The International Energy Agency reported in 2016 that energy efficiency is increasingly understood as a key component of low-carbon energy policy. The European Union encourages Member States to introduce energy efficiency obligation schemes (EEOS) to help meet energy savings objectives. Today, the EU boasts 15 active programs, more than double the number upon introduction of the 2012 Energy Efficiency Directive. However, the long-standing EEOS in Denmark and the U.K. face challenges because of concerns over increasing costs.

In many countries now, the question is not whether energy efficiency should be delivered, but how best to do so. Which policies and policy mixes are most effective and economical, and how should they be implemented? These questions are even more relevant with the ratification of the U.N. Paris Agreement, which sets an aspirational limit for global temperature rise at 1.5 degrees Celsius, rather than the 2 degrees that formed the basis for much of earlier policymaking.

After considering the role of EEOS in EU energy policy, authors Tina Fawcett, Dr. Jan Rosenow, and Paolo Bertoldi use Denmark and the U.K. as case studies to explore the future of longer-established EEOS. They assess recent and planned redesigns in these two countries, analysing the factors that led to changes in policy ambition. They determined that an over-ambitious delivery target and timeline, coupled with the absence of opportunities to learn about effective policy, are the key risks to new EEOS. After assessing nine EEOS, their research found that savings in Croatia, Latvia, and Spain are the most at risk.

Correctly designed, an energy efficiency obligation scheme can deliver sustained energy savings over multiple years. This tool is flexible and can be designed in a variety of ways to meet national needs and fit within different policy mixes. EEOS have been used to deliver savings primarily through upgrading building stock, replacing inefficient appliances and equipment early, and improving industrial processes—efficiency savings that are not covered by minimum standards or regulations.

EEOS are likely to continue to evolve in objectives, design, and delivery as the energy and policy landscape changes around them. The new European framework of “energy efficiency first” supports EEOS, and the planned extension of the Energy Efficiency Directive to 2030 is also vital. EEOS have a strong track record in securing savings from low-cost measures, and they are expected to continue to do so. However, their scope may need to widen as savings targets increase and if—or when—low-cost opportunities reduce. Delivering higher-cost measures, particularly deep retrofits to buildings, is very challenging, regardless of the policy instrument or policy mix used. EEOS may be able to support this progress, but policymakers will need to ensure that the policy is seen as fair and retains energy company, public, and political support.