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#38 - JRL 2009-29 - JRL Home
Date: Wed, 11 Feb 2009
Subject: Energy Efficiency Like Free Cheese
From: Mark Izeman <mizeman@nrdc.org>

Op-Ed: Free Cheese (and No Mousetrap!) through Energy Efficiency
By Mark Izeman and Edith Pike-Biegunska
Mark Izeman is a senior attorney with the international environmental organization Natural Resources Defense Council, and Edith Pike-Biegunska is an attorney working in Russia as an Alfa Fellow.

In the midst of the current economic turmoil, one might think that this is the wrong time to advance long anticipated energy efficiency reforms in Russia.

But in fact right now is the perfect opportunity to put in place new energy efficiency programs because they can generate new sources of capital -- and, at the same time, help Russia continue to grow and diversify its economy.

The Kremlin has already recognized the importance of energy efficiency in expanding Russias economy. Two years ago, Vladimir Putin declared that making Russia more competitive in the world economy required action to make our energy consumption radically more efficient. And this past summer, President Dimitry Medvedev took this call for action further by signing a decree directing top officials to submit new legislation to the Duma that will promote energy-efficient and ecologically clean technologies, and setting a goal of slashing the countrys energy wastefulness by 40% by 2020.

The good news is that existing efficiency technologies are now available in the marketplace to meet the Presidents goals. By employing these off-the-shelf energy efficiency measures, Russia can in effect create new supplies of energy to help meet its domestic needs, and also ensure sufficient resources that can be exported. Stated another way, $100 spent on energy efficiency can free up more energy than $100 could create through expanded production.

Further, investing in energy efficiency projects can create new money. A recent study by the respected McKinsey Global Institute, for example, concludes that at least one half of projected worldwide energy demand growth over the next 12 years could be met through increased energy efficiency in all sectors (e.g., residential, commercial, industrial) -- and that this can be accomplished by employing existing technologies that generate significant rates of return on investments. By paying for themselves, these energy efficiency technologies therefore generate capital that can be spent elsewhere.

So how can Russia capture these opportunities?

As President Medvedev has recognized, reforming Russias energy laws is a necessary first step. We respectfully suggest four proposals for new federal legislation in this area:

1. Designate A Single Authority to Advance Energy Efficiency: Perhaps the most important reform is to pass a new law that empowers a single agency with the necessary authority to advance energy efficiency policies. Currently, federal energy efficiency responsibilities are scattered throughout the government. The chosen agency should have chief responsibility for carrying out efficiency priorities, and should also include concrete targets and timelines for achieving greater energy efficiency in specific sectors.

2. Retain and Strengthen Building Efficiency Rules: Remarkably, commercial, residential and public buildings consume including through heating, hot water and lighting more than 50% of Russias total energy usage. Fortunately, Russia already has some of the most progressive mandatory efficiency standards in the world for how new buildings are designed, constructed and operated. But the Duma must expeditiously re-authorize the existing building efficiency laws so that they retain mandatory force beyond 2010. And new legislation is needed to significantly strengthen enforcement of the standards. The legislation could also require compliance with the standards as a condition of receiving government monies for repairs to existing residential and other buildings, as recently suggested by the IFC and World Bank

3. Adopt New Efficiency Standards for Consumer Appliances: Household appliances such as refrigerators, TVs and lamps consume large amounts of electricity. New federal laws should be established that impose mandatory limits on how much energy household electrical devices sold in Russia can utilize. Many other countries have already adopted such appliance standards. And in the US, minimum efficiency rules have slashed refrigerator energy usage alone by 75% over the last three decades, while the cost of new refrigerators has been cut in half. The Duma should also consider creating an appliance labeling program that allows consumers to compare models based on how much electricity they will consume. Such labels are already required in the European Union, the US, and China.

4. Reform District Heating Laws: Within Russias buildings, nearly 70% of the heat generated comes from large, centralized district heating systems. Unfortunately, the current system is made of up largely inefficient boilers and leaking transmission pipes (as much as 25% of the heat escapes before it reaches apartments). And there is little incentive for residents to reduce waste because they are not charged for actual heat usage. Accordingly, a new federal law should be drafted that, among other things, fosters greater public-private partnerships in this sector to boost needed investments, and also establishes clear efficiency targets for boilers and pipes. The law should also begin to require the installation of meters and temperature controls in buildings so that utility bills can gradually and with adequate protections for the economically disadvantaged begin to reflect actual energy use. (The City of Moscow is now launching a pilot program along these lines over the next four years.) And it is critical that any new law provide consumers with the know-how and resources to take simple steps, such as fixing or replacing windows and adding insulation that can dramatically reduce heat loss.

This is not intended to be a comprehensive list of possible legal reforms. And of course, simply enacting new laws in Russia or in any country does not guarantee actual implementation. But international experience has shown that a strong legal framework will be essential to achieve the Presidents ambitious objectives and seize the attractive investment opportunities energy efficiency offers.

An old Russian proverb states that Free cheese is found only in mousetraps. When it comes to money gained through energy efficiency, however, this wise saying is not true at all. Harnessing the opportunities in energy-efficiency is a mousetrap-free way to reduce energy use and strengthen the economy.