Market-based instruments for energy efficiency – can they support the energy efficiency industry?

Panel: 1. Policies and programmes to drive transformation

Authors:
Jan Rosenow, The Regulatory Assistance Project (RAP), Belgium
Richard Cowart, RAP

Abstract

There is a growing interest in so-called market-based instruments (MBIs) for energy efficiency, such as auctions, energy efficiency obligations on utilities and white certificate programmes. In this paper, we assess how important MBIs are globally as a driver of the energy efficiency industry and particularly the ESCo market. Our research found that the number of MBIs has quadrupled over the last ten years, while investment stimulated by them has risen six-fold, to USD 26 billion in 2015. What distinguishes MBIs from other policy instruments is that, by giving market actors the freedom to choose the measures and delivery routes that work best for them, the market as a whole is able to discover the most cost-effective way to achieve the outcomes set out by policy makers. That freedom puts a premium on good policy design and implementation, including strong monitoring, verification and evaluation. And as this paper shows, sharing knowledge across jurisdictions will be central to the success of the next wave of policy making in this area.

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