Energy efficiency is also a cost effective way to reduce greenhouse emissions. The International Energy Agency (IEA) has concluded that between 1990 and 2004 energy efficiency improvements in IEA countries avoided around 1.2 billion tonnes of greenhouse pollution being emitted in 2004.ⁱⁱ They also saved at least $170 billion dollars in fuel and electricity costs in the same year.

In the past, the IEA has noted that Australia compares poorly to other OECD countries in the uptake of technical energy efficiency.^iii,1 Over the period from 1990 to 1998, Australian energy efficiency improved at an average annual rate of 0.3%, while the average in other OECD countries was 0.7% per year.^iv

However, in the IEA most recent assessment of countries energy efficiency performance, no Australian national average rate of improvement was reported.^v To provide an up-to-date assessment of Australia's energy efficiency improvement, The Climate Institute commissioned independent expert, Dr Hugh Saddler from Energy Strategies² to update previous IEA estimates of energy efficiency improvement in Australia. This was done using methodologies developed by the IEA to ensure consistency of the results with IEA estimates. ^vi,vii

Key findings are:

• Australia's technical energy efficiency improvement between 1990-2004 has been around a third the average amongst other IEA assessed OECD countries. (Figure 1.) Over the period, Australian energy efficiency improved at an average annual rate of 0.3%, while the average in other IEA countries was 0.9% per year

• World leaders, Canada, Germany and New Zealand have improved their technical energy efficiency at a rate 4-5 times that of Australia. Australia's improvement is faster than Austria, Italy and Japan.

National Energy Efficiency Targets

Specific, quantitative and meaningful targets are a key element of energy efficiency policy. Targets have an important policy role as expressions of political will and setting out a strategic vision of policy direction. Overall progress can be measured against these targets and they also have a role in the assessment of particular policy programs

Australia should set a National Energy Efficiency Target and implement mandatory measures to lift Australia to world class energy saving standards by 2015.

A comprehensive policy programme to bring Australia up to OECD average technical energy efficiency improvement by 2015, would involve stronger mandated energy standards for buildings and appliances, rapidly replacing electric hot water heating with either solar hot water or efficient gas systems, expanding and strengthening incentives for distributed energy systems such as solar PV, an energy efficiency retrofit program for houses and commercial buildings, introducing world class fuel efficiency standards for all passenger vehicles, and removing many elements in the tax system that hamper the use of alternative fuels and broader transport options.

Independent modelling commissioned by The Climate Institute estimated that meeting a National Energy Efficiency Target that saw Australia meet OECD standards by 2015 would reduce the electricity sectors' cost of achieving a 80% reduction in emissions by nearly 50% or about $12 billion to 2050.^viii

Figure 1: Annual average technical energy efficiency improvement: 1990-2004

1 Changes are represented as the average change in overall energy intensity of the economy minus the effects of structural changes to the economy that would lead to reductions in energy use for a given level of GDP (e.g. a shift from an energy intensive to a service based economy).

2 Dr. Saddler is the Managing Director of Energy Strategies, a consultancy company he established in 1982, specialising in the fields of energy, environment and technology economics and policy. He has training in science, with degrees from Adelaide and Cambridge Universities. He has been fully engaged in the analysis of major national energy policy issues in the UK and Australia, as an academic, government employee and consultant, since 1973. Since 1990 he has undertaken a large amount of work relating to greenhouse policy, including the development of methodologies and workbooks for the estimation of greenhouse emissions and the compilation of emissions inventories, and policies relating to energy efficiency, renewable energy, and other approaches to reducing energy related greenhouse emissions.

i Government of Australia (2004), Securing Australia's Energy Future, Department of Prime Minister and Cabinet, Canberra.

ii IEA (2007), Energy use in the new Millennium, Trends in IEA countries. IEA, Paris.

iii IEA (2004), Oil, Crises & Climate Challenges, 30 years of energy use in IEA countries. IEA, Paris.

iv IEA (2004), ibid.

v IEA (2007), op cit.

vi IEA (2004), op cit.

vii IEA (2007), op cit.

viii The Climate Institute (2007), Making the Switch - Australian clean energy policies, Preliminary Research Report, Sydney.