Energy efficiency: the challenges of policy design

Energy Policy 29 (2001) 615}629

Energy e$ciency: the challenges of policy design FreH deH ric Varone *, Bernard Aebischer
Catholic University of Louvain, Louvain-la-Neuve, Belgium
Swiss Federal Institute of Technology, Zurich, Switzerland Received 13 March 2000

Abstract This article is about the choice of policy instruments to promote electricity-e$cient household appliances and o$ce equipment. We analyse the design process of the energy-e$ciency policies implemented by Canada, Denmark, the United States, Sweden and Switzerland from 1973 to 1996. The results of this comparative study suggest that a policy instrument is adopted (1) if the degree of coercion involved is compatible with the party ideology of the ruling majority, (2) if a specialized administrative institution already exists, which helps to minimize the costs of implementation, (3) if other political or administrative jurisdictions have already applied it with success and if the transfer of their experiences is desirable or necessary, or (4) if the groups which are targeted are not opposed to it. Finally (5), its adoption also depends on the structure of the market and the speed of technological developments a!ecting household appliances and o$ce equipment. In conclusion, we recommend taking account of these considerations in designing new energy-e$ciency policies at both national and international levels.  2001 Elsevier Science Ltd. All rights reserved. Keywords: Energy e$ciency; Policy instruments; Electrical appliances

The White House is becoming a showcase for energy e$ciency and environmental responsibility. Hillary and Chelsea and I have (2) a new refrigerator, built in my own State, that uses 50% less electricity than the most refrigerators and does not use gases that deplete the ozone layer (B. Clinton, 21 April 1994)

1. Introduction Energy-e$ciency policies are an aspect of the battle against CO emissions and the climatic changes brought  about by the greenhouse e!ect * problems which feature on the political agenda of all industrialized countries. This raises the question of how to make such policies as e!ective as possible. Until now, academic debate has mainly focused on the intervention instruments which ought to be adopted as part of energy-e$ciency policies (normative, prescriptive approach; e.g. special issues of Energy Policy in April 1991 and October 1994, and of Energy and Buildings in 1997). Far less research has been * Corresponding author. Tel.: #32-10-47-42-74; fax: #32-10-4746-03. E-mail address: [email protected] (FeH deH ric Varone).

done on the instruments actually adopted in practice and, above all, on the reasons for these political choices (positive, explanatory approach, e.g. Norberg-Bohm, 1999). The purpose of this article is to make up for this de"ciency by identifying the factors which account for the formulation of energy-e$ciency policies. We believe that such a `policy designa approach is essential to the planning of new intervention strategies which have a real chance of being adopted and implemented by policy makers. The structure of our argumentation is the following. Firstly, we identify the potential of CO emissions reduc tion through electricity end-use e$ciency in the domestic and service sectors. Secondly, we present the policy tools which could theoretically be adopted by public administrations and/or private actors to overcome the `energy e$ciency gapa as well as the instruments actually implemented in "ve countries (Canada, Denmark, United States, Sweden and Switzerland) from 1973 to 1996. Thirdly, we give political and administrative as well as technical and economic reasons why these "ve countries have chosen alternative policy tools to cope with this energy policy problem. Finally, we discuss some conditions and limits, from a policy analysis point of view, to a comprehensive and e!ective policy and institutional design at the (inter)national level.

0301-4215/01/$ - see front matter  2001 Elsevier Science Ltd. All rights reserved. PII: S 0 3 0 1 - 4 2 1 5 ( 0 0 ) 0 0 1 5 6 - 7

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2. CO2 Emissions, electricty end-use and e7ciency gap The generation of electricity is responsible for more than 30% of the energy-related global CO emissions.  There are three ways of reducing the CO emission from  electricity without cutting the energy services: (1) increasing the e$ciency of electricity end-use, (2) using less carbon-intensive fuels to generate electricity, and (3) improving the thermal e$ciency of converting energy to electricity (Levine et al., 1992). This paper deals only with the "rst challenge * the potentials for more rational use of electricity * in the domestic and service sectors. Electricity consumption in the building sector can theoretically be reduced by as much as 90%. With technologies available on the market, the reduction potential in the domestic and service sectors is estimated by many authors to be of the order of (35}45)% (Worrell et al., 1997). In recent years researchers have focused their investigations on the cost e!ectiveness of measures and on the market acceptance of more e$cient technologies. For the domestic sector Koomey et al. (1996) show a `supply curve of conserved electricitya with 20/40% savings at 4/8 cts/kW h. In the service sector, 27/35% of electricity can be saved for less than 4.3/7.1 cts/kW h (Hennicke, 1998). These costs usually do not include transaction costs. This is one possible explanation why an important fraction of these cost-e!ective saving potentials are not exploited by the consumers. But, some of these potential e$ciency improvements are successful in the market and can be estimated to be of the order of (0.5}1.5)%/year in a `business as usuala (BAU) case (Aebischer et al., 1989), compared to a `frozen e$ciencya scenario. Despite these improvements in e$ciency, electricity consumption is increasing in most countries due to growth in population and in economic activity and due to new electricity-using devices and increasing use of traditional energy services. The e!ect of various policies to accelerate innovation in energy e$ciency and market penetration of more energy-e$cient equipment has been investigated by many analysts. A study in Switzerland shows that a very aggressive CO -reduction policy * including a steadily  increasing energy tax, reaching in the year 2030, 200% of the retail price without a tax on electricity * can lead to a reduction of electricity consumption relative to a BAU-scenario of 8% (2010) and 31% (2030) in the domestic sector (Hofer, 1997) and of 6% (2010) and 29% (2030) in the service sector (Aebischer, 1997). A French study arrives at savings in the electricity demand (space heating excluded) of the service sector in 2010 of 12% (moderate DSM measures) and 22% (accentuated DSM measures), relative to a BAU-scenario (Angioletti, 1998). A study in the United States estimates the possible electricity savings in 2010 (relative to a BAU-scenario) by means of various policy measures at 7% (E$ciency scenario) and 17% (high-e$ciency/low-carbon scenario) in

the domestic sector and at 6% (e$ciency scenario) and 15% (high-e$ciency/low-carbon scenario) in the service sector (Interlaboratory working group, 1997). A research group in United Kingdom evaluated the potential savings in electricity use for lighting and appliances in households induced by a strong political support for CO reductions at 33% in 2010 (Boardman et al., 1997).  For o$ce equipment, due to the fast increase of the quantity of equipment and due to their relatively short life time, energy savings of the order of 50% (relative to a BAU-scenario) could be reached within 10 years if measures to reduce the electricity consumption in standby- and o!-mode were adopted by manufacturers and accepted by the users (Aebischer and Pain, 1995). Detailed scenario calculations are presented by Koomey et al. (1996) for o$ce equipment in the US, showing, in 2010, savings (relative to a BAU-scenario) between 13% (scenario: Energy Star current practice continues) and 58% (scenario: advanced case). Table 1 summarizes these potentials for the OECD countries. Electricity savings and reductions of CO emissions are measured relative  to a BAU-scenario, which includes itself an improvement of electricity e$ciency of about 10% in 10 years. Technologies to increase electricity end-use e$ciency are available and cost-e!ective, but only partly used. According to neoclassical economic theory, equilibrium prices of the di!erent agents and energy technologies leads to a pareto-optimal allocation of resources. Thus producers and consumers invest rationally in the development and end-use of the most energy-e$ciency technologies. However, market distortions and institutional obstacles lead to an under-investment in energy-e$cient household appliances and o$ce equipment. So, the various economic actors do not opt systematically for technologies that ensure their energy services for the lesser economic and environmental cost. Such an allocation of resources proves therefore de"cient. The potential of energy savings, and thereby CO emission reduction, in  connection with the development, distribution and utilization of more end-use e$cient appliances, is partly unexploited. Several factors explain this situation, commonly referred as `energy-e$ciency gapa or `energy-e$ciency paradoxa (Ja!e and Stavins, 1994; Eyre, 1997; Weber, 1997). Energy analysts consider that the majority of these factors (e.g. information de"cits by the consumers and retailers, "nancial disincentives for the landlords, who support the investment cost of appliances, fragmentation of on-line production, etc.) are indeed `market failuresa and, thus, maintain that a strong public action is essential to palliate all of them. Economists de"ne as real `market failuresa only two types of obstacles: the external costs and the information de"ciency. As a corollary of their diagnosis, they suggest minimal public action (Fisher and Rothkopf, 1989, 398ss; Sutherland, 1991, 31ss). Nevertheless, all authors have now reached a consensus on problems of information asymmetry between producers and

F. Varone, B. Aebischer / Energy Policy 29 (2001) 615}629

617

Table 1 Electricity saving and CO -reduction potentials in the residential sector (all electricity uses), in residential appliances, in the commercial sector (all  electricity uses) and in o$ce equipment in the commercial sector in the OECD-countries Electricity Electricity demand 1990, demand 2010, OECD (TWh/a) OECD, (scen. BAU) (TWh/a)

Resendential sector (total) Residential appliances Service sector (total) O$ce equipment

Saving potential 2010 (relative to scenario BAU)

Saving potential Reduction in 2010 in OCED energy costs (TWh/a) 2010 OECD (Bill, USD/a)

CO -emission  reduction potential 2010 in OECD (Mt CO /a)


CO -emission  reduction potential 2010 in OECD countries, (relative to total energy induced CO -emissions in  scanario BAU)

2024

2892

(10}15)%

290}430

29}43

140}220

(1.1}1.7)%

1012

1446

(10}25)%

140}360

14}36

70}180

(0.5}1.4)%

2024

2892

(8}20)%

230}580

23}58

120}290

(0.9}2.3)%

25}50

250}300

(20}50)%

50}150

5}15

30}80

(0.2}0.6)%

0.1 USD/kWh
Assuming 0.5 Mt CO /TWh, (approximately UCPTE-mix today)  Total energy induced CO -emissions in OECD-countries: 12847 Mt CO (European Commission, 1996).   One third of total electricity demand in OECD-countries in 1990 and in 2010, scenario `Conventional Wisdoma (European Commission, 1996). Detailed information in the text. 50% of total electricity use in the residential sector (own estimation). Own estimation based on (McMahon et al., 1995).

consumers, as the main cause of `market failuresa and sub-optimality of investments in high energy-e$ciency appliances and equipment (Huntington et al., 1994, p.795).

3. Policy design: the choice of instruments Furthermore, most energy analysts and economists agree that the state should play a certain role in the promotion of energy e$ciency. Their normative recommendations regarding the choice of instruments diverge however. Several authors propose a selection of instruments which considers only the type of `market failurea they have identi"ed (e.g., Ja!e and Stavins, 1994, p. 60). But instrument choice is never a rational or technical process as some neoclassical economists postulate. The process is not limited to policy makers' identifying a market failure (e.g. information asymmetry) and then choosing an instrument to palliate it (e.g. labelling). Rather, the design of policy instruments is always dependent on the political sphere and on power struggles between the public and private actors of the regulated sector. Thus, the `policy designa approach should stress the political essence of the instrument choice and reject the economic thesis according to which policy tool selection is a neutral process that looks solely to minimize the social costs of state intervention once public policy objectives are decided upon. An empirical analysis of the context, actors and modalities of the political choice of instruments is therefore necessary.

3.1. The political economy of instruments Although di!erent policy tools (e.g., labelling, standards, tax, technology procurement) can be alternatively implemented by the government to achieve the same political objective (e.g. energy e$ciency), these di!erent instruments should not be considered as functionally equivalent from a political perspective. Indeed, each policy instrument is inextricably linked to administrative resources, implementing agencies, target groups, and speci"c institutional procedures. Alternative policy tools thus involve distinct models of state intervention and policy processes. Each policy tool generates its own `political economya and constitutes a (quasi) independent system of action in and of itself. Empirical evidence has led a majority of authors to accept the idea of separate political economies for each policy tool. These authors focus on one or another of the multiple modalities of instrument operation from their respective theoretical perspectives. Salamon (1981, 1989) has examined the structure of policy tool implementation. He notes that instruments di!erentiate themselves by the degree of centralism and automatism involved in their implementation. Schneider and Ingram (1990) look at the political economy of policy tools in terms of their impact on designated target groups. They suggest that instruments vary according to the nature of the behavioural changes they induce and the degree of participation and policy coproduction they require. Finally, Trebilcock (1982) and Howard and Standbury (1984)

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apply the hypotheses of public choice to formalize the (re)distributive e!ects of policy tools. They argue that instruments are characterized by di!erent degrees of cost and bene"t concentration and the visibility of this (re)distribution among groups. According to the prevailing literature on `policy designa (see Varone, 1998, pp. 41}62 for an overview), four main dimensions allow us adequately to de"ne the principal facets of the political economy of a policy instrument (Linder and Peters, 1989). These four fundamental attributes * which can be applied to each instrument * are to be understood as the valuation criteria by which political and administrative actors evaluate and choose a speci"c policy instrument: (1) the instrument's degree of coercion, de"ned in terms of ideological and "nancial constraints on the respective role of government and private market, (2) its resource intensiveness, de"ned in terms of administrative operating costs, (3) its political risk, de"ned in terms of public visibility of (potential) policy failure and, "nally, (4) its targeting, de"ned in terms of how precisely and selectively policy instruments target recipients of bene"ts and costs. Other criteria, which are not considered explicitly here, could include for example the time frame for the instrument's e!ec-

tiveness (e.g., immediate impacts in the case of energy standards versus long-term impacts in the case of education programs for consumers). A choice among di!erent (possible) policy instruments is a choice among their di!erent political economies. Thus, the empirical analysis should test hypotheses for each of these four valuation criteria which account for the principal dimensions of a policy instrument (see Sections 4.1.1}4.1.4 below). 3.2. Theoretical repertoire of instruments In theory, there is a long list of possible instruments to promote energy-e$ciency, limited only by the imagination of policy makers and academic researchers. Without claiming to be exhaustive, the classi"cation elaborated by the US Department of Energy distinguishes instruments according to e!ects expected on the market structure, which is represented by the distribution of the number of purchased appliances according to their respective energy e$ciency (cf. Fig. 1). According to this classi"cation, three categories of instruments can be identi"ed: (1) instruments eliminating the least e$cient appliances (e.g., voluntary agreement on target values, standards on minimal energy-e$ciency); (2)

Fig. 1. Classi"cation of policy instruments according to their e!ect on the market for household appliances and o$ce equipment. (Source: Free adaptation of Millhone (1994) and Menanteau and Lefebvre (1995))

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instruments guiding the choice of consumers towards more energy-e$cient appliances by means of better information and economic interest (e.g., obligatory or voluntary labelling, quality label, retailers campaign training, rebate for consumers, appliance tax) and promoting new patterns of usage of appliances (e.g., education programs, incentive tax on electricity); and, "nally, (3) instruments to develop and launch more e$cient appliances on the market (e.g., "nancial support of private R&D, organizational support for technology transfer, public purchasing and cooperative technology procurement). This classi"cation underlines that the government can in#uence the market (`market transformationa: Peach, 1993; Bachmann and Aebischer, 1995, 8ss) in di!erent ways depending on the instruments it chooses to use: it can initiate (A) an earlier release of energy-e$cient appliances on the market (`anticipation e!ecta), (B) an acceleration of the marketing process of these appliances (`di!usion e!ecta), and (C) a growth in the number of e$cient appliances sold (`penetration e!ecta). Thus, it suggests that a strategy of coherent and e$cient action must rely on a combination of instruments (`policy mixa) rather than on a single intervention: all stages of the appliance's life cycle have to be considered and to compound the e!ect, di!erent instruments have to be used in order to realize a transformation of the market structure. 3.3. Instruments implemented in xve national policies In a detailed empirical study, Varone (1998) compared the policy instruments used between 1973 and 1997 in Canada, Denmark, United States, Sweden and Switzerland to promote the energy e$ciency of household appliances and o$ce equipment. Eighteen di!erent

619

instruments (de"ned here as empirical events to be explained) were identi"ed (cf. Table 2). In practice, the approaches of the di!erent countries with respect to the policy instruments varied in a number of ways. The degree of coercion associated with the instruments applied to domestic appliances was higher than with those used to in#uence the electricity consumption of o$ce equipment (e.g. no mandatory labelling or standards). Within the domestic sector, the degree of coercion associated with the tools adopted by the United States and Canada was higher than that of the co-operative intervention strategy preferred by Switzerland. Moreover, only Sweden and the United States used incentive tools. Di!erences were also apparent in the service sector, in particular with the adoption of information and incentive tools in Sweden and the United States, and voluntary agreements on labelling and target values in Switzerland. In cases where identical instruments were used by di!erent countries, the date of their legal adoption di!ered considerably, especially in the domestic sector. On the other hand, we noted a sequential pattern in the adoption of policy instruments, the more recent supplementing or supplanting older ones. With the exception of Sweden, there was certain regularity to this pattern of development, with information instruments (e.g. voluntary labelling) being followed by prescriptive instruments (e.g. mandatory standards) and "nally, in some cases, incentive instruments (e.g. public purchasing).

4. Explanation for the choice of instruments Why do di!erent countries prefer di!erent instruments or di!erent combinations of instruments (`policy mixa)

Table 2 Policy instruments applied from 1973 to 1997 in the "ve compared countries Compared countries

Household appliances

O$ce equipment

Canada

Quality label (1992) Public purchasing (1993)

Sweden

Mandatory labelling (1978) Standards (1992) Mandatory labelling (1982) Standards (1994) Voluntary labelling (1973) Target values (1975) Mandatory labelling (1975) Standards (1978) Technology procurement (1992) Mandatory labelling (1976)

Technology procurement (1988)

Quality label (1993)

Switzerland

Voluntary labelling (1990)

Target values (1990)

Quality label (1994) Public purchasing (1994)

Denmark United States

Technology procurement in Sweden and the target values negotiated in Switzerland aim to in#uence consumption both of domestic electrical appliances and of o$ce equipment, while all other instruments apply to either the household or the commercial sector. Source Varone (1998, p. 143).

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to promote the electricity e$ciency of the same end-use? According to our policy design approach, the explanatory variables for the choice of policy instruments include political and administrative factors as well as technical and economic factors. 4.1. Political and administrative factors We analysed empirically to what extent the four political valuation criteria mentioned above (degree of coercion, resource intensiveness, political risk and targeting) can explain the choice of policy instruments. To do this, we formulated one research hypothesis for each of the four valuation criteria. We discuss each of these four hypotheses below, taking one country as an example in each case. These executive case studies are presented for illustrative purposes and do not suggest that the hypothesis used for a given country is necessarily the only one which is relevant to explain the events there (refer to Varone 1998 for an exhaustive interpretation of the "ve case studies according to the four hypotheses). 4.1.1. Ideology of the political majority and degree of coercion of instruments: the example of the US Our "rst hypothesis is that the degree of coercion used depends on the ideology (pro-state versus pro-market) of the ruling political majority. In the case of the United States, we postulate the following pattern: a Democrat President or Congress tends to adopt constraining instruments (mandatory labelling and standards) or incentives (public purchasing and procurement of technologies), whereas a Republican President or Congress opts for voluntary instruments (voluntary labelling, quality label, negotiated target values). In fact, there have been seven stages to the ideological confrontation between Democrats and Republicans. (1) A Democrat Congress introduces mandatory labelling against the advice of Republican presidents: In March 1973, the Democrat Representatives and Senators introduced a number of bills to make the labelling of domestic appliances mandatory. Reacting to this pressure from Congress, in April 1973 Richard Nixon instructed the Federal Trade Department (FTD) to introduce a program of voluntary labelling * a policy which was followed by his successor, Gerald Ford. In December 1975, without even waiting for the implementation of the FTD program, the Democrat Congress adopted the Energy Policy Conservation Act, which authorized the Federal Trade Commission (FTC) to introduce mandatory labelling and the Federal Energy Administration (FEA) to negotiate electricity consumption target values. (2) A Democrat President and Congress introduce mandatory standards: To bring in an e!ective energy-e$ciency policy, Jimmy Carter asked Congress to adopt "xed standards instead of negotiated target values. In November 1978, the Democrats' double majority in the House of

Representatives and the Senate led to the adoption of the National Energy Policy and Conservation Act, which gave the Federal Department of Energy (DoE) discretionary powers to lay down standards for the electricity consumption of domestic appliances. The DoE immediately began introducing a regulatory process. (3) A Republican President annuls the introduction of mandatory standards against the advice of a Democratdominated House of Representatives, which, in conjunction with various non-governmental bodies, resorts to court arbitration: In accordance with his non-interventionist ideology, Ronald Reagan tried to block the e!ective application of standards. Working with a Democrat House of Representatives and a Republican Senate, he preferred to avoid the uncertainty of legal reform, and made maximum use of his room for manoeuvre in the regulatory "eld. Thus, in April 1982, the DoE concluded that standards could never be economically viable and therefore could not be introduced. This administrative decision, referred to as the `no-standard standarda, met with opposition from the Democrat Representatives, who demanded an audit by the General Attorney (head of the General Accounting O$ce, GAO). At the same time, the decision was contested in the courts by consumer organizations, environmental groups and a number of States. Between 1982 and 1985, the con#ict between the Republican administration and the Democrat House of Representatives was arbitrated by the GAO and the Appeal Court of the District of Columbia. These bodies required the DoE to reconsider * legally this time * the entire regulatory process. In parallel with the internal workings of the DoE, a grand coalition of manufacturers and other interests, concerned about the slowness and possible outcome of a revision imposed by the courts, negotiated the electricity-consumption levels required by future standards. These negotiations were motivated by the fact that * following the example of California * several States adopted their own divergent standards, thus inducing new manufacturing costs for the producers (see hypothesis 3 below). The results of these negotiations (federal standards which pre-empt over States standards) were reintroduced into Congress in the form of a bill. Though adopted by a majority of Democrats and Republicans, the bill did not become law because Ronald Reagan exercised his right of `pocket vetoa in November 1986. (4) A Republican President gives in to a Democrat Congress, which (re)introduces mandatory standards: Following the reconstitution of Congress, the Democrat majorities in the House of Representatives and the Senate, with the support of manufacturers for federal standards instead of divergent States standards, soon adopted a bill identical to that of 1986. Certain to have his veto overturned if he imposed it again, Ronald Reagan signed the National Appliance Energy Conservation Act in March 1987. This law "xed the

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Table 3 Choice of policy instruments in the United States according to the political majority Retained instruments

Democrat Congress

Democrat House and Republican Senate

Republican Congress

Democrat President

NECPA: standards (1978) Public purchasing (1993)

This combination did not occur during 1973}1996

Freezing of the regulating process by the budget reduction

Republican President

Voluntary labelling (1973) EPCA: obligatory labelling and target values (1975) NAECA: standards (1987) EPA: voluntary labelling (1992) Quality label (1992) Technology procurement (1992)

Solution of `no-standard standarda This combination did not occur ('Audit of GAO and judicial arbitration) during 1973}1996 NAECA: `pocket vetoa of the president (1986)

EPCA: Energy Policy and Conservation Act (PL 94}163).NECPA: National Energy Conservation Policy Act (PL 95}619).NAECA: National Appliance Energy Conservation Act (PL 100}12).EPA: Energy Policy Act (PL 102}486).Source: Varone (1998, p. 169).

electricity-consumption levels required by the federal standards, which the DoE was gradually to implement and revise. (5) A Republican President and Democrat Congress agree on a domestic appliance procurement strategy, voluntary labelling and quality labels for ozce equipment: New information and incentive instruments were introduced to diversify the action strategy in favour of energy e$ciency, as these proved compatible with George Bush's determination to establish a partnership between the State and the private sector. Beginning in July 1992, the Environmental Protection Agency (EPA) was involved in a project to procure a super-e$cient refrigerator. At the same time, the Agency initiated the `Energy Stara quality label program for PCs. In March 1991, the Democrat Representatives and Senators introduced into Congress a number of bills drawn up by the DoE with a view to making the labelling of o$ce equipment mandatory. A voluntary solution was eventually built into the Energy Policy Act of October 1992, representing a compromise solution acceptable to the Democrat Congress, President Bush and the Republican Administration. However, the DoE was also given backup authority to require mandatory energy labels if the industry led voluntary program was not adequate. (6) A Democrat President introduces regulations for public purchasing: Counting on the purchasing power of government departments and the exemplary nature of government behaviour, in March 1993 Bill Clinton issued an Executive Order relating to the public purchasing of o$ce equipment. Under its provisions, only equipment bearing the `Energy Stara label was to be purchased by the federal administration. (7) A Republican Congress blocks the regulatory processes of the Democrat Administration: The diversi"cation strategy adopted in 1992, and particularly the gradual

raising of standards for domestic appliances, was seriously called into question in 1995, when the Republicans secured a double majority, in the House of Representatives and in the Senate. Again intending to block any regulatory process, Congress imposed a freeze, then reductions of the DoE's budget in 1996 and 1997. This short analysis shows how the party confrontation between Democrats and Republicans has in#uenced the choice and adoption of instruments in the United States (a part from other factors). Table 3 illustrates, for the United States, the in#uence of the ideology of the political majority on the choice of the degree of coercion of the instruments. Our "rst research hypothesis has been con"rmed regarding voluntary and mandatory labelling, standards, quality labels and public purchasing. On the other hand, it has been invalidated as regards negotiated target values (adopted by Democrats) and the acquisition of technologies (adopted by Republicans). Generally speaking, the link we postulated between the degree of coercion associated with the chosen instruments and the pro-state versus pro-market ideology of the ruling political majority is empirically observable in more than two-thirds of our observations. In Canada, a Liberal Cabinet introduced mandatory labelling and the Progressive Conservative Cabinets initially opposed the standards. In Denmark, the proposition and adoption of mandatory labelling and standards was advanced by a `green majoritya of the Parliament, led by the Social Democrats, or by a SocialDemocrat Cabinet. In Sweden, Social-Democrat Cabinets introduced a mandatory labelling program and the "rst technology procurement programs. Finally, in Switzerland, the Right majority of the Parliament and of the Government strongly and successfully opposed all constraining instruments and, as expected by our "rst hypothesis, supported voluntary labelling, target values

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and quality labels. Furthermore, it could be observed that the greater the `ideological gapa between the major political parties (Schmidt, 1996), the better the hypothesis is veri"ed. 4.1.2. Policy problem, administrative institution and resource intensiveness of instruments: the example of Denmark Our second hypothesis is that the adoption of an instrument depends on the existence of an administrative institution with a specialized knowledge of energye$ciency issues and endowed with adequate resources to implement it. If this is the case, the administrative costs of implementation are of course reduced. In the example of Denmark, the relationship between administrative structures and choice of instruments has evolved in three stages. (1) The Ministry of Trade undertakes planning work and sets up the Danish Energy Agency: In the wake of the "rst oil crisis, in November 1973 the Danish government set up an Energy Conservation Committee responsible for implementing various emergency measures. Having managed the immediate crisis, in May 1976 the Trade Ministry (TM) formulated its "rst energy plan, the "rst aim of which was to reduce the proportion of oil used as a source of energy. At the same time, the TM set up the Danish Energy Agency (DEA), the main reason for this organizational arrangement being to limit the costs of oil-related imports. Consequently, the TM and the DEA were only marginally concerned with energy savings. Although some preparatory work was done, no concrete policy instrument was introduced, largely because the necessary legal framework and administrative resources were not in place. (2) The Danish Energy Agency becomes part of the Energy Ministry and introduces mandatory labelling: The second oil crisis and the nuclear accident at Harrisburg (1978}1979) again highlighted the costs of buying oil from abroad and the risks associated with nuclear energy. In response to these external stimuli, in late 1979 the government established an Energy Ministry (EM), which together with the new Industry Ministry replaced the former TM. The DEA also became part of the EM, and at the same time its resources were considerably augmented, its sta! increasing from 30 workers in 1976 to 100 in 1980. In addition, the Energy Ministry set up a management group of 50 o$cials to plan future energy policy. Following this major administrative reform, in November 1981 the EM published a second energy plan which gave greater prominence to reducing energy demand. This new action plan, the signi"cant increase in the DEA's resources and the adoption in May 1982 of legislation on labelling enabled the DEA to make energy labelling mandatory. However, regulatory activity was restricted by the conservative government, which argued that the bene"ts to be expected from the labelling pro-

gram did not justify the cost of implementing it (which incidentally was not quanti"ed). (3) The Danish Energy Agency becomes part of the Energy and Environment Ministry and lays down standards: Energy policy took a new direction after the publication, in 1987, of the Brundtland report on sustainable development. Political debate was then dominated by the environmental issues relating to the emissions of CO  produced by power stations. The aim of the action plan for the environment and development announced in December 1988, and of the `Energy 2000a action plan launched in April 1990, was to reduce consumption of primary energy and, by 2005, to reduce emissions of CO  by 20% compared with their 1988 level. The only way to achieve such savings was by more rational use of electricity, which caused the DEA to revitalize its policy of mandatory labelling. However, a move in this direction was temporarily checked by the prevailing policy of the EEC, which was more cautious in approach. The EM nevertheless announced a number of other measures, though these did not come into e!ect until after the adoption of the `Follow-up to Energy 2000a, in November 1993. By this time, more than 250 people were working for the DEA. In February 1994, the Danish Parliament adopted legislation on energy-e$ciency standards, and authorized the EM and the DEA to lay down limit values. In addition, to achieve better co-ordination of energy and environmental policies, in September 1994 the government established a new Energy and Environment Ministry, incorporating the DEA. Strengthened by this reform, in late 1994 the DEA began introducing mandatory labelling, standards and related measures, for instance the training of domestic appliance distributors. For the implementation of standards alone, it was allocated a generous budget, enabling it to call on the services of external experts and take other measures. The Danish example demonstrates the high degree of plausibility of our second hypothesis, which is con"rmed as regards both mandatory labelling and standards. If we extend the empirical basis to the "ve countries of our comparative analysis, the hypothesis that the choice of an instrument depends on the pre-existence of a specialized administrative institution is con"rmed in two-thirds of the empirical observations. Two complementary points also tend to validate the hypothesis of a political determination to control the means of implementation. Firstly, if the administrative costs of an instrument are high, it tends to be adopted at a later stage, with less costly instruments adopted in the "rst instance. Secondly, if the political and administrative players are opposed to an instrument, they deliberately seek to demonstrate that the related administrative costs are too high and/or to render it inoperative by signi"cantly reducing the resources of the department responsible for implementing the regulations (cf. also cases of United States and Canada).

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In addition, it is worthwhile to point to the fact that the administrative institution chosen for the implementation of an instrument is selected in direct relation to the nature of the collective problem which is socially perceived and politically de"ned as a priority for state intervention. Thus, the instruments to promote energy e$ciency have been successively implemented * in all the "ve countries compared here * by the Trade Ministry after the "rst oil price crisis (since 1973); by the Energy Ministry after nuclear accidents (since 1979); and, "nally, by the Environment Ministry after the UN report on sustainable development (since 1987). If a collective problem becomes a priority issue on the political agenda (e.g. energy price, nuclear risk and environmental degradation), especially after an external shock, then a new administrative institution is created and/or a new action program is initiated. These new policies priorities, implementation structures and resources then constitute a `window of opportunitya for the design of an instrument whose costs of implementation would otherwise be considered too high and, thus, would not be adopted. 4.1.3. Past experiences, transfer process and political risk of instruments: the example of Canada Our-third research hypothesis is that the political and administrative actors adopt instruments with which the risks of policy failure and unwanted side e!ects are reduced to a minimum. With this in mind, they draw on experience built up in other jurisdictions, taking into account (inter)national harmonization processes and/or reacting to the costs incurred in their own jurisdiction by the instruments already implemented in other jurisdictions. These three mechanisms are at work not only between di!erent countries, but also between the di!erent institutional levels of a federal system. The hypothesis to be tested empirically can be expressed as follows: an instrument is adopted if one or more other public jurisdictions have already experimented with it and if these experiments have proved positive and transferable, if (inter)national harmonization imposes it, or if adoption of the instrument makes it possible to reduce economic costs induced by other public jurisdictions. Interpreted in this way, the adoption of labelling and of mandatory standards in Canada has progressed through six stages. (1) The **EnerGuide++ mandatory labelling program is initiated, then thrown back into question, independently of the experience of other countries: The United States (1975) and Sweden (1976) adopted the legal bases for mandatory labelling before Canada decided to do so (1978). However, the Canadian `EnerGuidea program was not in#uenced by these earlier experiences: the Consumption and Corporations Ministry (CCM) was not guided by evaluations of the American and Swedish policies. There was at that time (in the 1970s) no lesson-drawing between the di!erent countries. The content and method of implementation of the three countries' mandatory labelling

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policies in fact di!ered considerably. Similarly, when in 1985 the CCM decided to stop all labelling in Canada, it did so without any reference to the results of the American, Swedish and Danish (1982) programs. The * partly pure ideological * decision of the Conservative Cabinet was based solely on the very limited potential for improving the energy performance of the appliances in question and on the high costs of implementing `EnerGuidea (see hypotheses 1 and 2 above). (2) The **no-standard standard++ regulatory decision in the United States legitimizes the decision not to introduce standards in Canada: In adopting the National Energy Policy and Conservation Act in 1978, the American Congress gave the Federal Department of Energy (DoE) the task of laying down the "rst energy-e$ciency standards. However, in 1982 the DoE formulated its famous `no-standard standarda, arguing that it was impossible to justify standards on economic grounds. This regulatory decision had a direct in#uence on the CCM's noninterventionist strategy in Canada. In 1985, when the `EnerGuidea program and possible alternatives (including the introduction of standards) were being evaluated, the Canadian administration supported the view that no standards should be adopted, taking into account the calculations and conclusions of the American DoE. It should be pointed out that, although the CCM did introduce the `no-standard standarda solution in March 1985, the basis for this decision was soon undermined. In June 1985, the American courts judged that the DoE's decision was not acceptable in law, and demanded a review of the regulatory process. However, this legal judgement was without e!ect in Canada, where the federal Cabinet agreed * for ideological reasons * in June 1985 to do away with the requirement of mandatory labelling without delay, and not to introduce standards (see hypothesis 1 above). (3) The costs imposed on Canadian xrms by American standards force the Province of Ontario to begin laying down standards of its own: Unlike the federal government, which remained passive when American standards "rst came into force in March 1987, the Province of Ontario evaluated the new instrument and in May 1987 concluded that the DoE standards were engendering a number of negative e!ects. Ontario manufacturers had already fallen behind their American counterparts in technological terms. Their appliances did not ful"l the energy-e$ciency requirements that would allow them to be marketed in the United States, and they were therefore losing a considerable share of the market. Controlled by American parent companies which, in compliance with the DoE standards, were concentrating their R&D resources in the United States, the Ontario companies were unable to "nance the technological innovations needed to improve their products. This situation was further aggravating their technological backwardness and might, in the longer term, lead to lay-o!s. In addition, Ontario

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was in danger of becoming a dumping ground for energy-ine$cient American appliances, and this would add to the Province's energy bill. To avoid the energy and economic costs being imported in this way, in June 1988 the Ontario Cabinet and Parliament adopted legislation on energy performance. The "rst regulatory standards, which ensured complete convergence with the American position, were laid down a year later. Thus, the driving force in support of e$ciency standards come from industry sources who see a threat to their market share or export potential (see hypothesis 4 below). (4) The process of emulation gradually extends to three other Canadian provinces, which lay down their own standards: Learning the lessons of the Ontario strategy, three other provinces also adopted their own standards: British Columbia in July 1990, Quebec in June 1991 and Nova Scotia in July 1991. Rapid intervention in all three provinces was justi"ed by arguments similar in every respect to those "rst advanced in Ontario regarding the external costs engendered by the American standards, and the legislation adopted was identical. The regulatory activities of the three provincial administrations were co-ordinated by a number of bodies (e.g. the Conference of Energy Ministers, the `EnerGuidea Management Committee and the Canadian Standards Association). The other Canadian provinces were then in turn in danger of becoming dumping grounds for Canadian appliances with the poorest energy-e$ciency performance. New costs were again being engendered, but this time within the Canadian federal system itself. (5) The federal government harmonizes the provincial standards and reinforces the policy of mandatory labelling: Aware of the hindrances to inter-provincial trade in appliances and the negative e!ects on energy consumption resulting from the absence of federal standards, the central government "nally decided to act. In 1992, it adopted legislation on energy e$ciency enshrining the principle of pan-Canadian standards. This legal underpinning also strengthened the `EnerGuidea energy labelling program, with the acceptance of the recommendations Ontario had formulated in 1990 as a result of its comparative evaluation of the programs adopted by Denmark, the United States and Sweden. The federal harmonization of standards was therefore reactive. It should be noted that the United States had experienced a broadly similar process of standardization: federal standards were adopted to have legal precedence over the di!ering standards previously laid down by a number of individual states (especially California). In this respect, the Canadian government did not learn all the lessons to be drawn from the American experience, or it would have introduced harmonized regulations at the national level from the outset. (6) Canada benexts from the positive ewects of the American **Energy Star++ label: Apart from mandatory labelling and standards for domestic appliances, Canada

has not adopted any other policy instrument. It has, however, bene"ted from the positive externalities associated with the `Energy Stara quality label that the American Environmental Protection Agency (EPA) awards to the best items of o$ce equipment. As the market in such technology is perfectly integrated at the North-American level, and the EPA negotiates directly with the most innovative companies internationally, Canada is not in danger of having to bear costs comparable to those previously incurred as a result of introducing standards for domestic appliances. On the contrary, it bene"ts indirectly from the United States' intervention strategy, without having to bear the administrative costs of implementing its own energy quality labelling policy. Furthermore, there was no state intervention in Canada because the public utilities introduced voluntary DSM and labelling programs (Energy Smart). Where Canada is concerned, our third hypothesis was borne out by the federal standards policy, but invalidated as regards mandatory labelling. Across the whole range of our empirical observations, there was strong evidence of mechanisms determining the reduction of costs imposed by other jurisdictions and (federal) harmonization of (infra-)national regulations (e.g. the decisive in#uence of California for the set up of federal standards in the United States of America, the proactive role of Denmark for the development of European policy on standards). On the other hand, there was little evidence of the in#uence of international organizations (e.g. the International Energy Agency) on the co-ordination of national choices. All in all, the choice of instruments was best explained by a combination of di!erent policy transfer processes (emulation, harmonization and cost reduction). 4.1.4. Organization of interest groups, political power of coalitions and targeting of instruments: the example of Switzerland Our "nal hypothesis is that an instrument is adopted if the target-groups }who have to change their behaviour * are not opposed to it. The primary targets of state intervention are of course the producers of household appliances and o$ce equipment. Consumers and environmental associations, meanwhile, are the "nal bene"ciaries of public action, to the extent to which they bene"t "nancially and environmentally from being able to purchase products with high energy-e$ciency performance. Opposition between the manufacturers, on the one hand, and environmental associations and consumers, on the other, is therefore the phenomenon we need to observe empirically in order to test our fourth hypothesis. In Switzerland, the struggle between interest groups has developed in "ve main stages, and has involved a number of popular referendums. (1) The manufacturers oppose the instruments that environmental associations propose to introduce in the form of a constitutional article: Following the "rst oil crisis, and

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as an alternative to the `global concept of energya formulated by representative of the private sector, six environmental organizations, working under the leadership of the Swiss Energy Foundation (SEF), developed their own plan for energy saving. In 1978, they recommended the introduction of mandatory labelling and standards. This proposal was partially adopted by the federal government, which wanted to formulate a constitutional article in respect of energy. However, the main trade and industry associations * the Swiss Union of Commerce and Industry (the Vorort) and the Swiss Union of Small and Medium-sized Enterprises (USME) * were categorically opposed, and were supported in this matter by most of the cantonal governments. In February 1983, the energy article was rejected in a constitutional referendum. Following this failure, the SEF, in conjunction with 50 environmental organizations, launched another popular initiative, one aim of which was to introduce mandatory labelling, again at the constitutional level. This attempt was also voted down in a popular referendum held in September 1984. (2) Despite the opposition of the manufacturers, popular acceptance of a second version of the constitutional article enshrines the principle of mandatory labelling and standards: In the absence of consensus within the (extra)parliamentary committees concerned, neither labelling nor standards were included in the new legislation on electricity saving and consumer protection being envisaged at the time. The two instruments in question were nevertheless championed by the federal government, which formulated a second version of the constitutional article. When presented for public consultation, the project met with strong opposition from the Vorort and USME. The manufacturers particularly criticized the state interventionism associated with labelling and energy standards, and the legislative in#ation which would stem from their introduction. However, this position was upheld by only a minority in the referendum held in September 1990, the constitutional article being widely supported by the general public and cantonal authorities. Faced with this reality, the manufacturers turned their attention to limiting the scope of the federal government's new powers in this "eld. (3) The manufacturers and electricity companies oppose any constraining regulatory instrument, against the wishes of consumers: Aware of the reluctance of the private sector to countenance mandatory labelling and standards, in the Decree of December 1990 implementing the constitutional energy article, the federal government and Parliament adopted a compromise solution to satisfy both the manufacturers' associations and the environmental and consumer groups. Initially, only voluntary labelling and target values were to be negotiated; subsequently, and only if the initial instruments proved ine!ective, mandatory labelling and standards would be introduced. In fact this compromise did not seem to

625

satisfy any of the parties concerned. During the consultation on the Energy Ordinance, which "xed the regulatory provisions of the said instruments, the FEA (Swiss association of manufacturers and suppliers of domestic appliances) claimed that such regulations were not economically viable. On the other hand, the regional consumer federations recommended that the standards be adopted with immediate e!ect. (4) To avoid the need for constraining instruments, the manufacturers co-operate with the administration and consumers in the implementation of voluntary labelling and target values, and support related instruments: In 1991, the FEA adopted an environmental charter stating that it intended to co-operate with the Swiss Federal O$ce of Energy (SFoE), consumer associations and independent experts in de"ning energy-e$ciency labels and target values. They began working together in 1992, and the negotiations began to produce concrete results in 1993. In addition, the manufacturers gave their support to related instruments. For instance, they supported the `E2000a quality label launched in 1994 by the managers of the `Energy 2000a action program, which was intended to serve as a reference for public purchasing of o$ce equipment. Where the domestic sector was concerned, the manufacturers launched a pilot project to equip 50 private households with the most energy-e$cient appliances on the market, to show consumers what energy-saving and "nancial bene"ts were already available. (5) The manufacturers and electricity companies again oppose the constraining instruments and incentives being recommended by consumers and environmentalists in the context of the new energy legislation: The Energy Decree of 1990 was time limited and itself stipulated that it should be replaced in 1999 by new legislation in respect of energy e$ciency. During the consultation procedure regarding the new draft law, the parties concerned took up diametrically opposed positions. Whereas the consumers and environmental groups proposed introducing mandatory labelling and incentive instruments (e.g. a `bonus-malusa taxation system), the manufacturers (FEA) and the Swiss Electricity Supply Association (SESA) sought to limit any kind of federal intervention to voluntary labelling, and even rejected the target values already in force. Given the success of the instruments already introduced, the SFoE recommended that the federal government and Parliament pursue their implementation. In the event, the recent Energy Law (1998) maintained the status quo. Where Switzerland is concerned, the hypothesis that an instrument is adopted if manufacturers and their associations do not oppose it was con"rmed in the case of quality label and public purchasing, but invalidated for the case of voluntary labelling and negotiated target values. More generally, other lessons can be drawn from our comparative analysis of "ve countries. If

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Table 4 Recapitulation of the empirical results according to the four research hypothesis on political and administrative variables Compared countries

Implemented instruments

H1: degree of coercion

H2: resource intensivenes

H3: political risk

H4: targeting

Number of veri"ed hypotheses

Canada

Mandatory labelling Standards Mandatory labelling Standards Voluntary labelling Mandatory labelling Target values Standards Quality label Technology procurement Public purchasing Mandatory labelling Technology procurement Quality label Voluntary labelling Target values Quality label Public purchasing

# ! # # # # ! # # ! # # # # # # # ! 14

! # # # ! ! # # ! ! # ! # # # # # # 12

! # # # ! # ! # # # ! # ! # ! ! # # 11

! # # # # ! ! ! # # # ! # # ! ! # # 11

1 3 4 4 2 2 1 3 3 2 3 2 3 4 2 2 4 3

Denmark United States

Sweden

Switzerland

Number of empirical observations con"rming the hypothesis (Nⴝ18)

We indicate by the sign#that the hypothesis is veri"ed and by the sign } that the hypothesis is falsi"ed.Source: Varone (1998, p. 310).

manufacturers are opposed to the introduction of an instrument and all the other political actors (consumers, environmentalists and electricity companies) fail to form a grand coalition, the instrument does not get adopted (e.g. standards in Switzerland). On the other hand, if the policy bene"ciaries organize themselves into a coalition having the necessary resources, the manufacturers will try to negotiate a compromise with this coalition, the state then ratifying the instrument that emerges from this negotiation (e.g. standards in the United States and in Canada). If there are internal dissensions among the manufacturers, the state has a window of opportunity to impose its own instruments (e.g. standards at the European level). Finally, it is not possible to establish a direct link between a minority group's institutional opportunities to in#uence the decision-making process (e.g. the rights to take initiatives and call for referendums in Switzerland; appeals to the courts in the United States) and the instruments adopted. The number of partners in a coalition, their degree of organization and resources are decisive in explaining the real e!ects of institutional rules on the choice of instruments. 4.1.5. Summary: politics matter in policy design As a xrst conclusion of our empirical analysis, we deduce that instrument choice is not a technical process as the neoclassical economists postulate. On the con-

trary, the design of policy instruments depends on pure politics. As recapitulated in Table 4, the four hypotheses on the in#uence of political and administrative variables are all plausible (see columns in Table 4). Furthermore, the choice of each of the instruments analysed here can be explained, at least partially, by one or more hypotheses (see lines of Table 4). This implies that every realistic policy designer must recognize the groups of concerned actors together with their economic and political power, if he wishes to elaborate an intervention strategy to co-opt the political majority necessary for the policy's adoption. 4.2. Technical and economic factors Apart from political and administrative factors, the choice of instruments is also in#uenced by technologies and by the market structure. As seen in Table 5, the market for o$ce equipment is signi"cantly di!erent from the market for household appliances, with respect to the degree of globalization, the innovation cycle and the life time of equipment. Considering the rapid technological development in o$ce equipment, no constraining instrument is adopted. Technical standards would be too complicated and too expensive for the simple reason that norms would have to be updated frequently, in order to re#ect the technical

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Table 5 Main di!erences between the domestic and o$ce sectors Di!erences between domestic and o$ce sectors

Refrigerators}freezers

Market(s)

National and regional (Europe, North America, Asia), Worldwide, as consumers needs are identical as consumers needs and habits are di!erent Medium-slow Fast Long (15 years) Medium}short (5 years) Instrument harmonization (e.g. mandatory Instrument harmonization (e.g. quality label) on standards) on regional level international level

Technology development Models life time Recommendation of the International Energy Agency

Personal computers

Synthesis of arguments by Mullins (1996, p. 13).

development. Furthermore, standards would sti#e or slow innovation. Thus, all "ve countries compared here adopted voluntary and incentive instruments. The instruments adopted in the United States, Sweden and in Switzerland are (basically) identical. This convergence can be explained by the fact that decision makers in these countries are conscious of the very high degree of market globalization and thus of the necessity to coordinate their intervention strategy on an international level. In fact, a small group of multinational companies dominate the market (International energy agency 1996, p. 136). On the other hand, the electrical appliances market is always national and/or regional. For example, "ve large companies control the North American market for refrigerators, while the European market is divided, although a tendency toward consolidation is noticeable (Waide and Lebot 1995, pp. 7,8). Consumer needs and consumption patterns are very di!erent and no integration or important trading happens between these two markets. This is an important reason why, in the "eld of electrical appliances, the instruments adopted by di!erent countries diverge signi"cantly; so do their adoption date and the energy-e$ciency level they tend to implement. In the case of household appliances, a country (or the European Union) has therefore a certain margin of manoeuvrability to in#uence directly the "rms producing and commercialising models on their own territory. As a second conclusion of our empirical analysis, it seems important to consider technological and economic factors which are not directly in#uenced by public policies. In order to explain the choice of energy e$ciency instruments, we should * besides studying the political and administrative aspects * analyse minutely the technological evolution, the degree of market integration, and the constellation of economic actor within each particular sector.

5. Implications for future policies Considering the results of our comparative analysis which was brie#y resumed above, the question arises how

to reinforce and coordinate national strategies, and perhaps how to harmonize them on an international level. Thigpen and others (1998), taking the example of the Energy Star label in USA, Europe and Japan, envisage the possibility of inducing a market transformation through international cooperation. Summarizing Thigpen's analysis of this information instrument, Table 6 presents the technical conditions, economic advantages, as well as the political challenges of an international cooperation in this sector. Thigpen et al. (1998) assume that economic bene"ts of international cooperation prevail. Thus, international cooperation seems to be the only real means for inducing a market transformation. Nevertheless, one could also argue that it was the US dominance of the o$ce equipment market (rather than the international cooperation) that has driven market transformation globally. Furthermore, we think that this analysis (of an instrument which is not as constraining and whose e!ects are limited when compared to mandatory standards) does not su$ciently consider the political challenges of international cooperation. As stated above, the choice of instruments depends, among others, on mere political factors (e.g., partisan ideology of leading coalition, organization power of producer, NGO and consumers, administrative resources, past experiences). We must take into consideration not only the costs of international negotiations, but also the costs of national policies inherent in the process of decision taking in the individual countries. The di$culties encountered in transferring the Swedish experience with Technology Procurement (incentive instrument) to an international level (Appendix III of the IEA-DSM Agreement) and the failure of the IEA's attempt at harmonizing standards (prescriptive instrument), are not promising for a rapid harmonization of national policy designs, especially for instruments others than informative ones (e.g., Energy Star label). In our opinion, a successful transfer from one country to another cannot take place without considering the institutional environment of the `target countrya. Moreover, it seems advantageous to keep a certain diversity of instruments in di!erent countries: this allows the testing

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Table 6 Conditions for international harmonization of instruments according to Thigpen et al. (1998) Technical and commercial conditions

Environmental and "nancial bene"ts

Political challenges

1. Technologies consistent across markets (similar products and energy services: OK for o$ce equipment, but not for all household appliances)

1. Large-scale energy savings and CO reduction  opportunities (rapid market growth)

1. Program administration and national/local contextual di!erences (e.g. energy prices, composition of energy sources)

2. Fairness according to international trade agreement (test/measuring of e$ciency consistent across markets)

2. Opportunity for global market transformation (speci"cations easier for manufacturers)

2. Negotiation for establishing e$ciency levels (reaching consensus on test procedures and speci"cation)

3. Single-attribute, simple logo (while all parties must agree and to avoid confusion by producers, retailers and consumers)

3. Manufacturing e$ciencies (production and negotiation costs -' one signal from the state) 4. Administrative e$ciencies (credibility of ongoing program, public oriented material and test procedures) 5. Increased consumer recognition of energy e$ciency (spill-over e!ect between products, motivation of retailers -' one message)

Free adaptation of Thigpen et al. (1998).

of new instruments, even within small countries and small markets (e.g., target values in Switzerland, technology procurement in Sweden). Even more, it o!ers the possibility to test diverse combinations of instruments (`policy mixa) rather than a concentration of all e!orts on the harmonization of a single instrument (i.e., avoid the `best instrument of the yeara syndrome). Finally, it is important to take advantage of political `windows of opportunitya, speci"c to each country (e.g., new political majority, new policy problem on governmental agenda, new administrative capacities), to reinforce policies to increase energy e$ciency and to reduce CO emissions.  Certainly, we are aware of the necessity and relevance of the harmonization of instruments to promote electricity-e$cient technologies and spread them widely to induce a market transformation. But, at the same time, our analysis of policy design in "ve countries leads us to a certain amount of restraint or prudence, when all efforts are concentrated upon a cooperation and instrument harmonization strategy, on an international level. It is obvious that producers objecting to the implementation of standards and/or mandatory labelling harmonization will have more opportunities to delay or stop the political process on the international level, where it is di$cult to reach a consensus because of the numerous parties concerned, than to delay or stop the policy design on the national (or even infra-national) level (e.g. Nadel, 1997, pp. 125}127). We think that pressure from `bottom-upa, as Nadel and Suozzo (1996) suggest in the US context, is essential everywhere. In conclusion, it is worthwhile noting that any policy designer faces a dilemma: neglecting political and administrative institutions and actors may lead to unviable instruments (instruments which are not accepted and not

implemented), but designing in conformity to existing institutions (resulting in adopting instruments which cannot induce a global market transformation) may drastically reduce the potential to induce change in the policy. This observation is not meant to lead to a pessimistic strategy, but rather to a realistic one, based on a serious consideration of political}administrative and technical}economic factors. An encouraging approach consists of a continuous active transfer of knowledge and experiences among the countries: this strategy of drawing lessons and transferring instruments o!ers new opportunities to the leading international organizations (e.g., IEA), and to other actors (e.g., NGO). Yet, it takes for granted a systematic evaluation of national energy e$ciency policies (formulation, implementation and induced e!ects on markets for household appliances and o$ce equipment). References Aebischer, B., 1997. Perspektiven des Energieverbrauchs im primaK ren und tertiaK ren Sektor. Szenario IV. ETH ZuK rich. Aebischer, B., Pain, D., 1994. Energy e$ciency in the building sector: reducing standby-losses of electronic equipment. Proceedings Future Buildings Forum. E$cient Use of Electricity. IEA, Sophia Antipolis, 18}20 May 1994. Aebischer, B., Giovannini, B., Pain, D., 1989. Scienti"c and technical arguments for the optimal use of energy. Update 2.1. SeH rie de publications du CUEPE No 38. UniversiteH de Gene`ve, Geneva. Angioletti, R., 1998. Trends in electricity use in commercial buildings. Key "gures for EU 15 and French case. In Improving Electricity E$ciency in Commercial Buildings. Amsterdam, 21}23 September 1998. Bachmann, C., Aebischer, B., 1995. Demand-side measures for the accelerated development of more e$cient energy technologies and their market introduction. Swiss examples in an international

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