by Rona Fried
In 2008, the European Union launched an ambitious 20-20-20 plan for 2020, which would increase renewable energy to 20% of the mix, reduce greenhouse gas emissions 20% below 1990 levels, and increase energy efficiency 20% compared to business-as-usual projections.
The EU is on track to achieve the first two goals, but although energy efficiency is usually touted as the least expensive, easily achieved of the three goals, so far it’s turning out to be the laggard.
One reason is that the first two targets are legally binding, but the energy efficiency goal is not.
EU member countries are on track to increase energy efficiency just 10% by 2020, which prompted the Commission to intervene with a plan to raise it another 10%. They noted that legally binding measures may be necessary, but they are not starting with that.
The new energy efficiency plan focuses on the three main sources of energy consumption – buildings, transportation and industry.
1. Buildings: create incentives to trigger the renovation process in public and private buildings, while improving the energy performance of components and appliances used in them.
2. Transportation: a forthcoming "White Paper on Transport" will cover advanced traffic management systems, infrastructure investment, smart pricing, and vehicle efficiency standards.
3. Industry: offer incentives for increasing energy management (such as tax rebates, energy efficiency financing, funding for energy audits) for small and medium-size businesses; institute mandatory regular energy audits for large corporations; energy efficiency requirements for industrial equipment and HVAC.
Public authorities will be required to renovate at least 3% (by floor area) of their buildings each year – double the current rate. Retrofits would have to "bring the building up to the level of the best 10% of the national building stock." And "when public bodies rent or buy existing buildings, these should always be in the best available energy performance class."
While these are aggressive recommendations, public buildings represent only 12% of Europe’s building stock. They have yet to address the rest of the market.
Which Public Companies Benefit?
A number of green stocks stand to benefit from the EU’s emphasis on energy efficiency.
Johnson Controls (JCI) is the world’s largest energy efficiency services provider, which generated 38% of its sales ($13 billion) in FY2010.
Ameresco (AMRC) only has a nascent presence in Europe, and this would provide a significant opportunity for expansion. The company is the leading provider of energy efficiency and renewable energy services in the US.
EnerNOC (ENOC), known for its demand response and energy management solutions, has entered the UK as a first step toward EU-wide expansion. Other smart grid leaders would also benefit, such as Itron (ITRI), Echelon (ELON) and Telvent (TLVT).
Long-time sustainability pioneer Interface (IFSIA), which makes broadloom carpet, already generates 28% of its sales in Europe. As more buildings are renovated, their will be demand for green products such as carpets.
ICF International (ICFI) is at the forefront of issues like energy efficiency and climate change consulting in the US. This would provide a significant growth opportunity as they currently get less than 10% of revenue from Europe.
New Twist on Emissions Calculations
Not to minimize the EU’s targets, but research is showing that the calculations used to measure their success in meeting them probably need to be revised. Multinationals, which used to manufacture there are shifting their hiring, manufacturing – and emissions – to developing nations.
Developing countries, including China, are exempt from reporting emissions under the Kyoto Protocol, which remains in force through 2012. Meanwhile, industrialized countries only measure the emissions produced within their borders, which doesn’t consider the ever greater percentage of products they import from developing nations.
Therefore, while emissions may be declining in developed countries, they make actually be increasing if imports from TVs to cars are included in the equation. These "ghost" emissions surged from 400 million tons of carbon in 1990 to 1.6 billion tons in 2008, according to a study published in the Proceedings of the National Academy of Sciences.
Therefore, some scientists are urging the United Nations to shift its accounting methods to include emissions generated by international trade in addition to territorial emissions. Emissions from the production of exported goods accounted for 26% of world emissions in 2008 – world emissions skyrocketed from 21.9 billion tons in 1990 to 30.3 billion tons in 2008.
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Rona Fried, Ph.D. is CEO of SustainableBusiness.com
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