Protocol on Energy Efficiency and Related Matters

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The Protocol imposes more meaningful obligations in relation to energy efficiency, although there are still many shortcomings. Like article 19 of the Treaty, the Protocol adopts the principle of sustainable development. One of the stated objectives of the Protocol is stated by article 1(2)(a) to be 'the promotion of energy efficiency policies consistent with sustainable development'. Another major objective, in article 1(2)(b) is that energy markets should be based on 'a fuller reflection of environmental costs and benefits'. A similar wording is repeated in the Preamble to the Protocol and in article 3(2)(a). This makes obvious reference to the polluter pays principle. As in the case of article 19 of the Treaty, the commitment to this principle is only partial as the word 'fuller' indicates that a total adherence to the principle is neither demanded nor expected. Surprisingly, there is no reference anywhere in the Protocol to the precautionary principle. In this regard the commitment of the Protocol to environmental protection may be regarded as weaker than that of the Treaty, although it must be remembered that pursuant to article 14 of the Protocol it is not possible to become a signatory to the Protocol without also being a signatory to the Treaty.

In terms of general principles other than those specifically related to general environmental law, perhaps the most striking achievement of the Protocol is the acceptance of the notion that energy efficiency can in itself amount to an energy resource. This is made clear in article 1(1) which, referring to the scope of the Protocol, states: 'This Protocol defines policy principles for the promotion of energy efficiency as a considerable source of energy'. This clause constitutes explicit recognition of the argument first advanced by Amory Lovins, who coined the phrase 'negawatt' (a 'negative watt') to indicate that a unit of energy saved

91 'Cost-Effective' means 'to achieve a defined objective at the lowest cost or to achieve the greatest benefit at a given cost': article 19(3)(d).

92 See Shine, 'Environmental Protection Under the ECT, at 544.

is equivalent in worth to an additional unit of energy generated.93 This is the origin of the modern push towards demand-side management and integrated resource planning as a more sustainable alternative to supply-driven energy policies.

Other noteworthy general features of the Protocol relate to economic principles. Contrary to the view of some economic thought, the Preamble declares that the promotion of energy efficiency cannot be left exclusively to the private sector. The relevant clause in the Preamble states:

Recognizing that commercial forms of cooperation may need to be complemented by intergovernmental cooperation, particularly in the area of energy policy formulation and analysis as well as in other areas which are essential to the enhancement of the energy efficiency but not suitable for private funding.

The Protocol also explicitly rejects the strand of economic argument that the law has no role to play in the realm of energy conservation and renewable energy. These arguments run along the lines that the available measures to promote these energy sources can be divided into regulation, stimulation and education. Education is argued to be irrelevant to law, stimulation is argued to be a matter for economists rather than lawyers, and the sole possible role of law, that of regulation, is rejected as being heavy-handed and inappropriate in the modern competitive world markets.94 The rejection of these arguments occurs in three places: in article 3(1), which requires contracting parties to 'cooperate and, as appropriate, assist each other in developing and implementing energy efficiency policies, laws and regulations'; in article 3(2), which requires contracting Parties to 'establish energy efficiency policies and appropriate legal and regulatory frameworks'; and in article 8(3), which states that 'In implementing their energy efficiency programmes, Contracting Parties shall ensure that adequate institutional and legal infrastructure exist'.

The Protocol imposes obligations on contracting Parties to take action in support of energy efficiency at both the national and international levels. The national obligations are contained in articles 3,5 and 8. Article 3 requires the Parties to 'develop and implement energy efficiency policies, laws and regulations', while article 8 states that each Party 'shall develop, implement and regularly update energy efficiency programmes best suited to its circumstances'. The interrelationship between the sections is by no means clear, as the Protocol does not attempt to explain the difference between 'policies' in article 3 and 'programmes' in article 8. One possibility is that article 3 of the Protocol lists those actions requiring domestic legislation, while article 8 refers to actions which might be implemented by executive action of the government without the need for legislation. This possibility appears to be countered, however, by the reference in

93 SeeABLovins, Soft Energy Paths,Penguin Books, London, 1977; ABLovins,'Negawatts; Twelve Transitions, Eight Improvements and One Distraction' (1996) 24 Energy Policy 331.

94 On this point, see A J Bradbrook, 'Energy Law as an Academic Discipline' (1996) 14 J Energy and Natural Resources Law 180.

article 8(3) to the requirement that contracting Parties 'ensure that adequate institutional and legal infrastructure exist'. It must also be remembered that the question whether domestic legislation is required to implement government policies and programs will depend on the nature of the legal system in operation in each jurisdiction and the terms of each nation's Constitution. In reality, it is submitted that there is no conceptual difference between the obligations contained in articles 3 and 8 and that the terms of each article must be treated as cumulative.

The major parts of article 3 read as follows:

(2) Contracting Parties shall establish energy efficiency policies and appropriate legal and regulatory frameworks which promote, inter alia:

(a) efficient functioning of market mechanisms including market-oriented price formation and a fuller reflection of environmental costs and benefits;

(b) reduction of barriers to energy efficiency, thus stimulating investments;

(c) mechanisms for financing energy efficiency initiatives;

(d) education and awareness;

(e) dissemination and transfer of technologies;

(f) transparency of legal and regulatory frameworks.

(7) Contracting Parties shall strive to achieve the full benefit of energy efficiency throughout the Energy Cycle. To this end they shall, to the best of their competence, formulate and implement energy efficiency policies and cooperative or coordinated actions based on Cost-Effectiveness and economic efficiency, taking due account of environmental aspects.95

Article 5 reads:

Contracting Parties shall formulate strategies and policy aims for Improving Energy Efficiency and thereby reducing Environmental Impacts of the Energy Cycle as appropriate in relation to their own specific energy conditions. These strategies and policy aims shall be transparent to all interested parties.

Article 3(2) has the advantage of comprehensiveness. The paragraphs in the article are couched widely and are stated to be non-inclusive. In addition, the sub-article is phrased in such a way as to impose at least a general obligation on all contracting parties to take some action in support of energy efficiency. Unfortunately, article 3(3) suffers from the same qualifications as article 19 of the Treaty inasmuch as the obligation of States is limited to striving to achieve the full benefit of energy efficiency, and to acting to the best of their competence to formulate and implement energy efficiency policies. These obligations are far too vague to be enforceable.

Similar problems beset article 5. While there are significant differences in the energy mix and demands of different countries, and in this regard it is unrealistic to require each country to take similar measures in support of energy efficiency, the clause 'as appropriate in relation to their own specific energy conditions'

95 'Energy Cycle' and 'Cost-Effectiveness' are defined in article 2 of the Protocol in identical form as in article 19(3) of the Treaty; see notes 88 and 91 above, and accompanying text.

effectively gives each country carte blanche to do as much or as little in relation to energy efficiency as it might wish at any given time. The article effectively makes each country the sole arbiter of what is appropriate action and makes international enforcement impossible.

The wording of article 5 is echoed in article 8(1), which requires each contracting Party to 'develop, implement and regularly update energy efficiency programmes best suited to its circumstances'. Again, what is 'best suited to its circumstances' is a subjective test effectively within the exclusive preserve of each nation.

Article 8(2) refers to the activities to be included within domestic programs. It reads:

These programmes may include activities such as the:

(a) development of long-term energy demand and supply scenario to guide decision-making;

(b) assessment of the energy, environmental and economic impact of actions taken;

(c) definition of standards designed to improve the efficiency of energy using equipment, and efforts to harmonize these internationally to avoid trade distortions;

(d) development and encouragement of private initiative and industrial cooperation, including joint ventures;

(e) promotion of the use of the most energy efficient technologies that are economically viable and environmentally sound;

(f) encouragement of innovative approaches for investments in energy efficiency improvements, such as Third Party Financing and co-financing;

(g) development of appropriate energy balances and databases, for example with data on energy demand at a sufficiently detailed level and on technologies for Improving Energy Efficiency;96

(h) promotion of the creation of advisory and consultancy services which may be operated by public or private industry or utilities and which provide information about energy efficiency programmes and technologies, and assist customers and enterprises;

(i) support and promotion of cogeneration and of measures to increase the efficiency of district heat production and distribution systems to buildings and industry;

(j) establishment of specialized energy efficiency bodies at appropriate levels, that are sufficiently funded and staffed to develop and implement policies.

At first glance, article 8(2) appears broad-based and comprehensive. The subarticle recognises, for example, that lack of action in support of energy efficiency measures results from the limitations of current financing arrangements and supports the need for innovative approaches to remedy the current situation. The recognition and promotion of scenario planning to determine long-term energy supply and demand is also enlightened inasmuch as traditional planning has proved to be notoriously unreliable. Two problems exist, however. First, the paragraphs in article 8(2) are only optional, as the clause uses the verb

96 'Improving Energy Efficiency is defined in article 2(6) in identical form as in article 19(3)(c) of the Treaty: see note 87 above, and accompanying text.

'may' rather than 'shall'. Secondly, and more importantly, the programs listed in the sub-article only contain a small fraction of the provisions that have been adopted in domestic legislation, or at least considered for adoption, by the governments of more progressive nations in support of energy efficiency. Far from being broad-based and comprehensive, article 8(2) is in reality narrow and limited in scope.

The international obligations of the contracting Parties relate to cooperation and assistance. By article 3(1), contracting Parties shall cooperate and, as appropriate, assist each other in developing and implementing energy efficiency policies, laws and regulations. Articles 3(5) and 3(7) are also relevant in this regard:

(5) When cooperating to achieve the objectives of this Protocol, Contracting Parties shall take into account the differences in adverse effects and abatement costs between Contracting Parties.

(7) Cooperative or coordinated action shall take into account relevant principles adopted in international agreements, aimed at protection and improvement of the environment, to which Contracting Parties are parties.

Article 3(5) is interesting in that it recognises that the Parties' obligations under the Protocol are not necessarily uniform. The Protocol is not novel in this regard, as differing responsibilities between nations have already been accepted as a feature of international environmental law treaties in the Montreal Protocol on Substances that Deplete the Ozone Layer (and its later amendments)97 and in the United Nations Framework Convention on Climate Change.98 The international community has accepted in these cases that it is unrealistic to expect both developed and developing countries to undertake equal responsibility for environmental action in light of their gross disparity in wealth, and also on account of the fact that the majority of the pollution has been produced by developed nations. It appears that article 3(5) of the Protocol is following this trend. It is unfortunate that the sub-article is not more specific, as its brevity leads to confusion and uncertainty.

The term 'adverse effects' is certainly ambiguous. It could be referring to the general environmental state of each nation, and may imply that States that have more serious environmental difficulties should be expected to take greater action in support of energy efficiency measures. Alternatively, the term could be referring to adverse economical effects. If this is the correct interpretation, it would mean that those countries where the relative costs of adopting energy efficiency measures would be greater (for example, because of the need to import expensive equipment or foreign professionals) would not be expected to take as much action in support of the objectives of the Protocol as other contracting Parties. As a further alternative, 'adverse effects' may be referring to each contracting

97 (1987) 26 ILM 1541. 98 (1992) 31 ILM 849; 1771 UNTS 108.

Party's economic situation. On this interpretation, countries such as Canada and Australia, which have invested heavily infossil fuels and whose economy is largely based on the export of fossil fuel resources, might be able to justify taking less action in support of energy efficiency measures.

The term 'abatement costs' is also ambiguous. This could be interpreted as meaning that developing nations are not expected to spend as much money in support of the objectives of the Protocol as developed nations. Alternatively, it could justify a consideration of the respective costs of establishing similar energy efficiency measures in different nations. Such costs may well differ significantly between nations, bearing in mind matters such as whether materials and technology have to be imported or exist locally. A further possible relevant consideration in this context is the extent to which each nation has already adopted energy efficiency measures. For countries which have already invested heavily in energy efficiency, such as Japan, the costs of further abatement may require increasingly sophisticated and expensive technology and maybe considerable in comparison with those nations which have invested little in this area and which could make considerable improvements by undertaking basic and relatively cheap measures. Are nations that have taken a responsible approach to energy efficiency in the past to be penalised for their foresight?

Article 3(7) recognises the interrelationship between the Protocol and other international environmental law treaties and protocols. Although this is not specifically mentioned, the provision is presumably included to acknowledge that certain energy efficiency measures may have already been taken in pursuance of the discharge of obligations imposed on the contracting Parties under the Montreal Protocol on Substances that Deplete the Ozone Layer (and later amendments) and the Framework Convention on Climate Change. The wording of article 3(7) appears to ensure that countries that have already taken energy efficiency measures under the earlier conventions will receive a credit for their actions under the Protocol.

As regards the type of cooperation required under the Protocol, article 9 states simply that this may take any appropriate form. Areas of possible cooperation are listed in the Annex to the Protocol. This Annex is stated in its heading to be an 'illustrative and non-exhaustive list'. The list is noteworthy for its comprehensiveness, both in scope and in detail. As well as identifying a variety of areas of cooperation in respect of energy efficiency in power generation and transmission, and in the transport, industrial and building sectors of the economy, the list includes financing measures (third party financing, joint ventures and co-financing), efficiencies in municipalities and local community services (district heating systems, efficient gas distribution systems, energy planning technologies, twinning of towns, energy management in cities and in public buildings, and waste management and energy recovery waste), as well as energy efficiency analysis in refining, conversion, transport and distribution of hydrocarbons and international training and education programs. It is by far the most comprehensive list of energy efficiency measures ever attempted in any legal document, international or domestic.

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