Greece’s need for energy savings

Rising oil prices have reopened the debate on how to restrict the global economy’s dependence on petroleum. The European Union’s economy and finance ministers’ council (ECOFIN) last week discussed the promotion of a comprehensive energy savings policy, as distinct from the unilateral, tax-type incentives, such as those announced by French Finance Minister Nicolas Sarkozy. A study has concluded that had the EU tapped the existing energy saving potentialities, it would have limited its dependence on oil by 18 percent of current consumption, which roughly represents the combined final energy needs of Austria, Belgium, Denmark, Finland, Greece and the Netherlands. A draft directive adopted and projected to come into force in 2005 was based on this conclusion, and specific measures are expected to be adopted in the meantime. At the same time, in the US, which is much less dependent on oil, a discussion is already under way for substituting small cars for large ones and for orienting industry toward restructuring its production accordingly. In Greece, the debate so far has been limited to how to keep heating oil prices low, although due to the direct impact of higher costs on consumers, everyone agrees that the medium- and long-term effects of rising oil prices will be very serious on the country’s economic competitiveness. Greece’s dependence on oil is much higher than the eurozone average as well as being a rising trend. According to Eurostat data for 2002, crude oil and the various petroleum-derived products represent 57 percent of Greece’s total available energy, against a eurozone average of 41.4 percent. Solid fuels (lignite and coal) meet 31.4 percent of energy requirements, natural gas just 6 percent and renewable energy sources (RES) 4.1 percent. This high dependence by Greece on oil, combined with the country’s obligation toward a gradual reduction in the use of lignite, makes the need for energy savings and the development of RES even more imperative. However, projected consumption trends are unfavorable; demand for gasoline is estimated to rise by 2 percent annually until 2008, and that for diesel by 1 percent annually. The total annual average increase in demand for petroleum products is projected at 5 percent, compared to an 0.8 percent average in the rest of the eurozone, according to data from the International Energy Agency (IEA). As Greece consumes about 100 million barrels of oil a year, an average rise of one US dollar per barrel means an extra $100 million on the country’s import bill. From the above, it can be deduced that the competitiveness of the Greek economy is affected much more by the high fluctuations of the international price of oil than that of the other EU members. Greece also happens to have a high energy consuming economy, as the total use of energy as part of its gross domestic product (GDP) is the highest among EU members (IEA data), despite the fact that the sectors of the economy where energy is a significant production factor, such as transport, communications and industry, account for only 30 percent of GDP, against an approximate average of 40 percent in the rest of the EU. The Greek energy consumption for household heating is below the EU average in per capita terms but represents 54 percent of the total consumption of energy. The Development Ministry is currently giving priority to the liberalization of the power and natural gas markets, encouraging the penetration of natural gas in domestic consumption and drawing up a new legal framework for the development of RES. A basic instrument of this policy is the funds provided under the EU-subsidized Competitiveness Operational Program, where the energy sector is planned to absorb 2.6 billion euros, or 42 percent of the total resources of the program. Of this sum, 1.1 billion euros have been earmarked to back investment plans in energy savings and RES development. Campaign Over and above these sums, the ministry has also set aside about 1 million euros for an energy savings information campaign, to be unveiled shortly by Development Minister Dimitris Sioufas. According to sources, the campaign will be in two stages; one directly through television and radio ads and printed material distributed to households, and a more comprehensive campaign addressed to enterprises. The ministry is also considering proposing to the Education Ministry that it include lessons in saving energy as a subject in the syllabus of primary schools. The EU directive designed to lessen the dependence on oil and projected to come into force next year, will aim, at the same time, at limiting greenhouse gas emissions, as envisaged by the Kyoto Treaty. A sector of priority for the application of measures to improve energy performance is transport, which accounts for more than 30 percent of total consumption. Road transport accounts for 85 percent of total emissions in transport. The directive will include incentives to encourage people to use public transport and to car pool, to promote new technologies and the use of alternative means to air transport, the further development of the single market in rail transport and alternative ideas regarding citizens’ mobility. The short-term target of these measures will be energy savings of 5-10 percent. Other technical targets include the use of upgraded fuels and improved competitiveness of alternative fuels in transport. Priority will also be given to the promotion of energy efficient equipment in small enterprises, households and offices, and of modern technologies, such as the combined production of electricity and heating. An important instrument of the policy will be taxation and pricing policy. Energy saving signs on household appliances are expected to be expanded to include all large items and installed equipment.