Speaker after speaker at the United Nations Conference on Climate Change in Bali last December insisted that energy efficiency was the key to meeting the UN’s targets for early and sharp reductions in greenhouse gas emissions. However, energy efficiency has failed to deliver promised savings in the past, especially amongst smaller customers. What explains this past failure and what must be done to succeed this time?
This paper explores an important reason why energy efficiency has delivered less than expected results in developed countries. The reason is that electricity and gas retail suppliers often have a clear incentive to promote increased consumption of energy, as opposed to having an incentive to promote energy efficiency. One way forward is to give them an incentive to promote, or at least not discourage, energy efficiency.