welcome that fact that the United Kingdom remains on track to meet its Kyoto obligations. However, as the emissions data for 2003 show, there is no cause for complacency or self-congratulation—the Government have themselves conceded that the domestic targets contained in the Energy White Paper are unlikely now to be met. In fact the United Kingdom had already met its Kyoto obligations before the end of the 1990s, largely for structural reasons and because of changes in the fuel mix, whereas since 1999 carbon dioxide emissions have risen. (Paragraph 2.49)

12.8.  Energy efficiency could contribute significantly to future reductions in emissions, and in the remainder of this report we analyse ways in which this contribution can be maximised. However, we believe that in the long term there is no prospect of the Government's climate change objectives being met unless there are also innovations in generating technology, fundamentally changing the carbon intensity of the primary fuel mix. We urge the Government to face up to this issue. (Paragraph 2.50)

The economics of energy efficiency

ENERGY EFFICIENCY AND ENERGY DEMAND

12.9.  The Government's proposition that improvements in energy efficiency can lead to significant reductions in energy demand and hence in greenhouse gas emissions remains the subject of debate among economists. The "Khazzoom-Brookes postulate", while not proven, offers at least a plausible explanation of why in recent years improvements in "energy intensity" at the macroeconomic level have stubbornly refused to be translated into reductions in overall energy demand. The Government have so far failed to engage with this fundamental issue, appearing to rely instead on an analogy between micro- and macroeconomic effects. (Paragraph 3.11)

12.10.  We welcome the UKERC project to investigate the "rebound effect" and the empirical basis for the "Khazzoom-Brookes postulate", and recommend that the Government, in parallel with the establishment of a more robust measure for energy efficiency, take full account of the project's progress and results in developing future policies in this area. (Paragraph 3.12)

COST EFFECTIVENESS

12.11.  We recommend that the Government exercise caution in using the potentially misleading term "cost-effective" to describe investment in energy efficiency. They should seek to demonstrate realism as to what is economically achievable by means of private sector investment in energy efficiency. (Paragraph 3.18)

12.12.  We further recommend that the Government promote the application of the Green Book guidelines, encouraging decision-makers at all levels, including local authorities, housing associations, PFI projects and other private sector providers to the public sector, to consider lifetime costs in committing expenditure to long-term capital projects. (Paragraph 3.19)

Policy coherence and departmental structure

CENTRAL GOVERNMENT

12.13.  The Government assert that the Strategic Energy Policy Network (SEPN) ensures effective co-ordination across Departments and agencies. The evidence we have heard does not bear this out. While there will inevitably be boundaries between different departmental responsibilities, the way these are currently set is a recipe for confusion. We therefore recommend once again that the Government bring together responsibility for those aspects of energy policy currently handled by Defra and the DTI under a single Energy Minister. We believe this to be a necessary first step if the wide range of policies and agencies in the energy field are to be rationalised and effectively co-ordinated. (Paragraph 4.15)

12.14.  We believe that the existence of two agencies promoting energy efficiency risks overlap and confusion. We therefore recommend that the Carbon Trust and the Energy Saving Trust be merged. (Paragraph 4.16)

LOCAL GOVERNMENT

12.15.  Local authorities are in many cases better placed than central Government to bring together local people and industry in developing innovative projects to promote sustainability and energy efficiency. However, there is no consistency of approach across local authorities, while the successes of authorities such as Leicester and Woking appear to have been if anything hindered rather than helped by central Government. We therefore recommend that the Government both make more effort to disseminate the existing "invest to save" rules, and explore new ways to promote dynamic local action in pursuit of its energy policy goals. In particular the Government should consider the model of the Swedish Local Investment Programme, as a highly effective means to kick-start local initiatives. (Paragraph 4.23)

THE EUROPEAN UNION

12.16.  The European Union is already influential in the field of energy efficiency, and is likely to become still more influential in future. We look to the Government to ensure that the United Kingdom uses the opportunity presented by its forthcoming Presidency to promote best practice, negotiating effective, enforceable legislation where appropriate, and at the same time ensuring that the principles of subsidiarity and proportionality are respected. (Paragraph 4.26)

Behaviour

INCENTIVES

12.17.  We endorse the view of the Energy Saving Trust, that the Government should urgently review the fiscal incentives to energy efficiency. None of the proposals we have heard appears to be without difficulties, but we look forward to the results of the pilot scheme initiated by British Gas and Braintree Council, which should provide valuable information on the effectiveness of Council Tax rebates. (Paragraph 5.29)

12.18.  We look forward to the results of the Carbon Trust's review of the impact of the Enhanced Capital Allowances scheme, and, subject to the results of that review, recommend strengthening the financial incentives for small companies, and increasing use by the public sector of the Energy Technology List. This should include the extension of the requirement to use the List to Private Finance Initiative projects. (Paragraph 5.30)

12.19.  We welcome the current energy services pilot scheme. If the results of the pilot are satisfactory we look forward to the extension of the energy services model nationally. (Paragraph 5.31)

12.20.  We further recommend that the Government and regulator review current energy pricing arrangements, which create a perverse incentive to consume more energy. In particular, we recommend that the Government explore the feasibility of introducing pricing arrangements based on the model of "lifeline tariffs". (Paragraph 5.32)

EDUCATION

12.21.  We recommend that the Government make ear-marked funding available, possibly as part of the "Building Schools for the Future" programme, to finance innovative, energy-based school projects such as those in Leicester. (Paragraph 5.33)

12.22.  There are currently too many possible sources for energy efficiency advice; the quality is inconsistent, and follow-up patchy. We welcome the efforts of the Energy Saving Trust and Energy Advice Providers Group to bring coherence to the field. (Paragraph 5.41)

12.23.  However, we believe that local authorities, particularly if they are able to assume the more proactive role in promoting energy efficiency that we have already recommended, are likely to be best placed to provide impartial advice tailored to the needs of local consumers. We recommend that the new Sustainable Energy Network be developed in such a way as to promote best practice, while ensuring that the responsibility for delivering advice is devolved to local level. (Paragraph 5.42)

12.24.  Wherever possible energy efficiency advice should be tied to firm data so as to produce specific recommendations for action. Energy supply companies are to an extent already offering such a service by means of energy surveys. The introduction of Energy Performance Certificates will offer an ideal opportunity for local authorities to target advice more effectively. (Paragraph 5.43)

INFORMATION

12.25.  We recommend that the Government, together with the regulator, not only press forward their review of the presentation of information on bills, but that they specifically explore innovative ways in which information can be presented so as to exert the greatest possible influence on behaviour. (Paragraph 5.46)

12.26.  Since 2001 the Government has dragged its feet on smart and remote metering, and now appears to be resisting draft European legislation that would require more rapid development of the technology. We deplore this. In the long term, the surest way to achieve lasting reductions in energy use is to empower consumers—to provide them with the information that enables them to manage their energy use. We therefore urge the Government to take the lead in establishing a large-scale trial both of remote metering and of low-cost options for "smart" domestic display units, which could be rapidly developed and rolled out. (Paragraph 5.57)

New Buildings

BUILDING REGULATIONS

12.27.  It is disappointing that the standards of energy efficiency required by Part L of Building Regulations will, even after the latest review, not match the best standards in Europe. We have considerable sympathy with those who argue for a step-change in these standards. However it appears on balance that the construction industry in this country is not equipped, particularly in terms of skills, to cope with such a step change. The Government's approach of regular reviews between now and 2020 therefore represents a pragmatic approach. However, it is essential that the Government set a clear direction for the next 15 years, and demonstrate its determination not to let a conservative industry hold back progress. (Paragraph 6.14)

THE CODE FOR SUSTAINABLE BUILDINGS

12.28.  We strongly believe that the new Code for Sustainable Buildings should build upon the existing BREEAM and EcoHomes standards. There is no need to reinvent the wheel. BREEAM and EcoHomes are well-established, and have been developed with the full input of the construction industry as well as the research expertise of the BRE. We doubt that any new Code would have similar authority or would command similar support. (Paragraph 6.20)

12.29.  We note that ODPM, as part of its consultation on the revision of Part L, has published papers setting out aspirational standards for 2010. We welcome this initiative, and recommend that aspirational standards in future be built into the Code for Sustainable Buildings, so as to give a clear signal to the industry of future trends in Building Regulations. (Paragraph 6.22)

ENFORCEMENT

12.30.  We share the alarm of the Environmental Audit Committee at the "apparent ease and possible extent of non-compliance with Part L of Building Regulations", and endorse their recommendation that ODPM conduct a thorough review of the problem. (Paragraph 6.29)

12.31.  We are concerned that the introduction of competition and self-certification into the building control process has already led to falling standards, and will continue to undermine efforts to raise standards. We urge the Government to ensure that adequate quality assurance, through a system of formal accreditation, is in place to underpin the process. (Paragraph 6.30)

12.32.  We further recommend that the Government increase the resources available to local authority Building Control sections in order to assist them both in on-site inspection and in bringing prosecutions for non-compliance. (Paragraph 6.31)

12.33.  With increased design flexibility, and in the absence of clear, mandatory pass/fail tests, or specific requirements for components such as double glazing, the task of monitoring and enforcing compliance with Building Regulations has become almost impossible. We recommend that the Government introduce a series of mandatory tests for completed buildings. In particular, we look to ODPM to abide by its stated intention to introduce mandatory pressure-testing for all new buildings. (Paragraph 6.32)

CONSTRUCTION: SKILLS AND TRAINING

12.34.  Skills shortages pose a serious threat to the Government's energy efficiency targets, particularly given the major house-building programme now under way. It is essential that the Government address these issues in a more energetic and co-ordinated fashion than they have done hitherto. (Paragraph 6.39)

12.35.  Skills shortages are compounded by a widespread culture of sloppy workmanship and cost-cutting by builders. This must change, and in tandem with improved enforcement of building standards we recommend that the Government strengthen the legal rights of purchasers who acquire poorly built properties. (Paragraph 6.40)

ENERGY PERFORMANCE OF BUILDINGS DIRECTIVE

12.36.  The Government appear to have done little to prepare for implementation of the Energy Performance of Buildings Directive. We fear, for instance, that the Government's failure to train adequate numbers of inspectors will be used as an excuse for deferring full implementation, or for adopting a narrow, "lowest common denominator" interpretation of the term "public buildings". We deplore this prospect, and urge the Government both to adopt a broad definition of "public buildings", and to make preparation for the Directive a high priority between now and January 2006. (Paragraph 6.45)

12.37.  Energy Performance Certificates could potentially be as influential in improving building standards and advancing the Government's energy efficiency objectives as "Investors in People" accreditation has been in promoting good management practices. We therefore urge the Government to give careful thought to the design and display of certificates. (Paragraph 6.46)

THE SCOPE FOR IMPROVING BUILDING STANDARDS

12.38.  The scope for improving the energy efficiency of new buildings in the United Kingdom is clear. However, although there have been individually impressive projects such as the BedZED development in Sutton, many more such projects will be needed before it is clear what approach yields the best results. Indeed, the best approach may differ between the north and south of the country. (Paragraph 6.55)

12.39.  Modern Methods of Construction have proved to be a cost-effective way to achieve high levels of build quality and energy efficiency in many parts of the world, particularly in colder climates, and we support the Government's aim to introduce them more widely in this country. However, in certain circumstances, particularly in larger commercial or office buildings, or possibly in warmer parts of the country, the cooling effects of high thermal mass may yield better results in terms of overall energy use. We urge the Government, particularly in its role as a major procurer of new building, to show leadership in promoting innovation on the part of a largely conservative industry. (Paragraph 6.56)

Existing buildings

ENERGY EFFICIENCY COMMITMENT

12.40.  We urge the Government to consider further fiscal incentives to encourage private and social sector landlords to invest in energy efficiency. We welcome the announcement in the 2004 Budget that the Government would give consideration to a "green landlords" scheme, and look forward to further progress on this proposal. (Paragraph 7.19)

12.41.  We are concerned that the methodology for calculating the carbon benefits of the Energy Efficiency Commitment is so lax, and so poorly supported by hard data. While we support the data monitoring being undertaken by the Energy Saving Trust, we also recommend that the Government take steps to oblige energy supply companies to collect specific but anonymised data on energy use and make them available to the research community. (Paragraph 7.22)

12.42.  There is a risk that solid-walled houses, the least energy efficient, will not benefit from the Energy Efficiency Commitment. The development of cheaper and less intrusive insulation for such properties is a key priority for future research. (Paragraph 7.24)

HERITAGE

12.43.  We recommend that the Government review the guidance issued to planning authorities with a view to developing a more flexible approach to energy efficient refurbishment of older buildings. (Paragraph 7.27)

DEMOLITION AND REFURBISHMENT

12.44.  We recommend that the Government review its strategy on demolition of poor quality housing. (Paragraph 7.29)

12.45.  We welcome the Government's commitment to arguing within the Council of Ministers for further revision of VAT rules in order to stimulate energy efficiency. However, the changes that have been agreed so far, such as the reduction of VAT on micro-CHP, are relatively peripheral. Far more important is the perverse effect of the current application of the full rate of VAT to building extension and refurbishment. We recommend that the Government redouble its efforts to persuade the European Union of the need to give strong fiscal signals to encourage energy efficient refurbishment of existing buildings. (Paragraph 7.36)

12.46.  We welcome the consideration that the Government have been giving to extending Building Regulations to cover existing buildings. However, in order to avoid creating a disincentive to building improvement, we recommend that the cost to property-owners of any extension of regulation in this area be offset by financial incentives such as a reduction in VAT. (Paragraph 7.37)

THE PUBLIC SECTOR

12.47.  We welcome the Government's targets for sustainable development in the Government estate, in particular the announcement that they will procure only buildings in the top quartile of energy performance for the central Government estate. We agree with the Government in believing that this will have a marked effect on the wider commercial property market. (Paragraph 7.42)

12.48.  However, uncertainties remain over the coverage of these targets: for example, the target for central Government energy use contained in the Action Plan is not in itself adequate, given the huge size and the diversity of the public estate. We therefore look to the Government to extend their initiatives on procurement and energy use to all parts of the public estate as soon as possible. (Paragraph 7.43)

THE PARLIAMENTARY ESTATE

12.49.  We commend the authorities of both Houses for their achievements in controlling energy use within the Parliamentary Estate. However, we believe that Parliament should seek to set an example for the wider public sector. We therefore make the following recommendations to the House authorities:

Developing markets for heat

12.50.  We recommend that ODPM encourage local authorities and developers to incorporate community heating as standard in all new build projects. (Paragraph 8.9)

BARRIERS AND POLICY MEASURES

12.51.  We endorse the recommendation of the IPA study that the Community Energy Programme be extended. However, we note that the programme has had limited impact so far, and that commercial barriers to the take-up of heat provision must also be addressed. (Paragraph 8.14)

12.52.  It is time for the Government to progress from analysis to action in promoting markets for heat, particularly from renewable sources, and we so recommend. (Paragraph 8.18)

12.53.  We recommend that the Government explore the application of the Energy Services model to community heating. In particular, we believe that the establishment of the London Climate Change Agency offers a unique opportunity to apply such a model on a large scale, with corresponding gains in energy efficiency and emissions. (Paragraph 8.22)

Appliances

EUROPEAN UNION PRODUCT STANDARDS

12.54.  Product labelling, to be effective, must be dynamic, reflecting technological innovation and product improvement. The EU energy labelling scheme, for all its past success, is in danger of becoming outdated and inflexible. The decision to introduce "A+" and "A++" ratings fundamentally undermines the scheme's integrity, while European product standards lag behind those in the far East and North America. (Paragraph 9.12)

12.55.  We therefore urge the Government to use their forthcoming EU Presidency to engage with the European institutions and Member States in strengthening and extending the mandatory labelling scheme. This process should include an investigation into whether the EU Commission has sufficient resources to implement and update the scheme adequately. It should also include consideration of comparable schemes elsewhere in the world, such as the Japanese "top runner" scheme, and their applicability within the EU. (Paragraph 9.13)

12.56.  We welcome the Government's commitment to securing agreement to the EcoDesign of Energy Using Products Directive, and look forward to progress in this area. We recommend that the provisions of the Directive be used to establish challenging minimum standards for a wider range of energy using products. (Paragraph 9.14)

12.57.  We also urge the Government to argue the case for extending the existing, standardised labelling scheme to a wider range of products, including IT equipment and televisions. (Paragraph 9.15)

MARKET TRANSFORMATION

12.58.  The Market Transformation Programme is too reactive, too nebulous in organisation and working methods, and too unfocused in its objectives and measures of success. We therefore recommend that the Government review the effectiveness of the MTP, with a view to giving more dynamic and effective leadership to the process of market transformation. (Paragraph 9.21)

RISK AREAS

12.59.  The fast-growing, diverse market for consumer electronics presents a serious a risk of uncontrollable rises in energy consumption. The Government's reliance on voluntary codes and best practice guidelines, while it may deliver improvements in certain areas, is a piecemeal and fundamentally inadequate response to this threat. We therefore recommend that the Government examine the feasibility of setting minimum standards for this sector, as well as requiring better information for consumers, for example on standby power consumption. (Paragraph 9.28)

12.60.  The projected trebling over the next 20 years of the floor area in commercial or office buildings that is air conditioned has serious implications for future energy consumption. We welcome the willingness of the air conditioning industry to engage in discussion on minimum efficiency standards and the development of Building Regulations, and recommend that the Government address these issues as a matter of urgency. (Paragraph 9.31)

Industrial energy efficiency

CLIMATE CHANGE INSTRUMENTS AFFECTING INDUSTRY

12.61.  We agree with our witnesses that the multiplication of schemes to promote industrial energy efficiency has been poorly planned, and is likely to be burdensome and bureaucratic. We urge the Government to make a long-term commitment to consolidating these various schemes under the EU Emissions Trading Scheme, which is likely to be the most cost-effective route to emissions reductions. (Paragraph 10.16)

12.62.  We view the Government's apparent support for "white certificate" trading with serious concern: the introduction of yet another set of trading arrangements, incorporating yet another measure (in this case, targets for energy efficiency) is a recipe for still more confusion. What is needed is a period of policy consolidation and clarification, not the over-layering of existing policies with new targets and incentives. (Paragraph 10.17)

12.63.  Energy-intensive manufacturing industries have contributed a disproportionate share to the reduction in United Kingdom carbon emissions. They continue to be subject to strong international competition, along with rising energy prices and a raft of regulation. There is a serious risk that much of this industry will simply be driven overseas, contributing to a net increase in global emissions. We therefore look to the Government, in the interests both of the economy and the environment, to take full account of the ongoing competitiveness of these sectors within global markets when they consider further climate change targets. (Paragraph 10.29)

12.64.  At the same time, there is considerable potential for energy saving by the commercial sector and SMEs, which have so far been overlooked. Reaching SMEs will be a challenging task, but it is one the Government appear to have shied away from. We recommend that the Government urgently explore ways to encourage reductions in energy use by SMEs. (Paragraph 10.30)

12.65.  The dispute over the United Kingdom National Allocation Plan has potentially serious consequences. However, while we have sympathy with the views of the CBI, we cannot help concluding that this is a crisis of the Government's making, which adds to the difficulties faced by industry in long-term planning. We urge the Government to seek a rapid resolution to this dispute, even at the expense of some compromise. (Paragraph 10.31)

12.66.  We further recommend that the Government re-examine the allocation of carbon allowances to individual industries and companies. It is essential that allowances should be based on real energy efficiency, relative to competitors at home and overseas, whether or not efficiency improvements have been as a result of Climate Change Agreements. (Paragraph 10.32)

The longer term: research

THE LEVEL AND CO-ORDINATION OF ENERGY RESEARCH

12.67.  In 2001 Sir David King recommended the establishment of the UKERC. The Centre is now in existence, but its staff are handicapped by the half-hearted way in which it has been established. A "distributed centre", dependent on Research Council support, cannot provide leadership for the many, widely dispersed energy research projects around the country. We therefore recommend that the Government, in addition to the forthcoming review of the first phase of the UKERC's work by the Research Councils, separately consider ways to strengthen the Centre, giving it greater autonomy, a physical presence and legal personality. Additional investment in the UKERC would in the longer term be money well spent. (Paragraph 11.9)

12.68.  We are mystified by the announcement that the Government intend to establish a "UK Energy Research Partnership". We already have the UKERC, Research Councils, the Carbon Trust, Regional Development Agencies. We believe that it would be more fruitful to strengthen the role of the UKERC, and that no case has yet been made for adding another layer of bureaucracy to the administration of energy research. We therefore look to the Government to explain the benefits of this proposal in greater detail. (Paragraph 11.10)

12.69.  We welcome the increase in funding for energy research and development, from £40 million to £70 million by 2007-08, which was announced in the 2005 Budget statement. However, we note that funding for energy research in the United Kingdom will still be at a very low level compared to international competitors, particularly where research into energy conservation is concerned. Funding must rise much further if the Government's ambitious energy policy objectives are to be achieved. (Paragraph 11.13)

12.70.  We therefore recommend that the Government signal their long-term commitment to a progressive increase in funding for energy research to at least average IEA levels as a proportion of GDP by 2020. We believe such a commitment is essential in order to encourage new researchers to enter the field, and to stimulate the development of the energy research base at all levels. (Paragraph 11.14)

RESEARCH PRIORITIES

12.71.  We were shocked by the decline in DTI funding for applied construction research since 2002. While drawing attention to the importance of incremental research, the Government have withdrawn funding for just such research in a sector that is both central to future energy efficiency improvements, and in which they invest over £30 billion in procurement annually. We therefore recommend that the Government urgently commission a follow-up to Sir John Fairclough's 2002 report on construction research, with a view to identifying ways to rectify the situation, and in particular that they transfer responsibility for construction research from the DTI to ODPM. (Paragraph 11.25)


 
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