IEA Report Examines Energy Efficiency Policies in Conjunction with Carbon Pricing

1 August 2011: The International Energy Agency (IEA) has published an information paper examining whether there is a need for energy efficiency policies in economies that have carbon pricing in place and the potential for interaction between the two kinds of policies. The report concludes that, although carbon pricing is a prerequisite for least‐cost carbon mitigation strategies, there is still a need for energy efficiency policies, as carbon pricing is not enough to overcome all the barriers to cost‐effective energy efficiency actions.

The information paper, titled “Energy Efficiency Policy and Carbon Pricing,” focuses on ascertaining whether energy efficiency policies become redundant once carbon pricing is implemented. Concluding that such policies do not become redundant, the paper identifies several barriers that appear not to be addressed by carbon pricing, such as imperfect information, principal-agent problems and behavioral failures. The paper highlights that these barriers can be addressed by other policies, including energy efficiency policies, such as energy performance standards, energy performance labelling and contractual support for the construction of low energy buildings. It concludes that energy efficiency policies should therefore be implemented in addition to carbon pricing, and designed carefully for each sector to ensure optimal outcomes for a combination of economic, social and climate change goals. [IEA Press Release] [Publication: Energy Efficiency Policy and Carbon Pricing]