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Andrea Marandino 9 October 2012

Energy efficiency: cost or investment? The role of public policy in stimulating private investment, growth and jobs. Andrea Marandino 9 October 2012. The Mackinsey cost curve is not the whole story. E3G - Third Generation Environmentalism. 2. Energy efficiency is cheap but not free.

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Andrea Marandino 9 October 2012

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  1. E3G - Third Generation Environmentalism Energy efficiency: cost or investment?The role of public policy in stimulating private investment, growth and jobs Andrea Marandino 9 October 2012

  2. The Mackinsey cost curve is not the whole story E3G - Third Generation Environmentalism 2

  3. Energy efficiency is cheap but not free We need to take a longer term view on scaling energy efficiency investment Governments need to play a role in creating markets Economic instruments have had a critical role to play in driving energy efficiency uptake: Loans (both commercial and subsidised) Grants Guarantees But given the huge volumes that need to be invested, are they sustainable? E3G - Third Generation Environmentalism 3

  4. E3G - Third Generation Environmentalism Markets evolve – good news for limited public funding Rogers “Diffusion of Innovation” curve describes the technology adoption lifecycle according to the demographic and psychological characteristics of defined adopter groups YOU ARE HERE

  5. E3G - Third Generation Environmentalism Longer term regulation is critical to managing costs to the public purse Rogers “Diffusion of Innovation” curve describes the technology adoption lifecycle according to the demographic and psychological characteristics of defined adopter groups REGULATION STARTS HERE REGULATION STARTS HERE TIME-LIMITED SUBSIDIES YOU GET TO HERE! YOU GET TO HERE!

  6. E3G - Third Generation Environmentalism Gaining private sector interest: a framework for government action • Task 1: Signal market size (targets) and underpin with incentives to create credible levels of demand • Task 2: Manage risk within the policy and institutional architecture – e.g. technology accreditation, clear mechanisms for delivery and facilitating access to finance • Task 3: Mainstream investment – use regulation to ensure sustained demand and a shift to private sector financing

  7. E3G - Third Generation Environmentalism Why bother? The macroeconomic case Energy efficiency investment has a greater impact on UK GDP than VAT cuts, fuel duty cuts, general capital investment or general government spending Source: Cambridge Econometrics and Verco 2012

  8. E3G - Third Generation Environmentalism Short and long-term benefits accumulate • Short term investment stimulus • Impacts equivalent to general government investment • Generates jobs (up to 71,000 in 2015) • Boosts economic output more than VAT cuts, fuel duty reductions and general government spending • Long term economic efficiency gains • Energy savings accumulate over time • Amount of heating energy (gas) imported reduces – contributes additional GDP impacts and greater energy security • Enables greater domestic spending

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