Costs and Benefits of Energy Efficiency Targets

Published: 25/11/2015

Commissioned by Friends of the Earth, this short study replicates the results from the Impact Assessment for the Energy Efficiency Communication using alternative discount rates for energy efficiency measures in households and private cars, and comparing total system costs with external benefits, like air pollution reduction and GDP increase.

The report Evaluating our future by Ecofys and eceee on the role of discount rates in energy system modelling for the European Commission had found that often the same discount rates are used for both individual decision making and the calculation of system costs. In the formulation of an energy efficiency target, the Commission recommended a level of ambition based on the system costs from the impact assessment.

It did not give equal consideration to the socio-economic benefits of efficiency. Using a lower discount rate for energy efficiency measures for households and private cars would have resulted in different system costs, which could point to a more ambitious energy efficiency target. This study calculates the energy system costs using a 10% discount rate for households and private cars instead of the original 17.5%. Additionally, external costs are taken into account and their relation to the total system costs is assessed.

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Kornelis Blok
Oskar Krabbe
Sustainable Industries and Services