 |
Dr Antonios Katris Research Associate, Centre for Energy Policy antonios.katris@strath.ac.uk |
 |
Ragne Low 7 September 2018 |
Governments are often criticised for moving too slowly on policy action to address climate change. However, there are risks associated with moving too fast, or from proceeding without a rigorous underpinning evidence base about the potential wider impacts of different policy options.
In our research at the Centre for Energy Policy, our focus is very much on the wider societal impacts of policy. We explore the potential impacts of policy action to understand the likely trade-offs between different policy objectives and the relative costs and benefits of different types of policy response.
The importance of looking at wider impacts
The study of wider impacts is important for two reasons. First, it provides an understanding of the potential consequences of a given course of policy action, alerting policy makers to the potential costs and benefits in terms of wider policy goals. Second, and perhaps more importantly, it also informs choices about policy design.
This second function is particularly relevant in the context of the design of significant programmes such as Energy Efficient Scotland. With energy efficiency named a National Infrastructure Priority, the Scottish Government has made a commitment to a programme of energy efficiency retrofit for Scotland’s buildings. The design of that programme has been informed by modelling of the state of Scotland’s building stock, an assessment of the rate at which retrofitting can be practically be rolled-out and analysis of the balance of costs and benefits to building owners and occupiers, as well as to the wider economy. It is in this last respect that our research has been particularly important.
Potential societal benefits from energy efficiency action in Scotland
In our analysis of the potential economic benefits of significant investment in energy efficiency across Scotland’s domestic building stock, we found benefits from supply chain activity in actually delivering the programme of retrofits and – more significantly - a wider economic boost from the increase in household spending power released by savings on energy bills. We also found that low income households benefit disproportionately from the wider programme.
Crucially, these benefits accrue over time. This has two important implications. Firstly, without careful design of funding mechanisms (e.g. loan repayment periods), there is a risk that even those households directly benefiting from efficiency improvements may suffer net income losses in early periods. This could be particularly problematic in the case of low income households. Secondly, the timing and extent of benefits realised depend upon the supply chain being incentivised to invest in its own capacity by the government’s commitment to a multi-decade programme.
Why supply chains matter
Our work suggests that where supply chain actors are not convinced of sustained Government commitment to programmes, the full extent of economic benefits may not be realised and there is in fact a danger of negative impacts on jobs and GDP where suppliers have to reallocate their resources one year to the next.
The potential benefits also depend upon the programme actually delivering the predicted energy savings benefits for households in full. That is, households must realise genuine savings that they can spend elsewhere in the economy. The readiness and capacity of the supply chain are therefore critical. The supply chain acts both as an underpinning means for delivering the wider economic benefits the programme offers and as the locus for job creation and economic activity.
Crucially, our work has assumed that Scottish supply chain capacity will be able to develop. If Scottish supply chains are not ready, there is a risk of ‘leakage’ to other UK or overseas supply chains. There is also a need to better understand within-Scotland supply chain capacity, to be able to assess potential benefits at a more regional level than has been possible in our work to date.
Implications for energy efficiency policy design
Based upon our research, we would argue that there is strong interaction between overall target setting and the design of policy actions. The two must be considered together, for example by looking at which technical options might need to be brought forward with what ultimate costs and benefits, and for whom, under different levels of ambition; or considering what the impact on balance of trade, employment and supply chain activity might be under different scenarios for the pace of action.
Policy can be designed to maximise wider benefits, and to ensure it reinforces wider objectives of sustainable and inclusive economic growth. We would argue that consideration of the wider effects of energy efficiency policy is critical. Getting policy design right requires knowledge of those wider effects, and a commitment to bringing that knowledge to bear on the design of policies and programmes.
Tags: News & Blogs