IESE Insight
Who Are Europe's Energy Pioneers and Laggards?
Curet, S.; Moraga González, José Luis
Editor: IESE
Artículo basado en: Climate Change Regulation
Año: 2011
Idioma: Multilingual

Europe leads the world in terms of policies mitigating climate change and greenhouse gas emissions, so it should serve as a good indicator of the kinds of measures markets may employ in these areas and to what effect.

That said, Europe seems to have hit a serious speed bump. To meet 2020 targets, E.U. countries will need to redouble their efforts.

In their report, "Climate Change Regulation: Energy Efficiency in Buildings in Europe," Sebastián Curet and José Luis Moraga of IESE's Public-Private Research Center study the impact of E.U. policies on the residential buildings market.

Residential buildings are one of the main sources of energy consumption, and hence, greenhouse gas emissions. As such, focusing efforts on this market presents key opportunities.

Implementing EPBD
Drawing on the Energy Performance of Buildings Directive (EPBD), the authors analyze the state of plans to implement the new regulations across European countries.

The directive includes a convergence index, which takes into account both the speed of adoption at the national level, and convergence with the new directive.

Countries fall into three types in terms of speed of adoption -- pioneers, early movers and laggards -- and another three types in terms of convergence to the directive -- convergent, chronic and non-convergent.

Leading the Way
The current pioneers in terms of speed of regulatory adoption are the United Kingdom, the Netherlands and Portugal.

Besides adapting rapidly to the new E.U. directive, these countries also provide guidance and experience in terms of enforcement and the effects of regulation on markets.

They also reveal some interesting insights on what consumers think of green initiatives.

For example, tests in the Greater London Area confirm that, in the trade-off between costs and green benefits, buyers are willing to pay 2.87 percent, or 17 pounds sterling, more in price per square foot for green dwellings.

More Convergence, More Opportunity
In the second group, we find countries, such as France or Germany, with a long history of energy efficiency regulation.

This, however, does not give them the leading edge, as one might assume.

On the contrary, such regulation, entrenched at both regional and local levels, makes it harder to adapt to new directives.

For instance, France and Germany have been unable to implement a national registry for Energy Performance Certificates.

In the coming years, we can expect more convergence to take place in these countries, as they attempt to establish a national level of regulation.

As this happens, major business opportunities should emerge.

For instance, consumers in France are still willing to pay more for green residences, but the current premium is very small: This, too, has growth potential.

To the Laggards: Act Soon!
In the laggards' corner, we have countries that are slow to react to policy, such as Spain and Italy.

Given that regulatory convergence must take place by 2020, these countries will have to act quickly and adjust their policies and markets to meet E.U. standards.

In other words, expect rapid changes in these markets, and some major opportunities opening up.

Carrot and Stick?
The E.U. is currently focusing on providing positive incentives, such as bonus points for introducing greater energy efficiency and reducing greenhouse emissions.

Moreover, due to regulation and consumer needs, new markets will arise, creating more employment opportunities.

However, given the slow rate of progress so far, sanctions from the European Commission cannot be ruled out, as time begins to run out.

On top of that, increasingly informed voters may have the final say by punishing leaders of countries that have failed to adapt to new green rules.

Those countries that are lagging behind, owing to structural problems or out of sheer stubbornness, need to respond -- and fast.

This is a fast-moving field. The IESE report provides a handy map of areas where different countries need to improve, not only to comply with the directive, but to catch up with their E.U. neighbors.

Future research could build upon the demand and supply methodologies explored here.

This may include, for example, establishing an index for the construction materials market, which is another key sector that could benefit from the regulatory drive toward increased energy efficiency.

© IESE Business School - University of Navarra