Response to interpellation 2022/23:130 on the termination of the inquiry into the energy system
Translated from Swedish by AI; the translation may contain errors. The Swedish text is the original.
Summary AI, written in advance
KD considers that the government is investing 400 million kronor in energy efficiency to reduce society's vulnerability during high energy prices 1. KD argues that a quota obligation system is not the most effective policy instrument 1. KD reprioritized and shut down the investigation prematurely due to limited resources and the need to focus on urgent issues 2. KD wants to support households and companies during the energy crisis and sees energy efficiency as part of the strategy to save 2. KD intends to return to the Riksdag after negotiations at the EU level 3. KD considers that they have well-justified why they shut down the investigation 4. MP considers that there is a need for help to reduce transaction costs for energy efficiency measures. MP argues that it is an enormous cost for individual households to find out for themselves which measures suit them best. MP considers that white certificates would have supported households in multi-family dwellings.
Written by AI in advance and may contain errors. The numbers lead to the speech a statement builds on; check against the text below.
Energi- och näringsministern Ebba Busch (KD)
Madam Speaker! Marielle Lahti has asked me on what facts and circumstances the government's decision to prematurely terminate the investigation into a quota system, so-called white certificates, is based.
I want to begin by underlining that the past year has not only shown how important it is to have a robust and fossil-free energy system but also how important it is to use energy in an efficient way. The Government sees that energy efficiency and reduced use of energy are very significant pieces of the puzzle in reducing society's vulnerability in cases such as high energy prices.
It is against this background that the government is investing approximately 400 million kronor in energy efficiency in this year's budget. The initiative includes both a financial investment grant for reduced electricity and gas consumption within the detached house stock and funds for capacity- and competence-enhancing measures for energy efficiency with the aim of reducing vulnerability during high energy prices.
Even within the EU, energy efficiency plays an important role in contributing to the EU's increased climate ambitions and in reducing the EU's dependence on fossil fuels, especially the dependence on Russian gas. Currently, negotiations are underway regarding several directives within the energy area, including the directive on energy efficiency.
One of the requirements in the energy efficiency directive is an annual national binding energy saving requirement. Sweden currently meets the energy saving requirement by counting savings resulting from the energy and carbon tax. According to the directive, the saving requirement can also be met by introducing a quota system for energy efficiency or alternative policy measures.
The Government considers that the state's role regarding the policy for energy efficiency should primarily be based on energy markets where instruments aim to correct market failures, primarily external effects and lack of information, but also behavior-related obstacles.
The Swedish Energy Agency has on three previous occasions been commissioned to investigate the need for and consequences of different ways to design a quota system for energy savings. The agency has concluded that such a system should not be introduced in Sweden, partly because the policy instrument is not judged to be socio-economically efficient as it is not considered to correct any market failure that other policy instruments do not already aim to correct.
In plain terms, this means that an expert authority has concluded on several occasions that a quota system is not the most effective management tool to ensure that energy efficiency increases.
In addition, the design of a quota system is affected by how the directive will ultimately be designed. The investigation was decided by the previous government with a deadline where it is not possible to have time to take into account the design of the amended directive. Given today's energy situation and because public funds must be used in a responsible manner, the government sees a need to be able to prioritize the funds for more urgent investigations.
Marielle Lahti (MP)
Madam Speaker and Minister! Thank you very much for the answer! I will just do a small recap of why we appointed the inquiry in the autumn of 2021 in the first place.
The purpose was to propose a quota system for energy efficiency in order to achieve a market-based and cost-effective instrument that can increase the rate of energy efficiency in Sweden and facilitate a rapid, smart, and socio-economically efficient electrification of society.
The investigation unfortunately did not get the chance to complete its work. Two days before Christmas Eve, the government announced that the investigation would conclude its work no later than December 31, nine days later. The investigation was supposed to have worked until March 31, 2023, and had already worked for approximately one year and three months before that. It is quite remarkable to conclude an investigation prematurely, three months before the planned reporting.
Why do I mean that it is troublesome for the government to do so? Well, in the final stage of investigations, final proposals are usually drawn up, for example, legislative proposals and impact assessments based on the proposals submitted. When the proposals and final report are then submitted to the government, they often become subject to a referral, for example, where the proposals can be further sharpened and potentially then proceed with a government bill.
All of this was left out. The commission was not given the opportunity to work through and complete its work. No decision-makers were given the opportunity to take part of the proposals. No referral body was given the opportunity to comment on the proposals. The Minister simply overruled the question of the quota system before the commission had the chance to do its job. It is remarkable.
On what grounds was the investigation then discontinued? First, I want to say that it is very pleasing that the government also sees the importance of energy efficiency. We agree on that. It is less pleasing to see the reasons why the investigation was discontinued.
The Minister states that Sweden currently meets the renewable energy requirements through a kind of mathematical gymnastics - we can call it that - based on energy and carbon taxes. But this mathematical gymnastics will not be enough to meet the requirements by 2030 - unless one can imagine raising the energy tax to 50 percent or so. And that was actually one of the reasons why the investigation into white certificates was initiated.
The Minister says in plain terms in the response that the expert authority has concluded on several occasions that a quota system is not the most effective steering measure. But that is not quite correct. In the first investigation in 2006, the Swedish Energy Agency said that they thought it was interesting, but too early, to introduce a market-based system. They wanted to wait for other experiences, for example from the electricity certificate trade.
The second investigation, from 2010, condemned the system. After that, a third investigation was conducted in 2015. At that time, the attitude was positive and it was stated that the circumstances had changed. New electricity meters had been installed progressively, which had changed the conditions. Other countries had also introduced this type of system. It was said that politicians needed to set goals and that there were better conditions to reassess the conclusions from 2010.
The Minister states in the response that one of the main reasons for closing the investigation is that the government considers that the state's role regarding the policy for energy efficiency should primarily be based on energy markets where instruments aim to correct market failures. In view of this, I would like to ask a question to the Minister.
It appears from the answer that the government intends to invest 400 million kronor in energy efficiency in this year's budget. What is the market failure that they want to correct with this investment?
Energi- och näringsministern Ebba Busch (KD)
Madam Speaker! I want to start by saying that even though I was fetching more water, I was all ears. That is the advantage of being a parent of small children – one can handle several things at once.
I want to say this regarding the white certificates: The purpose has been good. The intentions have been good. We agree with much of this. The government's view, however, is that since we have been involved in similar ideas previously and tested them, we believe it has shown that it is not the most fruitful way forward. In a situation where many investigations would be appointed, where we did not have infinite resources to be able to handle it, and where we had many important and pressing issues on the government's table, we chose to reprioritize.
For those listening, it may seem a bit strange when it was already so far along. I want to say that it is regrettable; it is not optimal. But it is not unusual during changes of government, regardless of whether one goes from blue to red or red to blue, as it is customary to review what should be completed and what should not. It is clear that it is regrettable that this is being scrapped so late in the game, but I mean that we had grounds to make that prioritization, both considering the doubts that have emerged earlier and when taking into account that the investigation resources are limited.
Marielle Lahti explains very profitably regarding the process that follows an investigation. It takes time but is also a question of cost, and we have chosen to prioritize other parts more heavily.
So, to the final question about whether we make such a clear prioritization in the budget and allocate funds for energy efficiency, and which market failure it compensates for.
As we see it, we are now in a situation where we clearly need to signal that we need to do what we can to deliver more electricity production and release everything we have.
That is the first of three legs in the government's management of the energy crisis. It is about consolidating power and releasing as much electricity production as possible. The second is about supporting households and companies and trying to alleviate the burden during this difficult time. The third is about saving to avoid and reduce the risk of disconnection.
But in this there is also the question of energy efficiency. We know that there is a large untapped potential within the business sector but also among many private consumers for precisely energy efficiency. It is clear that one should not waste unnecessarily. A lot is happening within the construction sector that is groundbreaking and can significantly reduce our electricity demand. It can have great significance at the same time as we build new.
At the same time, very many households are struggling. It is, as many have pointed out, expensive to be Swedish, and when the margins decrease for many households, it can be that which makes it impossible to buy that air source heat pump or whatever it may be to switch over from heating with direct electricity.
Can we support households in this while simultaneously setting clear demands and continuing to negotiate many of these issues at the EU level? It is a priority for the government.
Marielle Lahti (MP)
Madam Speaker! I intended to mention something about why energy efficiency is so important.
Most of us know that we will have a doubled energy demand by 2045 - if it is sufficient. That means we have a little over 20 years to ensure the energy supply for Swedish households and companies.
We need to work hard to get new production in place with geographical distribution across our entire country, but it will not be enough. Getting new production in place takes time - depending on the type of energy, everything from three to ten years. In addition, one needs to run lines to the production facilities. That can take as much as twelve years before lines are in place, and we simply do not have that time.
We need to focus on something other than new production and work in parallel with other measures. We need to work with energy efficiency, build smart power grids and utilize the flexibility that already exists in the energy system. But now we are talking about energy efficiency.
It can sometimes seem as if we in Sweden have already energy-efficiented sufficiently, but that does not actually match reality. In fact, it is the case that almost 80 percent of the buildings in Sweden achieve energy class E-G, which means that they use on average twice as much energy as they should. Sometimes even that is not enough.
I have met actors who work daily to help property owners improve energy efficiency. When they step in where the property owners are motivated, they reduce energy consumption by 50 percent, often as much as 65 percent. This provides many kilowatt-hours to the energy system.
The Minister for Energy has repeated on several occasions that every kilowatt-hour counts. I can do nothing but agree.
That justification was used, for example, in connection with the extraordinary measure to stop the environmental assessment of the hydropower, a regulatory framework that Sweden was already delayed in introducing before the previous stop decision. We risk fines of up to 1.2 billion per year because the regulatory framework has not been introduced. There, a powerful measure was taken to release every kilowatt-hour.
If every kilowatt-hour is counted, then 17 terawatt-hours of electricity and 11 terawatt-hours of district heating should really be counted. Now, it is indeed life-threatening to recalculate this, because then one can end up anywhere, but as a comparison, it is 17 billion kilowatt-hours and 11 billion kilowatt-hours.
Energy efficiency is a measure that provides several important terawatt-hours to our energy system in both the short and long term. The investigation into white certificates shows in its final report, which had to be delivered quite rapidly, that this saving corresponds to the production of two reactors - Ringhals 3 and 4 - exactly. That production could instead satisfy part of the needs that the transition of industry and electrification require.
My question to the Minister for Energy is what measures she will take to achieve an energy efficiency that corresponds to these 28 terawatt-hours by 2030.
Energi- och näringsministern Ebba Busch (KD)
Madam Speaker! The somewhat brief and dry answer to this, if I am to focus on the question itself - I could comment a lot on the subject in general - is that we will have to return to that.
Now we wish to see what the outcome will be of the prioritization of support for energy efficiency that we made in the budget bill for 2023 and which we will maintain even for the coming year.
As said, there are also quite extensive negotiations ongoing at the EU level where we have an ambition to move the acts as far forward as is possible during the spring. Then we will have reason to return to the Riksdag with further information on the matter.
Marielle Lahti (MP)
Madam Speaker! I would like to conclude by saying that I meet a great number of actors who are concerned about the developments ahead.
These are fantastically skilled companies that are, to the highest degree, a part of Swedish business. They are concerned that there is a major lack of knowledge and incentives for households, companies, and multi-family dwellings to improve energy efficiency. It is unfortunate, especially when one sees the enormous potential that exists.
There is a need for help and support. The investigation's proposal to reduce transaction costs for undertaking energy efficiency measures was to place that support with an energy actor. In a referral round, one might have been able to reformulate the proposal so that it became less administratively burdensome, but now we didn't even get a chance to do that.
The transaction cost for individual households to figure out for themselves which measures suit them best is enormous compared to a professional coming in and being able to say, "you have this palette of measures to choose from given how you live," and then implementing measures to achieve actual effect. It would have yielded 28 terawatt-hours.
Another factor that is important in this context is households in multi-family buildings. There, the property owners can pass on the cost of energy to the households, and the households have no power to take measures to reduce their energy costs. The white certificates would have supported that as well.
In conclusion, I ask what message the Minister for Energy gives to those customers who live in, for example, apartment buildings and do not have the possibility of reduced energy costs because you in your government have chosen to remove the support for apartment buildings that the previous government had in its budget.
Energi- och näringsministern Ebba Busch (KD)
Madam Speaker! I will try to keep it short and summarize. We share the ambition to prioritize energy efficiency moving forward. I think we have well justified why we chose to discontinue the ongoing investigation and prioritize something else. It is partly connected to the fact that the direction we have had and which has been driven for a long time regarding the electricity system in Sweden has resulted in us ending up in a situation where we have had to start up oil-fired power plants, where the operation hit records in 2021 and 2022, while at the same time we have decommissioned four nuclear power plants.
We will not be able to manage the electrification and the green transition without fossil-free power production and a robust electricity system; this needs to be the foundation. At the same time – I want to emphasize what we agree on – we still have a significant need for energy efficiency, which is prioritized.
We will have reason to adjust that support moving forward to ensure that it hits as accurately as possible and becomes as effective as possible, when it is now also hopefully to align with what we manage to complete or drive forward during the chairmanship when it concerns just that important question of energy efficiency. I suspect that we will have reason to debate this again.
Source: The Swedish Parliament. The speeches come from the open data of the Riksdag, translated into English by AI, which may contain errors.