Towards a green economy
certificate schemes and credit schemes such as flexible mechanisms29
introduced under the UNFCCC and most
recently, cap-and-trade schemes. Examples of their cost- effectiveness are the following (UNEP SBCI 2007b):
■ Cooperative procurement: – US$ 118/tCO2 saved (USA);
■ Energy efficiency/white certificate schemes: US$ 0.013/kWh expected (France); and
■ Kyoto flexibility mechanisms: – US$ 10/tCO2 Energy performance contracting
(Latvia). involves an energy
service company (ESCO) as an implementing agent, guaranteeing certain energy savings over a period of time, implementing improvements and getting paid out of the energy savings. They are already used in the USA, Germany, China and Brazil. They do require supportive legal, financial and business environments and the absences of subsidies that send the wrong energy-price signals. Analysis of the experience in the Netherlands (Keivani et al. 2010) has shown the importance of institutional support for ESCOs that can facilitate measures that reduce energy consumption costs for all stakeholders, particularly households.
Advanced institutional structures are also required for the running of efficiency certificate schemes. The Fund for Electric Energy Savings (FIDE) in Mexico offers a “seal of quality” to certify energy efficient equipment, materials and technologies. FIDE is a joint initiative of the state-owned electric power utility, the Mexican electric workers union and members of the business community (Martinez-Fernandez et al. 2010).
The UK Carbon Reduction Commitment (CRC) programme, a cap-and-trade scheme, aims to reduce greenhouse gases by 2050 by at least 80 per cent compared with the 1990 baseline (DECC 2010). Now called the CRC Energy Efficiency Scheme, it applies to organisations that have an electricity consumption measured through half-hourly metering greater than 6,000 MWh per year (equivalent to an annual electricity bill of about £ 400,000-£ 500,000). This covers organisations that fall below the threshold for the European Union Emissions Trading Scheme, yet account for some 10 per cent of the carbon emissions in the UK. These tend to be organisations such as hotels, supermarkets, banks, national and local public authorities. Organisations will purchase their first allowances in 2011, and the more each consumes over 6,000 MWh per year, the more each organisation will have to pay. Participant organisations will
report progress annually and pay penalties for non-compliance.
29. Among the flexible mechanisms (sometimes referred to as flexibility or Kyoto mechanisms) introduced under the Kyoto Protocol: Emissions trading, Joint Implementation and Clean Development Mechanism only the latter two are considered in the building sector.
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Carbon credit trading schemes crucially require reliable measurement and baselines. One of the reasons that the CDM under the Kyoto Protocol attracted so few building energy-efficiency projects was the fragmentation of the building market with few baselines and reference cases that could be used to determine additionality. High transaction costs and the absence of a sector-specific methodology was another reason for so few CDM projects in developing countries involving the building sector. The accumulative impact of change at the level of many small units has been a further complication. Energy-efficiency projects for buildings are often small in scale and use a variety of measure to decrease overall consumption. The necessity to validate, audit, monitor and verify each measure generates tremendous effort and extra costs that strongly impact the viability of the projects. Other limitations include the methodology to assess the impact of soft or non-technological measures (building design, occupants’ behavior). Finally, CDM has its limitation for the low-income housing sector where energy poverty induces low-energy consumption and carbon emission (Cheng et al. 2008; Schneider 2007; Ellis and Kamel 2007).
Considering ways of improving the use of an international credit scheme for the building sector, industry partners of the UNEP SBCI (2007a) made six recommendations for a post-Kyoto agreement. These underlined the need for using performance-based indicators (eg energy consumption per square metre) along with technology- based indicators, as well as the need for common baselines and national building energy-efficiency standards. In addition, it called for special recognition of energy- efficient housing for low-income groups, providing the poor with access to energy in an efficient manner even while absolute levels of energy consumption may be increasing (Ellis and Kamel 2007).
In April 2010 the Tokyo Metropolitan Government introduced the world’s first cap-and-trade scheme for urban buildings, covering 1,400 buildings, including commercial office buildings and industrial facilities (World Bank and Padeco Co. LTD. 2010)30
. At the same
time, the Seoul Metropolitan Government started a three-year trial of a carbon-trading system among 47 state-run public agencies, with a goal to achieve a 10 per cent reduction in GHG emissions (Hee-sung 2010).
Common carbon metrics are a recent international initiative to promote sustainability in the building sector. It is being developed by UNEP SBCI, the World Green Building Council (World GBC31 Building Alliance (SB Alliance32
) and the Sustainable ). The focus has been on
energy GHG emissions, but the metrics will address waste,
30. It sets a 2020 target of reducing carbon emissions by 25 per cent (below 2000 levels), with a cap set at a level of 6 per cent below base emissions for the first compliance period (2010-14), and then approximately 17 per cent below base emissions from 2014 to 2020.
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