A mere 26 years after appliance energy labelling was first introduced in New South Wales and Victoria, Australia is about to move to a national legislative framework for appliance energy efficiency. A bill to bring in GEMS (Greenhouse and Energy Minimum Standards) was introduced to parliament on May 30. Subject to parliamentary approval, it should be implemented late this year.
Energy efficiency is the big game changer in climate response policy: globally it is estimated to be the biggest method of emission reduction in coming decades. So why has it taken so long for Australia to move on efficiency? The sluggishness of this process shows how many blocks there are in this country to increased energy efficiency.
Take building energy regulation, for example. An all-party parliamentary committee in Victoria first proposed mandatory home insulation in 1976. Yet it was 2003 before we introduced our first national home insulation regulations. Energy regulation of non-residential buildings was only introduced in 2006, decades after many countries. And our building standards are still weak relative to many developed countries: just ask visitors from Europe or Canada what they think of our building energy performance!
Our appliance efficiency scheme has delivered around 50 million tonnes of abatement at an average cost of minus $56 per tonne of emissions avoided: see many reports at www.energyrating.gov.au. Building energy regulation has also cost-effectively saved substantial amounts of energy, reduced peak energy demand, and improved health and amenity. Even in major industries, the Energy Efficiency Opportunities program in its first few years delivered over $700 million dollars of annual savings at a cost of minus $120 per tonne of emissions avoided. Yet it took decades to begin to get serious about industrial energy efficiency after quite a good start in the early 1980s.
So why does it take so long to deliver programs that save a lot of money, cut emissions and provide many other benefits such as improved productivity and health? The answer is deep opposition combined with indifference from our political leaders.
Opposition comes from many directions. Within government, econocrats actively block implementation of effective energy efficiency measures. In 2005, the Productivity Commission inquiry into energy efficiency was scathing about most energy efficiency schemes, in particular mandatory energy standards. Traditional economists see mandatory energy efficiency measures as reducing choice: they uphold our right to waste money and damage the environment!
Classical economics also tells them that our economy is generally as energy efficient as it makes economic sense to be. At least the Productivity Commission grudgingly accepted that some barriers to implementation of cost-effective energy efficiency existed. But the overwhelming policy culture is for minimal intervention, despite widespread market failure.
At the same time, governments have (until recently) seen energy efficiency as a very low priority. It’s just not as sexy as renewable energy, and effective action provokes opposition internally, from business and from the powerful energy sector. So funding has been minuscule: for example, I have never seen an advertisement promoting the existence of TV energy labelling, which was introduced in 2009. Yet the best TVs now rate 8.5 stars and use 80% less energy than many TVs of just a few years ago. There has been no marketing budget to tell people the good news and help them to take advantage of energy efficiency.
Even now, energy efficiency schemes are under attack as governments shut down activities that are not seen as “complementary” to carbon pricing. Razor gangs all around Australia are undermining the small amount of progress we have made on energy efficiency.
Governance arrangements have been a mess, as explained by the PM’s Energy Efficiency Task Group report, published in 2010. Basically, no-one powerful in government has made energy efficiency a real priority. And when government has introduced major programs, such as Green Loans and the insulation scheme, it under-resourced development, rushed them and failed on delivery. This undermines the future of the energy efficiency industry. For example, governments simply don’t want to talk about or actively support insulation any more. Yet it is one of the most important energy efficiency measures in existence!
Within the energy industry, the market framework set up in the 1990s works strongly against energy efficiency. In its submission to the PM’s Energy Efficiency Task Group, International Power, an owner of power stations, reflected this situation by stating:
“IPRA rejects any proposal to introduce climate change policy, under the guise of energy efficiency measures, which has the potential to destroy the value of existing investments in the generator sector.”
Numerous inquiries and studies, and even changes to the energy market rules, have not overcome the problems in energy markets. But it’s not surprising, given the market rules and the “supply side” culture.
The draft Energy White Paper (my submission is here) illustrates the deep cultural bias of our energy sector policy makers against energy efficiency. They just don’t get it.
Powerful industry groups often oppose energy efficiency measures. For example, some major building industry groups have opposed energy regulation for decades, while implementing modest educational programs to show that they support the principle of improved energy efficiency. Indeed, the Housing Industry Association even suggested that building energy regulation discriminated against new home buyers by making new homes unaffordable!
Australia’s appliance industry (with a few exceptions) opposed appliance energy labelling in its early days, based on the argument that providing consumers with information would destroy our industry. Indeed, vehicle energy labelling was successfully blocked from 1984 until 2000 because the last thing the car industry wanted was informed consumers: information might undermine the impact of all their emotive advertising.
So the proposed introduction of a national framework for appliance efficiency, and the provision of some funding for the scheme is a major breakthrough. Let’s hope it’s the first of many: dramatic change is desperately needed.
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