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2.1
Promotion of National Legislation for Energy Conservation: Advocacy for Market Transparency and Sustainable Development
by Adrian J. Bradbrook, Bonython Professor of Energy Law, University of Adelaide, Australia; former Chair of the International Union for the Conservation of Nature Working Group on Climate Change and Energy
2.1.1 Introduction
In recent years a variety of national laws promoting household energy conservation have been introduced in the Asia Pacific region. These have varied enormously in nature and scope. One thing that they have in common is no single legislative solution -- different legislation is required for each sector of the economy. This chapter will examine “best practice” in each of the sectors.
National legislation is one of the major tools available to governments to promote energy conservation, although its role in promoting energy conservation is often misunderstood. The other two tools available to governments are education and fiscal incentives. Education takes place at all levels, from primary schools to media advertising for adults, and seldom requires the intervention of laws. Fiscal incentives usually take the form of taxation deductions, rebates or investment allowances to offset the cost of the installation of energy conservation appliances or materials. Legislation, in the form of mandatory regulations, interacts closely with such incentives.
Regulations, properly drafted, ensure that minimum requirements of energy efficiency or conservation are realized, although their weakness is that they do not encourage industries or individuals to go beyond the minimum specified standards. Incentives encourage industries or individuals to exceed the basic minimum requirements established by law. For this reason, the most appropriate government response to promoting energy conservation is in each sector of the economy to enact by legislation minimum efficiency requirements and also to introduce fiscal incentives to encourage all stakeholders to exceed these minimum requirements by the widest margin possible.
The importance of legislation was recognized at the Asia-Pacific NGO Forum on Effective Consumer Information for Sustainable Energy Use, held in May 1999 in Seoul, Republic of Korea, and at the North-East Asia Forum on Effective Consumer Information for Sustainable Energy Use, held in March 2001 in Beijing, China. Recommendation 6 of the Conclusions and Recommendations of the Seoul Forum states:
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“A comprehensive system of legislation designed to protect consumer interests is essential. Consumers investing in renewable energy devices and energy efficiency equipment deserve particular protection from misleading information”.
In similar fashion, paragraph 10 of the Conclusions and Recommendations of the Beijing Forum states:
“Participants stressed the importance of an appropriate national regulatory framework for energy efficiency promotion ... Participants recognized the merits of such regulatory measures which provided basic mandates for institutional development or for national technical advisory services, minimum energy efficiency standards, improved market transparency resulting from energy labels or other measures designed to enhance public or investor awareness for the benefits of energy efficiency investments and to stimulate energy efficiency technology”.
In the context of households, the sectors where legislation can appropriately introduced are the following:
- the building sector;
- rented housing;
- manufacturers’ warranties for consumer goods;
- consumer product standards;
- energy efficient appliances;
- training system for installers of appliances;
- appliance labelling systems; and
- a specialized government agency.
The manner in which national legislation can most effectively promote energy conservation in each of these sectors will now be examined.
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2.1.2 The building sector
Paragraph 16 of the Beijing Forum Conclusions and Recommendations states in part:
“Participants ... recognized that the installation, maintenance and operation of space heating systems [is] costly, both in terms of capital requirements as well as recurrent energy costs. Participants emphasized the importance of adequate building insulation and endorsed the concept of legislating building codes that include energy efficiency standards.”
Possible forms of legislation can be grouped under the categories below.
2.1.2.1 Compulsory information on insulation in contract of sale
A law of this nature would require the vendor of a building to provide information on the insulation installed in a building in the contract of sale of the building. This is required in the United States of America by the Trade Commission’s Home Insulation Rule. This rule, which went into effect in 1980, requires the seller of a new home to provide information on the type, thickness, and R-value of the insulation that will be installed in each part of the house in every sales contract. Insulation contractors are required to give their customers similar information.
This legislation in the United States is limited in its scope to domestic buildings, but there is no reason in principle why it should not also be extended to buildings designed for commercial use.
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2.1.2.2 Compulsory information on the past heating and cooling costs of a building
This is sometimes referred to as “truth in heating” legislation. It is based on the State of New York Truth in Heating Act 1981. This law entitles all prospective purchasers and renters of houses and residential apartments to receive information on the past heating and cooling costs of a home they are considering buying or renting.
Under the New York legislation, the information that must be divulged to prospective purchasers and renters is:
- the name and address of the fuel vendor and/or utility providing
 heating/cooling
fuel(s);
- the type, quantity and cost of all fuel and/or utility services consumed
during
the preceding two-year period for heating and cooling;
- any additional costs for lighting and water heating;
- whether other energy sources (such as solar, wind, or wood) were used
in
the residence; and
- and, if the residence was unoccupied for thirty consecutive days or
longer,
the approximate dates during which it was unoccupied.
A prospective purchaser or tenant may make a request for the relevant information either verbally or in writing, and the landlord or owner must respond immediately. Landlords are required to request copies of the relevant bills from the utility and/or vendor within five days after being notified that a home is to be vacated. Vendors then have ten days in which to respond to the landlord.
If thought appropriate, this provision could be drafted to apply also to the sale or lease of commercial or industrial premises.
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2.1.2.3 Energy rating or labelling system for buildings
A system of energy rating or labelling for buildings would perform several functions, including:
- encourage builders to select energy-efficient properties;
- induce home buyers to select energy efficient homes;
- encourage home owners to improve the energy efficiency of their
property;
and
- facilitate the inclusion of energy efficiency in appraisals and lending
decisions
by mortgage lenders.
A system of mandatory energy ratings for buildings already exists in a number of jurisdictions. The Florida Thermal Efficiency Code provides for the creation of an energy performance index for all new residential buildings, which must be displayed on the completed building until the time of sale. The local building official issues an energy performance index display card to be placed on the building permit by the local building inspector at the time of the final inspection by the building department. The display card is uniform statewide.
In Australia, the Australian Capital Territory has recently adopted energy rating legislation. The Energy Efficiency Ratings (Sale of Premises) Act 1997 (ACT), ss 6-7, requires an owner wishing to sell their home to first have it energy rated and then to include the resultant rating in any advertisement for its sale. It is an offence punishable by a monetary penalty for an owner to publish an advertisement for the sale of premises unless the advertisement contains a statement of the energy efficiency rating (s 6(1)). An offence is also committed if the energy efficiency rating that is published is false or misleading in a material particular (s 6(2)). Houses are rated using the Australian Capital Territory Home Energy Rating Scheme, which has been developed into software packages to make rating homes a relatively straightforward process.
A less sophisticated system of this nature also exists in Denmark under the Danish Building Regulations for Small Buildings 1985. Under these regulations, the label “low energy house” is bestowed on houses whose net energy need for heating and ventilation is not more than 50 per cent of the maximum energy needs of the building, calculated pursuant to a formula prescribed by the legislation.
A further possible option is a Five Star system of new building design. Under this system buildings would be rated between one and five stars according to a prescribed formula for measuring energy efficiency. It could be made mandatory that a building achieves at least four stars. Alternatively, the law could permit buildings of a lower standard to be sold, but only subject to the disclosure of the lower star rating to the purchaser.
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2.1.2.4 Energy conservation options points
The energy conservation option points system involves the establishment of a system of energy and resource conservation option points that are assigned to a new building for each energy conservation feature of the building. Each new building must achieve a specified minimum number of points. Such a system exists in the subdivision and land use planning ordinances of a number of municipalities in the United States such as the city of Boulder, Colorado.
A typical points system requires all new dwelling units for which building permits are requested to score a minimum number of points from the options list that the local ordinance prescribes. Points may be awarded, for example, for buildings that are favourably oriented for solar access purposes and have roofs physically and structurally capable of supporting a minimum number of solar collectors, or for buildings that contain specified hot water saving devices, air destratification systems, solar devices, and insulated exterior doors, high performance glazing, ambient temperature boiler controls, and specified energy efficient appliances.
Under Boulder’s city code, building permit requests for all new dwelling units must score a minimum of twenty points from a list of energy and resource conservation options. The list is extensive and contains a wide range of options. Illustrations are: insulation increased at least 25 per cent above prescribed levels for foundations (1 point), ceilings (1 point) and walls (2 points), hot water heaters of prescribed efficiency (1 or 2 points), hot water pipe insulation (1 point), air filtration rate below prescribed level (3 or 4 points), reduced area of non-south glazing (1 point), and insulated exterior door (1 or 2 points).
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2.1.3 Rented housing
The major problem associated with maximizing energy conservation in rented housing is the fact that neither tenants nor landlords have any incentive to install energy conservation measures. From the tenant’s perspective, they do not own the premises so are extremely reluctant to make capital investments on the landlord’s property by installing energy conservation measures. The legal title to any such improvements will rest with the landlord who will be under no obligation to compensate the tenant for the value of the improvements. From the landlord’s perspective, because in the majority of jurisdictions landlords do not pay the gas and electricity supply charges for their rented premises, there is little incentive for them to invest in energy conservation measures. And any investment in energy conservation measures is unlikely to increase the rental or resale value of the premises.
This problem could be resolved by a legislative provision requiring amendments to the national landlord and tenant laws. Two forms of relevant legislation exist.
One form of legislation was first devised in France. Pursuant to article 60 of the Law Quillot, enacted in June 1982, when improvements are made by the landlord to the building designed to increase its energy efficiency and the works carry a contractual guarantee of specified results, the landlord is entitled to increase the rent without complying with the normal legal requirements relating to rent increases. The amount of the rent increase must not exceed the value of the guaranteed level of energy saved.
The French provision applies regardless of the length of the lease. In contrast, the second relevant type of legislation involves the drawing of distinctions of this nature. For short-term leases, where the tenant has little or no financial reason to invest in the property, it is submitted that it would be appropriate to place a legal duty on landlords to install at their own expense minimum specified levels of insulation or to ensure that the building meets specified building performance standards. For long-term leases, it would be fairer to allow the landlord to recoup some of the associated costs from the tenant. The legislative framework could recommend in this regard a sliding scale of financial liability for each party depending on the length of the lease, on the basis that the longer the lease the greater should be the contribution of the tenant.
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2.1.4 Warranties of manufacturers for consumer goods
Paragraph 10 of the Seoul Forum Conclusions and Recommendations states:
“The Forum believes that to promote consumer confidence in renewable energy devices and energy conservation materials it is essential that an effective system of legal warranties exist. Warranties of a minimum specified duration should be prescribed in legislation and must give consumers an effective system of legal redress where the equipment fails to perform according to manufacturers’ specifications”.
A significant amount of legislation of this nature exists in the United States, where several states have enacted legislation designed to give specific protection to the purchasers of renewable energy devices against faulty manufacture, improper installation and a wide variety of forms of consumer fraud. For example, New York has enacted the Solar Energy Products Warranty Act, which provides for express warranties to purchasers of all solar energy products in the state, regardless of use. Express warranties for solar products such as a five-year warranty against defects in materials or manufacture and a one-year warranty for improper installation, are also stipulated by legislation in Delaware and Maine. Minnesota requires solar manufacturers to make a full disclosure at the time of sale regarding the performance of each device, the proper installation, warranty details, and instructions as to necessary maintenance.
To be effective in practice, it is suggested that any claims based on a breach of manufacturers’ warranties brought by consumers should be heard before informal small claims tribunals or consumer claims tribunals. This would be preferred to the traditional court system and its associated high level of costs and delays.
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2.1.5 Consumer product standards
Paragraphs 11-12 of the Seoul Forum Conclusions and Recommendations state in part:
“A further measure considered important by consumer organizations to promote sustainable development is the introduction of product standards ... To promote maximum compliance and to increase consumer confidence, it is important that all standards can be legally enforced. The simplest method of achieving this would be to enact legislation giving the appropriate government agency the power to prescribe a standard and to enact laws to protect and enforce all prescribed standards.”
“Minimum energy performance standards were recognized as an effective way to assist customers by requiring the manufacture of products with lower energy operating costs. Such standards should be phased in over several years in order to give manufacturers the opportunity to improve the efficiency of their products. Technical assistance and financial support may be necessary in some cases, especially for smaller manufacturers.”
Product standards have been described as mutually agreed upon statements of minimally acceptable characteristics of materials, products, systems or services (Lawrence and Minan, 1981). They are a measure of product adequacy and may be used to compare value and quality. Standards promote uniformity and thus avoid irregularities or undesirable variations in a product.
This system of legislative protection for consumers is of considerable potential significance in this context as the establishment of a comprehensive set of standards in the industry would have the advantage of instilling confidence in possible purchasers of renewable energy devices and energy efficiency equipment that the devices or equipment will be reliable and durable. Experience in the United States in relation to solar energy has shown that consumer confidence in solar devices has increased markedly in states having an active system of relevant standards (Lawrence and Minan, 1981).
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In recent years, a number of countries in the Asia and Pacific region have developed and published standards relating to the construction, installation and testing of various renewable energy devices and energy efficiency equipment. Article 17(1) of the Rational Energy Utilization Act 1995 of the Republic of Korea states:
“If it is deemed necessary for the rationalization of energy utilization, the Ministry of Trade, Industry and Energy may determine and notify publicly the criteria for establishment, period of achievement, method of measurement, etc. of the target consumption efficiency or target quantity consumed of the energy, and the minimum consumption efficiency or maximum quantity consumed of the energy, with respect to the energy using machinery and materials and the energy supply equipment which come into a wide and general uses, and consume a considerable quantity of energy in the use thereof, and which are prescribed by the Ordinance of the Ministry of Trade, Industry and Energy to increase the consumption efficiency of energy ...”.
In the Russian Federation, Article 4 of the Federal Law on Energy Saving states that one of the principles of the national savings policy is the establishment of state standards on equipment and materials. Articles 5 and 6 state:
“5. The state standards on energy consuming products shall comprise the energy efficiency indices of the latter, in the order established by the Law of the Russian Federation. The indices of efficient energy use during extraction, production, processing, transportation, storage and consumption of energy resources, as well as energy consumption for space heating, ventilation, hot water supply and space lighting, and other production processes characteristics shall be included in the relevant normative and technical documents in the established order. The energy saving requirements set forth in the state standards, technical norms and rules shall be binding throughout the territory of the Russian Federation.”
“6. Energy consuming products of any destination, as well as the energy resources, are liable to compulsory certification with regard to relevant energy efficiency indices. The compulsory certification shall be carried out in the order established by the Law of the Russian Federation....”.
To ensure maximum compliance and to increase consumer confidence, it is important that all standards can be legally enforced. The simplest method of achieving this would be to enact legislation giving the appropriate government agency the power to prescribe a standard and to enact laws to protect and enforce all prescribed standards.
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2.1.6 Appliance labelling system
Paragraph 15 of the Beijing Forum Conclusions and Recommendations states:
“Recognizing the important role of energy labelling in energy conservation, the Forum called for all major electrical appliances and other energy conversion or energy using equipment to be adequately marked with information on the relative energy efficiency. Energy labels must be designed and placed on the equipment/appliances in a manner easily visible and understood by consumers.”
Compulsory systems of labelling of designated appliances for energy consumption exist in a variety of countries in the Asia and Pacific region. The first country to introduce such laws was the United States. Appliance labelling was first introduced in California by the Warren-Alquist State Energy Resources Conservation and Development Act 1974. This legislation empowers the State Energy Resources Conservation and Development Commission to prescribe energy consumption labelling programs in respect of appliances which, in the opinion of the Commission, require a significant amount of energy on a state-wide basis. The Federal Government of the United States legislated in this area with the Energy Policy and Conservation Act 1975.
This act required the Federal Trade Commission to consider the imposition of energy labelling requirements for domestic appliances. The Commission adopted a rule for labelling in 1979, which requires manufacturers of refrigerators, freezers, dishwashers, water heaters, clothes washers, furnaces and room air conditioners to disclose energy efficiency ratings and energy costs. The rule requires a label to be placed on each unit for sale containing a highlighted annual energy cost or efficiency number, a comparison of energy cost or efficiency with the highest and lowest efficiency models, and a chart to estimate yearly or operating costs.
Appliance labelling elsewhere is of more recent origin. In the Russian Federation, pursuant to Article 6 of the Federal Law on Energy Saving, “the fact that [specified] manufactured electric appliances meet the adopted state standards with regard to energy consumption must be confirmed by the appropriate labelling of the said equipment.” In Japan, articles 20 and 21 of the Law Concerning the Rational Use of Energy state in part:
“20. The Minister shall determine and make notification of the matters enumerated below for each Designated Machinery ...:
1. Matters to be labelled by the Manufacturer, etc. with respect to the energy consumption efficiency of the Designated Machinery;
2. Matters to be observed by the Manufacturer, etc., such as the method of product labelling or other aspects regarding the labelling of energy consumption efficiency.”
“21. The Minister may, if the Minister finds that the Manufacturer, etc. has failed to label the energy consumption efficiency of Designated Machinery in accordance with the notification made as provided in the preceding article, recommend that such Manufacturer, etc. should label the energy consumption efficiency of the Designated Machinery manufactured or imported by such Manufacturer, etc. in accordance with such notification.”
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Compulsory systems of labelling have also been introduced progressively in the majority of the Australian states and territories during the late 1980s and 1990s. This legislation states that a person shall not sell any prescribed electrical appliance (defined as dishwashers, refrigerators, freezers, refrigerator/freezers and air conditioners) in respect of which there is a registered label unless the label is prominently displayed on the article.
Application forms for registration are specified. Each application must contain test reports ensuring that the appliance complies with the performance standards stipulated in the regulation.
The specified government agency may refuse an application for registration of a label for an appliance if the applicant fails to comply with any of the terms of the regulation or if the agency is in doubt as to the accuracy or reliability of either the report accompanying the application or the tests to which the report relates. The agency may cancel the registration of a label if the registered person for the article fails to comply with a request by the agency to furnish a sample of the article to the agency for testing, or if, after carrying out tests on the appliance, it is of the opinion that the energy consumption rate or the energy efficiency rating on the label is incorrect or misleading. It is an offence to advertise for sale any electrical article, to attach any label to an electrical article that is offered for sale, or to display on or near an electrical article that is offered for sale any sign or notice, if the person knows, or ought reasonably to have been aware, that it is false or misleading as to the article's comparative energy consumption, energy efficiency rating or star rating.
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2.1.7 Training system for installers of appliances
Paragraph 15 of the Seoul Forum Conclusions and Recommendations states:
“The Forum noted that the installation of renewable energy devices and energy efficiency equipment has given rise in the past to many consumer complaints and has proved in some cases to be a deterrent to the growth of the market in these products. It is believed that a lack of training of salespeople, installers and providers of after sales service is a deterrent to the growth of the industry in these products. Consumer organizations should support the establishment and development of training programs and facilities to train tradespeople in this area and to update the syllabus of plumbers and builders' apprenticeship course syllabuses.”
The installation of renewable energy devices and energy efficiency equipment has given rise in the past to many consumer complaints. For example, in the State of Victoria, Australia a 1985 report into solar water heating technology found that 83 per cent of installers had insufficient knowledge and training to deal with a solar enquiry (Victorian Solar Energy Council, 1985). It was found that the lack of training of installers was proving to be a deterrent to the growth of the solar industry. The report recommended that a special task force comprising representatives from the Master Plumbers Association, the Solar Energy Industries Association and various educational colleges be established to develop, coordinate and implement a state-wide solar energy training facility and programs, and that priority be given to conducting training programs for qualified tradespeople and updating the plumbers' apprenticeship course syllabus. These recommendations for solar hot water services should also be extended to the installation of all types of renewable energy devices and energy efficiency equipment.
If this approach is adopted, it follows that the problem of faulty installation can be more appropriately cured by education rather than legislation. If the education proposal is to be pursued, there is need for further research as to the appropriate levels of instruction and the establishment of a system of trade accreditation for successful participants. As suggested by the Australian study, any course for installers must attain the following goals:
- course literature must be up-to-date;
- there must be provision to view typical appliances and equipment;
- it must be related to current market installation practices;
- there must be effective mechanisms to update the course;
- the course must have information on current available appliances and
equipment;
- content must be practical and "hands on"; and
- course participants must gain substantial practical field experience.
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While this is the preferred option, a legislative remedy exists as a possibility in the event that the industry representatives are unwilling to update their educational programs voluntarily. As a minimum, the legislation should prohibit the installation of renewable energy devices and energy efficiency equipment by unqualified persons and should prescribe in detail the minimum educational standards required for a person to receive a license.
The possible forms of any such legislation are many and varied. There are numerous state statutes in the United States which could serve as a precedent. For example, legislation in Arizona and Maine requires all contractors installing solar equipment to pass a state examination covering problem areas in solar installations. Under the Hawaii Solar Energy Consumer Protection Act 1980, all dealers of solar equipment are required to post a US$5,000 bond with the Director of Regulatory Agencies. Customers are given a first claim on the bond if the equipment does not perform as the dealer claimed, provided that the consumer first tries to settle any dispute with the dealer.
2.1.8 Specialized government agency
In addition to legislating to promote energy conservation in the sectors discussed above, it is recommended that a government agency be established by legislation with the specific function of monitoring the operation of energy conservation laws and ensuring that the maximum efforts are made to enhance sustainable energy development. Such a body would perform the valuable function of coordinating efforts in this regard in the private sector and ensuring that the successful functioning of the sector-specific legislation in this regard is kept under review. Without such an agency, the danger exists that the laws will not be enforced, that the laws will be by-passed and become ineffective, and that law reform opportunities in the future will not be identified and pursued.
Legislation of this nature could take many possible forms. One recent legislation is the Sustainable Energy Development Authority of New South Wales, created by the Sustainable Energy Development Act 1995 (NSW). The functions of the authority, as specified in the act, are wide-ranging. They include reducing levels of greenhouse gas emissions and other adverse by-products of the production and use of energy and the development, commercialization, production and use of all forms of sustainable energy technology. Its functions also include promoting and giving advice to all persons on any matter concerning sustainable energy. The success of this government authority has led other jurisdictions to introduce similar agencies such as the Sustainable Energy Authority of Victoria.
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2.1.9 Conclusion
This paper has attempted to show that national legislation is an essential part of any government programme to promote household energy conservation. It has also attempted to give a representative illustration of the range of possible legal measures in each of the relevant sectors.
It is not enough, however, simply to introduce laws on the subject. The laws must be effective. The statute books are replete with illustrations of laws that have been introduced without adequate consideration, which as a result have either been ineffective and sometimes counter-productive. The success of new legislation will in many cases depend on the care with which the documents are drafted and the exact words chosen by the legislature to enact in the laws. This is a matter of legal experience and competence. The success of new legislation will also depend on the appropriateness and effectiveness of the compliance mechanisms specified. If, for example, inadequate or inappropriate penalties are specified, or if no practical means of verification and inspection are established, the laws will simply be ignored by the stakeholders. It is the duty of each Government to give particular care and attention to this aspect before national legislation to promote household energy conservation can fulfill its full potential.
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References
Bradbrook, A J, “Energy Law as an Academic Discipline” Journal of Energy and Natural Resources Law 14: 193-217 (1996)
Bradbrook, A J, “Eco-Labelling: Lessons from the Energy Sector” Adelaide Law Review 18: 35-46 (1996)
Bradbrook, A J, “A Legislative Framework for Renewable Energy and Energy Conservation” Journal of Energy and Natural Resources Law 15: 313-337 (1997)
Bradbrook, A J, “The Development of a Regulatory Framework on Consumer Protection and Consumer Information for Sustainable Energy Use” Asia Pacific Journal of Environmental Law 5: 239-263 (2000)
Danielson, L J, “Drafting a Solar Access Ordinance: One City’s Experience” Solar Law Reporter 3: 911-957 (1982)
Economic and Social Commission for Asia and the Pacific, Compendium of Energy Conservation Legislation in Countries of the Asia and Pacific Region, (United Nations, New York, 1999)
Lawrence, W H, and Minan, J H, “The Role of Warranties and Product Standards in Solar Energy Development” Vanderbilt Law Review 34: 537-5XX (1981)
Minan, J H, and Lawrence, W H, “Product Standards and Solar Energy”, in Minan, J H, and Lawrence, W H, (eds), Legal Aspects of Solar Energy, Lexington Books, Massachusetts, 1981, 153-178
Riley, J D, Odland, R and Barker, H, Standards, Building Codes and Certification Programs for Solar Technology Applications (United States Department of Energy, Report SERI/TR-53-095) (Department of Energy, Washington: 1983)
Victorian Solar Energy Council, Solar Trade Education Project (Report 120-P2/1/85) (Victorian Solar Energy Council, Melbourne: 1985)
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