Why EEOs are Better Than a CO2 Tax and Do EEOs Work?
As Europe pushes to decarbonise its energy sector, concerns about energy affordability are rising alongside increases in supply costs. The European Union’s emissions trading system increases the cost of energy and sends strong price signals to the supply side, but much weaker signals to the demand side. Implementing policies to address demand could have dramatic results. For example, reinvesting a one-off 3 percent price increase in household energy efficiency measures saved seven times more electricity than the savings from an ongoing price increase alone. Speaking at an energy efficiency workshop hosted by the Latvian Ministry of Economics, Eoin Lees drew on experience with Great Britain’s energy efficiency obligation (EEO) to demonstrate that this policy mechanism is more effective at saving CO2 and energy than a carbon or energy tax for non-energy intensive end-users. The success of EEOs has been demonstrated in numerous jurisdictions despite wide variation in the status of market liberalisation and implementation methods. At a time when many Member States are facing financial concerns, EEOs allow regulators to avoid investing public funds to stimulate energy efficiency, while significantly reducing energy demand.