World Energy Outlook 2006

� The decision-makers for energy-efficiency investments are not always the
final users who have to pay the energy bill. Thus, the overall cost of energy
services is not revealed by the market. For example, landlords and property
developers have less incentive to make buildings more efficient, as the
tenants and future owners are liable for the running costs and this factor is
not fully reflected in the value of the property.
A market cannot operate effectively when the value of the goods or services
being bought is unknown or unclear. Despite numerous important policydriven
improvements in this regard over recent years, the energy performance
of many energy-using systems is still either invisible or obscure to end-users.
In fast-growing economies, such as India and China, the energy efficiency of
new energy-consuming capital stock is of crucial importance to future energydemand
trends. However, rapid growth in itself may also compromise energy
efficiency, as the pressure to build new capacity quickly and cheaply often
outweighs longer-term considerations about efficiency and running costs
(World Bank, 2006b). Even if investment in energy efficiency is considered by
economists to be profitable and by policy-makers to be crucial to meeting
energy-security and environmental goals, it is likely to be necessary to offer
incentives for such investments. But such policies have been adopted only
slowly. Investment directed to energy efficiency by the World Bank over
the past 15 years represents a tiny percentage of its total energy investment
(Figure 8.9).
million dollars
Figure 8.9: World Bank Investment in Energy by Sector, 1990-2005
6 000
5 000
4 000
3 000
2 000
1 000
0
1990 1995 2000 2005
Power Renewable energy Coal
Oil and gas
Other energy industries
Energy efficiency
Chapter 8 - Assessing the Cost-Effectiveness of Alternative Policies 211
© OECD/IEA, 2007
8