DO ENERGY EFFICIENCY REGULATIONS WORK?

As previously mentioned, the aim of setting minimum thermal performance requirements is to reduce greenhouse gas emissions. However, the effectiveness of thermal performance, and other energy efficiency regulations, in achieving that goal has been questioned. The Productivity Commission (2005) recommended that more stringent energy efficiency standards should not be introduced for residential buildings until the existing standards were fully evaluated and shown to meet their aim. While standards have been increased since then, in 2011 the Department Climate Change and Energy Efficiency commissioned a study to compare the actual energy use of 4-star houses with the actual energy use of 5-

star houses.2 Williamson (1997) observed that improving thermal performance and reducing the life cycle greenhouse gas emissions of houses may in fact be contradictory goals. While he did not explain the circumstances that could lead to this, there are several possibilities:

(i) A house’s energy supply could be wholly, or partly, generated from renewable energy, which has no or low greenhouse gas emissions. Therefore the embodied greenhouse gas emissions associated with thermal performance improvement could outweigh any reduction in operational emissions it provides.

(ii) A house may be passively designed, and have occupants who do not use artificial heating/cooling. Improving a house’s thermal performance may add to embodied emissions, and therefore life cycle emissions, as there is no reduction in heating/cooling emissions to be made.

(iii) At some stage after a house is built, grid energy becomes less CO2 intensive (an aim of

federal government’s renewable energy target); depending on what stage of a house’s life that this occurred, embodied CO2 emissions of the thermal performance improvement

could outweigh any savings in heating/cooling CO2 emissions.

(iv) The choice of heating system is a factor: Joelsson and Gustvasson (2009) found that the efficiency of the heating system had a greater influence on primary energy use than house envelope measures. Furthermore, a house built to achieve a high level of thermal performance may use a heating system which is more carbon intensive than a heater used in a house with a lower level of thermal performance (e.g electric versus gas heating) While less energy may be used for heating in the house with the higher thermal performance level, the resultant CO2 emissions could be higher. In Tasmania

approximately 28% of houses use wood as their primary source of heating, and approximately 66% use electricity (ABS 2011).

A number of economists (Brookes 1990, Rees 1995) argue that improving energy efficiency at a micro-level actually increases energy consumption at a macro-level. This is due to the ‘rebound effect’ whereby money saved by households through energy efficiency measures is spent on other goods. Others (Horvath 2004) reject this view while Herring (1999) says that like most economic questions it is impossible to prove either way.

Some (Shellenberger and Nordhaus 2008, Herring 1999) question whether regulations alone are enough to address the problem of greenhouse gas emissions, particularly as population will increase and the standard of living of developing countries will rise. Even if energy is used more efficiently, worldwide consumption of energy may triple by 2050, at a time that it needs to be reduced by about 50% to stabilise global warming. Nordhaus and Shellenberger (2008) believe the main focus should be on investing in cleaner energy technologies, not on using energy efficiently. This is a view shared by Lomborg (2007) who also questions claims about the cost effectiveness of cutting greenhouse gas emissions. The economic costs from carbon taxes imposed of CO2 reduction far exceed the

benefits (avoided damage) they provide from lower resultant temperatures (Nordhaus in Lomborg 2007). However, Herring (1999) believes that cost effective energy efficiency measures will make it possible for people to more easily afford the shift to more expensive renewable fuels. Others (Lee & Yik, 2004) suggest that the best way to reduce greenhouse gas emission is through a policy mix that includes carbon taxes, energy efficiency measures and the use of renewable energy.

Another factor that will result in energy savings at the household level having no effect at the macro-level is the introduction of an Emissions Trading Scheme (ETS) (Australia Institute 2008), which will replace the carbon tax in 2015. The aim of the scheme is to put a cost on carbon emissions, thus encouraging the uptake of cleaner energy technologies. Under the Scheme, the federal government would set a cap on the total amount of carbon that industries covered under the scheme can emit. Permits are issued to the annual cap each year. Polluting industries will need to acquire a permit for every tonne of carbon they emit, with companies competing in the market for the permits they require. However, saving energy at a household level provides energy producers (one of the biggest emitters

of greenhouse gases) and local manufacturers of energy intensive building materials, such as aluminium and cement, more opportunity to emit up to their permitted cap. As the carbon tax legislation currently stands, saving greenhouse gas emissions through improved thermal performance, or even choosing materials with a lower embodied energy than alternative, will have no effect on the nation’s total emissions. The Wilken’s Strategic Review of Australian Government Programs (2008) noted that under an ETS it is the composition of CO2-e abatement that changes, not the amount. The lack of

complementarity between thermal performance regulations and the ETS is considered a serious policy flaw.