Rebates for Energy Efficiency increases


Rebates to small businesses can help save energy: 


Small and medium sized businesses may be more willing to invest in new energy efficient technologies if they are offered a helping hand financially as in the case of the Spanish rebate scheme. Under the 'Pyme-Energia' program Spanish electricity distribution companies offer a rebate scheme for small companies to cover part of their investment costs in certain energy efficient technologies. The electricity companies cover their costs through the electricity price and receive a financial bonus from the state per saved watt. Legislators elsewhere should consider similar schemes as this programme successfully save energy at a tenth of the costs of purchasing electricity.


The idea:


Small and medium sized businesses often claim that they cannot afford to invest in environmental improvement of their production technology.In Spain a rebate scheme has been introduced specifically aimed at overcoming this obstacle for small companies and thus begin to reduce the comparatively high and often wasteful energy consumption of the country's commercial sector.


The 'Pyme-Energia' programme in Spain is a low cost support scheme promoting energy efficiency technologies for business customers. Under the Pyme Energia programme, small and medium-sized businesses have been reimbursed up to 30% of their investment costs in electronic motor control systems and high efficiency lighting. This programme was initiated by government legislation, but is financed initially by the electricity distribution companies from their general income from customers. The electricity companies cover the costs of the rebates as well as the costs of management of the programme, promotion and diffusion costs, but as an incentive the power companies receive from the government a lump sum bonus per saved watt of installed power.


The actual energy savings achieved by the programme in some cases exceeded the targets set. One of the principle energy companies taking part in the scheme, Iberdrola, set an energy saving objective of 58,672 MWh/year in 1998, and achieved an actual saving of 63,953 MWh/year.


The programme has achieved energy savings at a low cost. In some areas it has cost only 0.8 Euro-cents to save one kWh, which is substantially less than the wholesale energy price in liberalized energy markets.

Compared to the average electricity expenditure of a small or medium-sized industrial company, the costs of saving electricity under this rebate scheme is only 1/10 of that expense

The Spanish example proves that investments in energy saving schemes can be profitable for industrial companies, even when short pay-back periods are required. Legislators should consider aiming energy efficiency programmes at small and medium-sized businesses as Spain has done, as this offers a great opportunity for substantial energy savings nation-wide.

Rebates on Efficient Appliances Help Sales:

Lowering prices on energy efficient appliances and products through rebates can change consumer behaviour and significantly increase the market share of the most efficient appliances. This has been clearly demonstrated by the Dutch rebate scheme where the government and energy companies have cooperated successfully to encourage consumers to purchase energy efficient technology. A small part of Dutch energy taxes is paid by the energy companies to the consumer as rebates on energy efficient appliances and building insulation material. The programme caused the market share of energy efficient appliances to grow dramatically from 26% in 1999 to 67% in 2001.


The idea: 

Energy companies in the Netherlands pay their customers a rebate when they purchase energy efficient equipment that qualifies among the best available on the market, and when they install building insulation measures. This rebate is applicable to energy efficient equipment that is designated as at least Class A equipment according to the EU energy label, and also to some thermal insulation measures.

An energy efficient refrigerator, for example, qualifies for a rebate of between 50 and 100 Euros, depending on efficiency performance. This rebate is paid by the energy company to its customer. The money comes from a government energy tax, and the government determines which energy efficient technologies are to be promoted and on the level of rebates.

This is a voluntary programme based on an agreement between the Dutch government and Dutch energy companies within the context of the so called ‘regulatory energy tax’, an ecotax which is collected by the energy company. The company is reimbursed by the state for the costs of administering this programme to stimulate consumers to buy energy efficient equipment. 15% of the energy tax revenues are used for this programme – which includes the total of rebates, costs to energy companies, information campaign etc.

The scheme includes support for energy performance analyses by specialized companies. The energy companies have to document clearly their activities and their expenses for implementing the scheme, as well as the effects of their activities. The scheme is monitored by an independent state body. This scheme has meant that:

  • 30% of Dutch households have received rebates;

  • by 2001, almost all refrigerators, freezers and washing machines on the Dutch market belonged to the most energy-efficient class of the EU energy label (Class A), which is more than twice the EU average market share for such appliances. More precisely, the sale of A-labeled refrigerators has increased from 26% in 1999 to 67% in 2001, compared to EU averages of 12% and 27% in those years.

  • prices of A labeled equipment have decreased.

To be successful, rebate schemes should be accompanied and promoted by wide scale, well targeted information campaigns as has been the case in the Netherlands. This has included the provision of information to the general public via TV-spots, information in national newspapers websites, advertisements in shops, and specific actions targeted at installers, sales personnel, etc.

Taxes and Rebates Improve Vehicle Fuel Efficiency:
Legislators can promote motor vehicle fuel efficiency through different types of financial mechanisms. One option used in the US is a skewed sales tax favouring manufacturers producing motor vehicles that exceed prescribed fuel efficiency standards. Another option used in Ontario, Canada, applies a sliding consumer tax on new vehicles with a fuel consumption above prescribed fuel efficiency standards and provides a rebate on vehicles with a fuel consumption below more stringent standards. Finally, in developing countries it may be worth reducing the cost of a new car when the customer scraps a car that is more than 10 years old.
The idea: 

There are various economic measures that can be introduced to encourage manufacturers to produce more energy efficient vehicles, and to encourage consumers to purchase them. Economic measures should be used in conjunction with minimum standards of performance and financial mechanisms encouraging and rewarding manufacturers to go beyond the specified minimum.

One possible financial mechanism used in the United States to encourage the production of more efficient vehicles is a skewed sales tax imposed on manufacturers producing motor vehicles with higher than standard rates of fuel consumption. The United States' programme specifies a supplementary lump-sum tax imposed on manufacturers on a sliding scale, with the most inefficient vehicles (less than 12.5 miles per gallon) getting a lump sum tax of $7,700.

A second option used in Canada does not only levy a lump-sum charge on energy inefficient cars, but also provides a rebate for efficient vehicles and apply the charge or rebate to the consumers themselves when they purchase new vehicles. This system was introduced in the province of Ontario in 1990, where a sliding tax ranging between $75 and $7000 is levied on vehicles with fuel consumption above nine litres per 100kms while a $100 tax rebate is given to consumers purchasing vehicles with fuel consumption ratings below six litres per 100kms. Thus, the Canadian scheme aims directly at the consumer-link, where the purchasing decision is being made.

A further mechanism might work well in developing countries, where a high percentage of cars are over 10 years old. Levying a lump-sum charge when consumers purchase inefficient vehicles would pay for a rebate for the purchase of more efficient vehicles. Under this scheme, the old model could be scrapped and the newer and more efficient model purchased with the rebate. In order to work well, this rebate would need to be more than the regular-trade in value of the car. Savings in gasoline could eventually repay the difference between the rebate and full purchase price of a more efficient vehicle.