It is often said that the "low hanging fruit" of climate change mitigation is improving energy efficiency. According to McKinsey, energy efficiency measures yield the cheapest emission reductions of any carbon abatement option: they are "better than free". Not only can energy efficiency measures significantly reduce greenhouse gas emissions and pay for themselves through lower energy bills, they also reduce demand for insecure supplies of energy, such as Russian gas.
In recognition of these benefits, the Conservatives are unveiling new policies on the issue, and the government recently increased annual expenditure on energy efficiency to about £1.25bn per annum. Despite this, even after current government plans end in 2011, more than 14m homes will be without some of the most basic energy efficiency measures available, such as loft and wall insulation. How can this be?
The obstacles that prevent homes from improving energy efficiency are well known. They relate to a lack of access to capital, payback periods that are often too long, a poor understanding of the benefits involved and also the fact that households have to be proactive to improve their energy efficiency – simply, there is too much inertia.
Energy efficiency policies need to be designed to tackle each one of these barriers. So far, the government's approach has largely failed to do this. Cumbersome application procedures for grants make it harder for people to overcome inertia, while having to pay a large part of upfront costs prevents the poorest from benefiting. There has been success in increasing awareness of the issue, but installing energy efficiency measures is still too difficult for millions of people.
There clearly needs to be a step change in the way Britain approaches the delivery of energy efficiency. The dribs and drabs of hard-to-access cash need to be replaced by a torrent of job creating investment. Making our homes more energy efficient should be made much easier and doing so can create jobs and reskill workers. This is exactly the kind of fiscal stimulus that's needed during the recession – one that will tackle a number of key goals simultaneously, from energy security to climate change.
To realise rapid improvements in energy efficiency, two practical things could be done. First, basic energy efficiency measures need to be installed in every home as soon as possible through a coordinated roll-out process. Second, more advanced energy-saving measures, such as heat pumps, solar PV, and micro CHP, need to be progressively introduced. These advanced energy-savings packages should be offered by energy supply companies to their customers, with the costs recouped through reductions in energy bills.
According to research from Policy Exchange, the first step alone could be delivered by 2014 with no extra cost to households or the state. It would reduce CO2 emission by 200m tonnes on 2006 levels and save £84.6bn off the nation's energy bills. The installation of more advanced energy-saving measures is likely to yield less dramatic cost savings and emission reductions, but will nevertheless be an important part of a cost-effective transition to a low carbon economy.
After many years of falling behind, we can rapidly become one of the most energy-efficient countries in Europe. With a recession, climate change and winter energy bills arriving on the doormat, not to mention an aggressive Russia threatening the energy security of Europe, there hasn't been a better time to show some political leadership on this issue.
The publication of the Conservatives' new energy efficiency policies will kickstart a much-needed national debate on this issue, let's hope it quickly results in more investment in energy efficiency.