Abstract
Radical energy efficiency improvements are needed to keep global warming within 1.5 °C until the end of the century. Minimum energy performance standards (MEPS) are a widely applied policy instrument to improve the energy efficiency of appliances and reduce CO2 emissions, but they are criticized as redundant if an overarching carbon pricing scheme is in place. In order to better understand how MEPS could play a more effective role in reaching the 1.5 °C target, life cycle costs (LCC) for four home appliances were modelled considering a cost for emitting CO2. First, a significant social cost of carbon was introduced in a LCC optimisation model and it was found that a modest tightening of MEPS is sufficient to account for the climate externality. Second, more stringent MEPS were modelled and it was found that the switching prices needed to incentivize a shift up one or two efficiency classes were far higher than current carbon prices. These results have several implications for climate policy towards the 1.5 °C target. MEPS can easily internalize the climate externality and have the advantage over carbon pricing that policy makers can be certain that consumers actually move to more efficient appliances. While stringent MEPS do not appear to be economically efficient on the short-run, they are likely cost-effective in long-run 1.5 °C-consistent scenarios.
Highlights
Energy efficiency improvements are crucial for limiting global warming to 1.5 °C by 2100, which is the aspirational target of the Paris Agreement (United Nations, 2015)
HM Treasury (2013) Boyano Larriba et al (2017) VHK and ARMINES (2016) Stobbe (2007) Lefèvre (2009) Department for Business, Energy & Department for Business, Energy, and Industrial Strategy (2016) IEA (2016b) High-end assumption based on literature review Approximate market exchange rate in early 2017 contrast, life cycle costs (LCC) trends vary: the least efficient refrigerators and dishwashers have the lowest LCC; television models in the least efficient class have the highest LCC; and tumble dryers have the lowest LCC in efficiency class A+ and a higher LCC both for more efficient and less efficient models
If this association is weak or even reversed, LCC optimisation is of little use and other approaches should be used, e.g. a simple rule that a Minimum energy performance standards (MEPS) is set at the bottom end of the best performing quintile on the market, an approach known as ‘toprunner’ approach (Siderius, 2014)
Summary
Energy efficiency improvements are crucial for limiting global warming to 1.5 °C by 2100, which is the aspirational target of the Paris Agreement (United Nations, 2015). A review of 1.5 °C-consistent scenarios found that ‘returning warming to below 1.5°C by 2100 becomes infeasible if final energy demand is not kept to very low levels’ Market forecasts indicate annual growth rates of the market for home appliances of 6% until 2022 (Oristep Consulting, 2017) and growth in the sales of white good units from 640 million in 2016 to 850 million in 2021 (Kithany et al, 2017). If materialized, such growth is not compatible with 1.5 °C-consistent scenarios unless significant improvements in energy efficiency are realized. By cutting off the worst performing appliances and targeting BATs, there is potential to reduce global annual CO2 emissions by 13% in 2030 (Letschert et al, 2013, p. 80), thereby making a significant contribution to achieving the 1.5 °C target
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