Are economic assessments provided in the EPBD and EED compatible with long-term climate targets?

Abstract

The EPBD and the EED ask Member States to carry out economic calculations to frame their energy efficiency policies: the EPBD foresees cost-optimality calculations for setting energy performance standards; the EED requires Member States to carry out a comprehensive assessment of efficient heating and cooling, including a cost-benefit analysis. In this paper we will analyse and discuss the following question: Is the way how these calculations were carried out by different Member states (in different periods) compatible with and supportive of the target of full decarbonisation and associated principles such as energy-efficiency-first? Do they need to be revised and reframed in order to ensure compatibility with the overall policy framework? Are the cost-optimality and cost-benefit analyses provided in the EPBD and EED as such compatible with the overall, long-term policy framework? We start with identifying key principles that can be derived from the existing long-term policy framework. One of them is that a scenario reflecting a system still relying on fossil fuels is not a reference point compatible with a decarbonised future. As a second step, we carry out a comparative analysis of underlying assumptions in the economic calculations being done in selected countries. Third, we show the impact of some of these assumptions by exemplary calculations by the means of sensitivity calculations. Preliminary results show that in a significant number of the past economic assessments carried out in the EPBD and EED fossil fuels still play a strong role as reference scenario. The assumptions on fossil energy prices and possible CO2-prices frame the results. We discuss the implications of a fully renewable reference system in the framing of the economic analyses and the possible impact on policy conclusions. We close with recommendations on the further development of these provisions, also discussing the newly adopted revisions of both directives in this context.