The Private Cost Effectiveness of Improving Energy Efficiency

The Productivity Commission’s inquiry report into ‘The Private Cost Effectiveness of Improving Energy Efficiency’, was released on 21 October 2005. The Commission was asked to report on the economic and environmental potential offered by energy efficiency improvements. The Commission found that the potential for making energy efficiency improvements, for energy users to save money, and for governments to efficiently intervene to address market failures, appeared to be modest. There was a case for governments to address information failures, particularly in consumer markets. The Commission favours ‘light-handed’ regulatory responses and information provision where possible. The final report provides a number of recommendations on existing and proposed energy efficiency policies. It argues that programs under Stage One of the National Framework for Energy Efficiency should only be expanded after the net social benefits have been established. The Commission recommends that there should be an independent evaluation of building energy efficiency standards and that local governments should not create variations in these standards. The Commission also recommends that future minimum energy performance standards for appliances be more comprehensively assessed. The Commission recommends against implementing a National energy efficiency target to address greenhouse gas abatement. It argues that it has serious disadvantages compared to other more directly-targeted policy options. Any increased investment in energy efficiency, could be at the expense of economic efficiency.