EE VA WS 05June13 in English

8/11/2019 EE VA WS 05June13 in English

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BCNG THNG

Clean Production and Energy Efficiency Project

Dn tit kim nng lng v sn xut sch hn ti Vit Nam

WORKSHOP ON

ENERGY EFFICIENCY VOLUNTARY AGREEMENT ININDUSTRY: INTERNATIONAL EXPERIENCES AND PRIMARY

DESIGN FOR VIETNAM

HI THOTHA THUN TNGUYN TIT KIM NNG LNG


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Policy instruments:

Voluntary AgreementsThe what & why of VA programmes

on industrial energy efficiency

Dian Phylipsen, international consultant

1st stakeholder conultation, June 5, 2013, Hanoi

P


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Objective of the Presentation

Explain what voluntary agreements are and

how they work

Outline the pros and cons of voluntary

agreements compared to other policy

instruments Indicate what is needed to develop and

implement a voluntary agreement


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Voluntary negotiated agreementsA spectrum of policy instruments, often distinguishing:

Unilateral commitments:Unilateral statements and pledges by individual companies orassociations to address a prominent policy issue or to demonstratetheir general commitment to a goal

Public voluntary schemes:Initiatives set up by governments, which define performancecriteria and membership conditions, but where participation isvoluntary. (e.g. national or international eco-labels)

Voluntary or negotiated agreements:Formal contracts between industry and public bodies to addressspecific environmental problems. Participation in voluntary, butclosed agreements may or may not be legally binding depending onnational rules


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Participation vs target-setting

Participation is by definition voluntary

Though some countries diverge from this

Target-setting, once entered into an agreement,can be unilateral, negotiated or imposed:

Unilateral: company unilaterally decides what target

to adopt, with little or no influence from government

Negotiated: company and government negotiate thetarget the company will adopt

Imposed: the government decides what target the

company must adopt

VA


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Advantages VAs over regulation

Voluntary agreements:

Can generally be introduced faster

Involve lower administrative costs

Offer greater flexibility in the choiceof targets, and allow the inclusion of soft

targets, which might result in additional savings

Ensure greater co-operation by manufacturers,resulting in a proactive role in defining feasibleand effective efficiency targets


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Advantages VAs over economic

instruments

Voluntary agreements:

Require less public funding resourcesthan subsidies, preferential loans,

depreciation schemes, etc

Less impact by freeriders that take money without

additional effort

Provide a stronger relation to the environmental

outcome through the target, where this is more

uncertain with economic instruments


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Choosing a policy instrument

Choice of policy instrument depends on

objective of the scheme!

Voluntary or mandatory participation?

Unilateral, negotiated or imposed targets?

Standard or market-based? Targets & timetables or

diagnostics, capacity building,

facilitation?


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Pros and cons of types of policiesParticipation

Voluntary:

Higher buy-in fromparticipants, strongersupport from sectors

Mandatory:Higher participation, largercoverage of energy/emissions, increased levelplaying field among industry

Targets

Unilateral:

Higher buy-in from partici-pants, feasible targets

Negotiated:High buy-in participants,more commitment bothsides, incentives by govern-ment

Imposed:Simple process of target-setting, more influencegovernment on target


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Pros and cons policies, contd Standards or market-based?

Standards:

More certainty onenvironmental outcome at plant

level. Simpler to manage and

participate in.

Market-based system:

Higher flexibility for

participants, more cost-efficient, cheaper to meet

target. More support from

industry (compared to above)

(energy/carbon tax)

Targets & timetables

More certainty about

environmental outcome,

progress to targets

Broader participation

Diagnostics, capacity building,

facilitation

High support from industry

Can be first step, leading to

other types of policies


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Industry arguments for joining

Avoid energy/carbon tax

Energy savings,cost reduction

Long-term certainty about energy cost

Voluntary action for the environent

Avoid tougher (future) policy alternatives(regulation, taxation)

Have more influence on policy direction,

targets


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Important elements of a VA Participants, roles & responsibilities

Who participates and who is responsible for what?

Target-setting What kind of targets are used in the Vas, how are they established and

who determines the target level?

Incentives & sanctions What kind of support does the government offer to VA participants in

return of participating in the VA and meeting the agreed targets? What happens if companies do not participate or do not meet their

targets?

Monitoring, Reporting, Verification, Compliance & Enforcement Is MRV required, and if so by whom? Are MRV rules prescribed, and is independent verificaiton required? Who carries out the oversight and determines non-compliance?

What are the consequences of non-compliance?


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Sectoral vs company targets If both sector targets and company targets are

adopted, how do they relate to each other?

Under joint liability agreements, all companies inaffected sectors are penalised if environmentalobjectives are not met

Individual liability agreements impose sanctionsagainst individual non-compliers.

In practice, many agreements employ both

Sectoral targets can: Serve as guidance for company targets, without

compliance & enforcement Act as stand-alone targets, in addition to company

targets, with its own compliance & enforcement


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For further information:

Dian Phylipsen

Phylipsen Climate Change Consulting

Phone: +31 6 55 80 46 19

E-mail: [email protected]

Senior Associate SQ Consult

www.SQConsult.com

[email protected]

PPhylipsen Climate Change Consulting
mailto:[email protected]://www.sqconsult.com/mailto:[email protected]:[email protected]://www.sqconsult.com/mailto:[email protected]


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Lessons learned on Voluntary

AgreementsInternational experiences with VA

programmes on industrial energy

efficiency

Dian Phylipsen, international consultant

1st stakeholder conultation, June 5, 2013, Hanoi

P


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Objective of the review (Task 1)

Identify lessons learned from internationalexperiences with voluntary agreements (VAs) on

industrial energy efficiency

Developed countries (update from earlier work)

Developing countries: China, South Korea,

Indonesia

Develop a conceptual design for a voluntaryagreement programme in Vietnam -> later


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Overview of the presentation

Countries and programmes analysed

Focal areas in the analysis Overview of programmes

Dutch voluntary agreements

Short overview of developed countries experience

Selected developing countries experience

Lessons learned for a VA programme in Vietnam


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Countries & programmes analysed1. Dutch covenants

Long Term Agreements (LTAs): 1989-2020

Benchmarking Agreement (BM): 2000-2012

2. Covered in LTA Uptake project and 2010 report:Netherlands, UK, Denmark,Sweden, Finland, Norway, Belgium

3. Newly added countries Germany, France, Ireland, Switzerland, Australia,

Canada, New Zealand, Japan

China, South Korea, Indonesia


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Focal areas

1. Roles and responsibilities of parties involved

2. Target-setting3. Monitoring, reporting, verification,

compliance, enforcement (MRVCE)

4. Incentives and sanctions Participation

Target achievement


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Early experiences with VAsLong-Term Agreements and theBenchmarking Agreement in the

Netherlands


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Voluntary agreements timeline NL 1992 (VA period: 89-00)

Long-Term Agreement on Energy Efficiency (LTA)

2000 (VA period: 00-12) 2nd generation LTA (LTA-2) energy use 0.5 PJ/yr

2005 (trading periods: 05-07, 08-12, 13-20)EU Emissions Trading System (EU ETS)

2007 (VA period: 05-20):3rd generation LTA (LTA-3)

2012 (VA period:Long-term agreement for Energy-intensive ETScompanies (LEE)


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Netherlands: LTA-1 Target:

~20% efficiency improvement in 2000 compared to 89;

29 agreements, 1000 companies, 90% of industrialenergy use (including energy companies) Reasons for involvement:

Have more influence on policy direction, targets

Avoid tougher policy alternatives (regulation, taxation)

Participants: Companies, sector associations

Ministry of Economic Affairs: target-setting, incentives; Energy agency (intermediary): implementation, oversight,

enforcement


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Netherlands: LTA-1 Targets set only at sectoral level

Companies obligations: Establishing and implementing

Energy Efficiency Plan (EEP) Monitoring & reporting

Incentives: Energy tax deduction

Subsidies for energy audits

Early depreciation energy efficientequipment

No alternative legislation

Successful? Targets were more then met

(22.3%!)

Energy consumption increased!


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Netherlands: LTA-2/3 For companies with energy use


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Netherlands: Benchmarking agreement

For companies with energy use >0.5 PJ/yr Targets set at company or plant level

To be among the 10% most efficient plants in theworld (by sector/product category)

6 power companies (100% of energy use), 97industrial companies (94%)

Company obligations: establish top-of-the world, meet target, monitorresults

Achieved: 0.8%/yr efficiency improvement(LTA achieved 1.5%/yr)


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An overviewSummarising developed countryexperiences


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VA FeaturesNL NO SE BE

(Wl)FI DK UK IR

Voluntary nature X X X X X X X XDefined timeframe (long-term) X X X X X X X XNegotiated between participantrepresentatives and authorities

X X X X X

Sector reference energyconsumption defined

X X X X X X

Target for energy reduction defined X X X X X Dependson sector

Target for CO2 reduction defined XDependson sector

Commitments for the authorities tosupport target achievement

X X X X X X X

Commitments for agreement

participants

X X X X X X X X


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0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Industrial energy use coverage (%)


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Reasons for joining the VANL NO SE BE

Wl

BE

Fl

FI DK UK IE

Energy or CO2 tax exemption X(large)

X X X X X X

Avoid future taxation X X X

Avoid regulation X X

Long-term guarantee on energycost X

Cost reduction / energy saving X X X X X X

Voluntary action for environment X X


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Commitments


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Financial incentives


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Selected developing countriesExperiences in China, South Koreaand Indonesia


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China: Top-1000 programme VA pilot carried out in the steel sector in Shandong province

with aim for national roll-out (00-03) Participants:

Shandong Economic and Trade Commission (ETC), the StateEconomic and Trade Commission (SETC), the China EnergyConservation Association (CECA), selected steel companies inShandong

Targets set for 2005, based on 2002 base year Activities carried out:

Assessment of current EE performance, identification ofimprovement potentials and costs, developing capacity buildingon these topcis, as well as MRV and VAs as a policy instrument,provision of tools

Conclusion: Chinese companies would only sign a voluntaryagreement if ordered to do so by government


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Government role & responsibilitiesNational government: Established guiding principles and goals of the program

Published a list of the Top-1000 enterprises by name

National Bureau of Statistics (NBS): Established information system for Top-1000

enterprises

Organized training on data collection and reporting ; and Tracked, collected and reviewed data submitted by the

enterprises Analyzed the progress of the program


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Government role & responsibilitiesEnergy saving authorities of the province, district, or city: Collaborated with related organizations to lead and

implement the Top-1000 program

Tracked, supervised, and managed energy-saving activities ofenterprises

Local authorities: Oversaw enterprises in their energy management, energy

auditing, and energy reporting requirements Monitored enterprises through audits and sampling Promoted use of new mechanisms such as target-setting

agreements Encouraged enterprises to meet energy saving targets and

attain international advanced levels ahead of schedule


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Enterprise role & responsibilities Meet energy savings target laid down in agreement

Establish a sound energy measuring and statistical system

Regularly submit energy utilization status reports information on energy consumption, energy efficiency, cost-

effectiveness of energy savings, energy-efficiency measures

Conduct energy audits following the Chinese energyauditing standard to Analyze existing situation, identify key issues and potentials,

provide feasible and practical energy-saving measures Submit initial energy audit reports to provincial govern-

ments for review

Develop energy conservation plans based on energy auditsand formulate energy conservation plans annually


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Incentives & sanctions Financial incentives available under Ten Key Projects programme]

If monitoring system and can prove savings > 10ktce:200 RMB/tce saved per year($29) for enterprises in East China to 250RMB/tce.yr ($36) in poorer regions (Mid/West China)

If targets are not met Regions and enterprises do not receive annual rewards/honorary titles

Leaders in state-owned enterprises do not receive annual evaluationawards

Officialswould not be promoted

For non-compliant enterprises a notice of criticism is circulated,approval of energy-intensive projects or additional industrial land usemay be suspended, no favorable exemption policies will be applied.

For non-compliant state-owned enterprise, its leader does not receiveany type of awards, no matter how well the enterprise is doing inother aspects.


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MRVCE Annual reporting to National Bureau of Statistics

and provincial energy conservation centers (ECCs)

Verification by provincial ECCs, with on-site spotchecks by ERI Provincial ECCs provide provincial report to

provincial authority and NDRC Identified weaknesses:

No independent third party verification No structural publication of results No clear correlation between reported results,

evaluation and policy revision


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South Korea: evolving programmes Voluntary Agreement Programme for Energy

Savings and GHG Reductions: 1998 Companies with energy use > 5000 toe/yr as of 2004: energy use >2000 toe/yr 15 companies in 1998 increasing to 1300 in 2009 Managed by KEMCO

Emissions Target Management Scheme: 2012

Managed by sector ministries, more stringent emissions: facilities > 25kt/yr; companies > 125kt/yr 570 companies

Transition to Emissions Trading System: 2015 490 companies, 68% of national emissions


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Participation and target-setting Voluntary Agreement:

Voluntary participation Target: recommended >5% energy savings over 5

years, compared to year before agreement (based onsector targets set in legislation)

Proposed by company, limited influence KEMCO Emissions Target Management Scheme:

Mandatory participation Target negotiated with sector ministry, based on

sectoral target, reflecting specific circumstances Emission Trading System:

Mandatory participation Targets still to be set by Ministry

C


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Government roles & responsibilitiesGovernment: Provides support in the form of funds and tax incentives Performs monitoring and evaluation to achieve the goals in

collaboration with businesses

KEMCO (in VA): Evaluation of implementation plan submitted by the business

(makes suggestions, provides support, but will not demandchanges on the basis of evaluation results.

Providing technical support for target setting, formulation ofimplementation plan, consultation on technologies

Evaluation of business reports on annual achievements Selection of excellent business places (rewards)


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Company roles & responsibilities Voluntary Agreement:

Conclude a 5-target agreement with local government Present energy saving/GHG emission reduction goals,

implementation schedules, implementation methods, etc. Submits implementation plan to KEMCO, incl current

status of business, recent record of saving, plans for next 5years, energy saving systems, etc.

Achieve proposed goals

Submit recorded achievement to KEMCO on annual basisvia a business report (no verification required) Emissions Target Management System:

Similar activities, but target agreement, implementation planand reporting are submitted to the relevant ministry and areto be verified.


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Incentives & sanctions Voluntary Agreement:

Low-interest loans and tax incentives Technical support by KEMCO, media support Reduction of administrative burden (less energy audits

required, exemption other environmental obligations) Award of Excellent business status to best performers Loss of access to support on non-compliance

Emissions Target Management System/ETS: Financial support for businesses vulnerable to

competitive disadvantage Financial incentives and tax credits for green

technologies Financial penalty on non-compliance (ETS)


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MRVCE Voluntary Agreement:

Annual reporting to KEMCO No prescribed monitoring protocols No verification required No sanctions on non-compliance

Emissions Target Management System/ETS: Annual reporting to sector ministry

Using prescribed methodologies according tointernational standards (mainly EU ETS) Verification required according to international

standars Financial penalty on non-compliance (ETS)


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Indonesia:

Cement emission reduction scheme AFD-funded project:

Data gathering at plant level (energy, production,emissions, technology)

Assessment of emission mitigation potential and costat sector- and installation-level

Capcity building on MRV Target-setting, based on potential and cost data,

different scenarions, different ambition levels

Stakeholder consultations Drafting regulation Discussion of incentives Roadmap for further development, including capacity

building


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Example target-setting scenarios

C1

C2

C3

C4C5

C6C7

C8

C9

C10

600

700

800

900

1000

1100

2005 2010 2015 2020 2025 2030 20

Year

CO2intensity

[kg

CO2/tcement]

1059

724

680

847

635 (level 3)

514 (level 5)

772 (level 1)

Range

C1

C2

C3

C4C5

C6C7

C8

C9

C10

600

700

800

900

1000

1100

2005 2010 2015 2020 2025 2030 20

Year

CO2intensity

[kg

CO2/tcement]

1059

724

680

847

635 (level 3)

514 (level 5)

772 (level 1)

Range


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Marginal abatement cost curve


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Follow-up: Sectoral roadmap In 2010, BAPPENAS (the Indonesian National Planning

Agency) published the International Climate Change SectorRoadmap for the industry sector

Identifies cement sector as priority sector

Recommended negotiating a Climate Change CooperativeAgreement for cement sector for 2010 2014, modelled onUK or Dutch VAs (LTAs).

Agreements must contain target-setting process,benchmarking, energy audits, energy savings action plans, theappointment of energy managers at each facility, informationand training workshops, measuring and monitoring progresstowards targets, annual reporting, program evaluation andincentives and supporting policies, such as a CO2 tax rebateas a reward for meeting emission reduction targets.


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Government roles & responsibilities

Responsibility of Ministry of Industry as per regulation: Capacity building for emissions reduction activities Implementation of Environmental & Energy

Management Development of technical guidelines and procedures to

calculate emissions intensity Development of incentive mechanisms for emissions

reduction activities

Formulation and harmonization of related policies Development of MRV system in cement industry Socialization of related policies Implementation of MRV system


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Company roles & responsibilities Other than reducing emissions to meet their target,

enterprise obligations are as yet unclear Regulation mentions obligation to implement energy

management systems (in place since 06 in energyconservation regulation from Min of Energy & MineralResources) All facilities with energy use >6000 toe/yr have the

obligation to implement energy management

Companies must appoint an energy manager, conductenergy audits and implement recommendations from theaudits

Implementation of MERM regulation has not yetreached full scale, supporting mechanisms are needed.


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Lessons learnedInput to the development of theVietnamese VA programme


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Important:

Means must match end!

Indicators must matchpolicy objectives anddrivers

Monitoring must matchobjectives and drivers

Lesson learned


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Lessons learned: 7 golden rules A good negotiation position of the government;

Clear and quantified targets;

Clear timetables;

Long lasting government support;

For large energy intensive companies; Physical energy efficiency monitoring;

Clear monitoring guidelines;

Independent verification.


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Lessons learned: a summary Initiating a VA is easier when there is good co-operation between authorities and industry The VA programme needs effective carrots and sticks, a defined long-term timeline and

adequate transparency. Goals should be challenging but not discouraging, while the monitoring procedure should

be reliable and guarantee confidentiality.

Major risk is definition of targets that are not demanding/little more than Business-as-Usual (BaU) developments. Happens especially if: Targets are not negotiated There is insufficient information to establish saving potential/cost Government is unduly biased towards industry arguments

An open negotiation process, where other stakeholders are invited to comment on thetarget, avoids the conclusion of closed deals cut between the public authority and industry,

which may endorse little more than the BAU.

In developing countries, also the negotiation position of industry deserves attention, asboth the availability of sufficient information, data and technical expertise and the powerposition vis--vis government may be limiting factors in successful, balanced negotiations.


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Lessons learned: VA development


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Lessons learned: more insights Best design of VA programme depends on

country circumstances and culture

VA programmes evolve over time: Increasing mandatory character, more stringent

enforcement systems or stronger incentives Voluntary -> mandatory -> emissions trading

Reflecting picking of low-hanging fruits in earlyphases, need for more stringent approaches todrive further improvements later on

Lagging implementation measures can seriouslylimit the effectiveness of the VA programme


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Dian Phylipsen


Phone

Mobile



www.SQConsult.com

mailto:[email protected]://www.sqconsult.com/http://www.sqconsult.com/mailto:[email protected]


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Draft design VA programme

for VietnamConceptual design and preliminary

elaboration of programme design

Dian Phylipsen, international consultant1st stakeholder conultation, June 5, 2013, Hanoi P


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Objective of the Presentation Outline the conceptual design of the VA

programme for Viet Nam

Present the assumptions used in the preliminaryelaboration of a draft design programme

Present the preliminary design of the programme

based on these assumptions Obtain stakeholder feedback to draft design

First significant input from stakeholders,important for revision of draft design in next steps


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Outline of the Presentation Main elements of the conceptual design

Outstanding questions

Steps in VA development piloting & roll-out

Assumptions for elaborating a preliminary draftdesign programme

First opportunity to respond

More detailed presentation of draft design

Further opportunity to respond


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Conceptual design VA programme A voluntary agreement, i.e. participation is voluntary

Targets negotiated between governments and candidate sectors/companies

Covering energy-intensive industrial sectors

Target-setting based on assessment of energy efficiency improvement potentialsand costs

Target-setting (and monitoring of progress to target) based on physical and

quantifiable measures

Long-term time horizon, predefined timing evaluation, revision, renewal

Government incentives to support companies in fulfilling their obligations

Uniform and transparent monitoring & reporting rules to be set upfront by

government

Regular reporting of monitoring results & progress to targets to oversight

organisation

Application of sanctions on miss-reporting and non-compliance to be applied by the

oversight organisation, with predefined criteria for non-compliance


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Outstanding questions (report 1) Intermediary (government) organisation

Will (over time) an intermediary organisation be established to carry

out implementation & compliance tasks on the government side or

will all government tasks be carried out by MOIT, also on the long run?

Role for local governments

Is a role foreseen for local governments in either providing support or

carrying out oversight, or will this be organised fully at the national level?

Role for sector associations

Will sector associations be a party to the agreement, and if so will they have a

facilitating/supporting role or will there also be a sectoral target in theagreements?

Policy objective

What are the broader aims behind the VA programme on industrial energy

efficiency and what are the consequences for the type of target to be defined

(absolute, relative, based on projections, defined in technical or economic terms).


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Outstanding questions contd Time horizon for the agreements and targets

Would a 10-year agreement period, with an interim target after

5 years be feasible? Would participants have to be in compliance

every year, or can this be assessed over multiple years?

Feasibility of different types of incentives

Are there economic or political reasons that limit the use of energy

taxes as an incentive for participation and compliance? Are there other limitations

to incentives (cultural, budgetary, legal, capacity, etc)?

Compliance culture

What consequences does the compliance culture in Vietnam have for the design of

the VA programme, in terms of incentives for participation and compliance and

sanctions and in terms of how to organise the oversight and enforcement?


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Steps in VA development

Piloting and roll-out


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Revision0.

Prepa-

ration

1.Initi-

ation

2.Nego-

tiation

3. Imple-

mentation

4.Evalu-

ation

Selection pilot sectors

Assessment improvement potentials pilot sectors

Development financial incentives

Development energy service sector capacity

Design VA programme & implementation guidelines

Selection of pilot companies

Establishment of incentives & sanctions

Establishment of MRV and compliance system

Negotiations with pilot companies

Implementation in pilot companies

Monitoring performance in pilot companies

Evaluation of VA programme

effectiveness in pilot companies

Decision-making on roll-

out & necessary revisionsPilot phase


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Revision0.

Prepa-ration

1.Initi-ation

2.Nego-tiation

3. Imple-mentation

4.Evalu-ation

Revision of programme design

Assessment improvement potentials other sectors

Negotiations with roll-out companies

Implementation in roll-out companies

Monitoring performance in all companies

Regular evaluations programme

effectiveness

Decision-making onrenewal/revisions

Roll-out phase


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Draft VA Programme DesignPreliminary elaboration based onpre-consultation assumptions

P


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Based on assumptions as laid out in draft report 2, i.e. before

feedback from stakeholders could be obtained.

Input received during this workshop and other meetings during

this mission will be taken on board in the revision of report 2.


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Structure of discussion

Organised under 4 headings:

Roles and responsibilities

Target-setting Monitoring, reporting, verification, compliance and

enforcement (MRVCE)

Incentives & Sanctions

For each:

Defining elements

Preliminary choices/recommendations


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Roles & responsibilities - elements

Elements of scope of participation who?

Government entities vs industry entities

Sector associations vs companies

Companies vs sites or installations

Eligible sectors

Size and minimum participation threshold

Other

State-owned vs private companies

?


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Role MOIT as per Law on Energy Efficiency & Conservation:

Issuing legislative documents, strategies, policies, programs, national

plans on energy efficiency & conservation, organizing the implementation

Coordinating with Ministries, ministerial-level agencies, Peoples

Committees at provincial level for State management on energy efficiency

& conservation

Organising national energy database system

Disseminating legal regulations on energy efficiency & conservation

Organising scientific research, technology transfer and application in the

field of energy efficiency & conservation

Inspecting, monitoring and handling of complaints and resolving violations

in energy efficiency & conservation activities in accordance with the law


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Recommended role MOIT in the VA programme (continuously):

Setting goals and objectives for the agreement programme

Developing the institutional capacity of sector associations, theintermediary and/or independent experts (and ensuring sufficient

financial support)

Deciding on the design of the VA programme

Developing incentives to support participants in reaching their objectives,

ensuring sufficient resources and adopting the required legal framework

Developing and implementing a compliance and enforcement regime,

(including data management rules to ensure confidentiality and protect

commercially sensitive data)


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Recommended role MOIT in the VA programme (contd):

Ensuring consistency with other policy objectives and legislation, and

where needed, liaise with other ministries to address inconsistencies Determining timeline and frequency for the evaluation of the

programmes effectiveness, the responsible organisation and the

evaluation methodology

Proposing revisions to the agreement programme on the basis of

frequent evaluations

Communicating to other key players and the general public the relevance

and advantages of negotiated agreements as an energy policy instrument,

its goals and periodic results.


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Recommended role intermediary in the VA programme (done

by MOIT in pilot phase):

Providing guidance, training and support to participants, as well asconcrete tools e.g. for carrying out energy scans, auditing, energy

management, benchmarking, energy efficiency planning, etc.

Data collection, processing and management

Validating individual participants deliverables & progress reports

Running the programmes compliance and enforcement system

Monitoring participants progress to target and evaluating and reporting

on the programmes effectiveness to other key players

Promoting the agreement scheme to new interested companies or sectors.


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If it is decided that no intermediary is set up to carry out these tasksin the roll-out phase, MOIT will continue to carry out this tasks, alsoon the longer term.

Feedback?


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In case it is decided that the People Committees will have a strongerrole, it needs to be ensured that sufficient capacity is available at thelocal level to carry out the associated responsibilities and that thetreatment of participants is consistent across different regions.

Feedback?


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Industry roles & responsibilities

Foreseen role associations and companies in VA programme: Sector associations coordinate the sectoral effort by proposing or

negotiating a sectoral target, setting the overall ambition level for the

sectors participants. In addition, they play a facilitating role in mobilisingthe sector and providing technical support

Individual companies take on individual targets to meet under the

agreement

Recommended status of sectoral vs company targets: Targets will be set at both levels Sector target will be to provide direction for companies in their target-

setting negotiations

Compliance with company targets will be the focus of the incentives

provided by government and the enforcement activities


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Recommended role sector associations in the VA programme:

Encouraging their members to join the agreement

Guiding and training participants in wide scope of agreement subjects Proposing sector agreement goals and participating in the negotiations

with the government on target-setting and incentives

Motivating and supporting members in actively fulfilling their

agreement obligations

Actively inform members about development & implementationof the VA programme

Defining annual sector reporting and data collection

Participating in development and demonstration projects

Participating in further development & modification of the VA programme


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Recommended role companiess in the VA programme:

Carrying out an energy audit to support the target-setting process

Setting up an energy management and reporting system Training corporate staff in energy management issues

Defining energy efficiency targets

Drawing up & implementing an energy conservation plan

Taking energy issues into account when purchasing new equipment/systems

Implementing profitable energy-saving measures

Monitoring & reporting energy use & energy-saving improvements annually

Reporting improvements and/or difficulties faced by the company annually

Participating in pilot projects


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In case it is deemed important that also the sectoral targets arecomplied with, provisions will be needed to attribute (part of) thesectoral non-compliance to the individual companies from that sectorparticipating in the VA programme.

Feedback?


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Size and minimum threshold

No principle reason for excluding small installations

Often done to reduce the complexity of the scheme and

to reduce transaction costs for both government and

industry, without significant impact on the overall energy savings that canbe reached

Minimum thresholds can be defined in terms of annual energy consumption,

in production capacity or annual emissions

Recommended in the VA programme:

No minimum participation threshold is established for the Vietnamese VAprogramme as no information is available on the size distribution in the

relevant sectors in Vietnam or how improvement potentials and compliance

costs vary with size.


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If subsequent steps indicate that the cost/benefit ratio for includingsmall installations is problematic, minimum thresholds can bedeveloped at that stage. In that case, care must be taken to avoiddistortions of competitiveness resulting from VAs only covering a partof the sector.

Feedback?


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Other elements

Eligible sectors

In principle, all sectors could participate in the VA programme

Subject to the possibility of defining transparent & robust methodologies

for target-setting and monitoring progress to targets For reasons of simplicity, it is recommended that the VA programme starts

with the more energy-intensive and concentrated sectors (limited number

of large players), with the possibility to expand to other sectors later

State-owned versus private companies, national/international companies

No distinction should be made between state-owned enterprises andprivate companies, or between national and international companies in

terms of participation

Organisational set-up of the VA programme and its rules must make sure no

undue advantages or disadvantages arise for any sub-set of participants

(including issues of data access and confidentiality)


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Target-setting - elements

Definition of type of target

Definition of baseline

Definition of sysem boundaries Time horizon, interim target, flexibility

Company targets vs site targets, pooling

Correction factors

Supporting obligations

Establishment of ambition level

Negotiation parties

Negotiation basis


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Type of target

An energy efficiency improvement target or an

energy savings target?

Defined as a change compared to a baseline (either

historic or projected) or as a target level to bereached (e.g. a benchmark energy efficiency level)?

Defined in relative terms (%) or absolute terms (GJ to be reduced)?

Defined in terms of final energy consumption or primary energy

consumption (also accounting for conversion losses)?

Recommended:

A relative energy efficiency target, allowing for industrial growth

To avoid sub-optimal developments in energy supply, the target

should be defined in terms of primary energy consumption


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Baseline

Target compared to a:

Historical baseline

Compared to energy use or emissions in a historic reference year

or reference period Projected future baseline

Compared to projected energy use or emissions in a future year or

period on the basis of a scenario (often expressed as a (%) change

compared to a business-as-usual (BaU) scenario)

Recommended:

Target is defined compared to a historic base year (s)

Using an approach that allows for a growth in production


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System boundaries

Sector boundaries

Installation or site boundaries

Process boundaries

Chain boundaries Energy carrier boundaries

Recommended:

Target includes both core process and utilities, leaving the choice

of measures to implement to reach the target to participants. Start with a narrow focus, i.e. on-site energy efficiency

improvement only, though looking at the consumption of primary

energy carriers to take into account the conversion losses in the

production of purchased energy carriers


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Time horizon, interim targets &

flexibility Do participants only need to achieve the target defined for

the end of the agreement or are interim targets imposed?

Interim targets allow earlier identification of a lack of

progress and an earlier intervention to strengthen the participants efforts

Do the same sanctions apply when interim targets are missed as when the

final target is not met?

Recommended:

Establish interim targets, especially in the beginning of the process, to

allow for lessons learned at an early redirection

A 10-year target period (duration of an individual agreement), which a 2-

yr and a 5-yr intermediate target

All targets subject to sanctions on non-compliance, but softer sanctions

on non-compliance with interim targets

Flexibility provision allows target achievement with a year (under certain

conditions)


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Correction factors

A number of situations can be agreed

where missing the target is not held against the

participant, i.e. are consideredforce majeure

Specific correction factors could be allowed to account

for negative impact of certain situations on energy

efficiency that are outside the participants control

Examples could be:

The exclusion of prolonged periods of down-time or start-up during which efficiency is lower than usual

The implementation of environmental protection measures

required by law that increases energy consumption


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Ambition level

This is a political choice, the outcome of

the negotiating process

Informed by the assessment of the energy efficiency

improvement potential at

the sector level; and

the individual participant level

Ambition level cannot be set without information aboutthe incentives available to the participants


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Negotiations on individual VAs are based on the assessment of energyefficiency improvement potentials at the individual participant level.A simpler option is when target-setting and negotiations are onlybased on the sector-level assessment of potentials and costs, or anintermediary approach, starting with the sector potential, with some

adjustments o reflect site specificsThis is simpler, quicker and cheaper, but differences betweencompanies are not/only limitedly reflected and efficient andinefficient companies are treated the same.

Feedback?


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Proposed target definition

Energy Efficiency Index (EEI)

The energy consumption in the year in question to produce the total

output in that year, divided by the energy consumption that would have

resulted had the same production been made with the energy efficiency

in the reference (base) year.

Structural changes during the target period are separated from

energy efficiency changes.

Corrections that are allowed include:

Changes in energy consumption due to change in manufactured or

purchased intermediary materials

Changes in energy consumption resulting from more stringent product

specifications

Energy to meet more stringent environment, safety or health

requirements


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The EEI is calculated as followed:

EEIx= (Ex- corr) * 100(Vx * (E0/V0))

In which:

EEIx = the Energy Efficiency Index in year x

E0 = Energy consumption in the base year

Ex = Energy consumption in year xV0 = Production volume in the base year

Vx = Production volume in year x

corr = Corrections, correcting actual energy consumption for the factors

allowed


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Simpler targets can also be defined, e.g. a percentage reduction in total energyconsumption, or a % reduction per tonne of product. This would be easier toestablish and monitor.However, its simplicity also means that what is being measured is not really(changes in) energy efficiency, but the result of a number of different drivers ofenergy consumption: production volume, product mix and quality, energy

efficiency and other factors. As such, it would be very difficult to assess whetherparticipants have really improved their energy efficiency in line with theircommitments, or whether energy savings result from other developments.

Feedback?


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MRVCE- elements

Elements of scope of participation

Prescription of what needs to be monitored, how, how

often and by whom Prescription of what needs to be reported, how often,

by whom and how

Prescription of whether independent third party

verification is required, and if so, by whom, how Establishment of the compliance and enforcement

regime


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Incentives & sanctions - elements

Incentives

Technical support

Financial support

Administrative support Awareness raising and public recognition

Sanctions could include:

Loss of access to positive incentives

Financial penalties Naming and shaming

Incentives & sanctions have a crucial role in a successful VA

programme and a balanced set of sticks and carrots is very

important.


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Incentives & sanctions

Until the work within the CPEE project on solutions to

facilitate the financing of energy efficiency investments

has been completed, the recommendations on (financial)

incentives and sanctions to be provided can only be made

here in generic terms


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For all incentives and sanctions it is very important that:

They are sufficiently strong to motivate participants

both to join the agreement and to achieve the agreed targets

Sufficient early clarity exists about their nature and level at the

start of discussions with candidate participants to inform their

decision-making about joining the agreement and the negotiations

with the government about the target

Sufficient insurance is provided to participants about the

continuity of the incentives and sanctions and sufficient time

periods will be allowed in case of any significant changes during

the agreement period


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Recommended Technical support on identifying improvement options and the calculation

of their potentials and costs, the development of energy managementsystems and the training of staff, the development of energy conservation

plans, the implementation of monitoring systems, the preparation of

monitoring reports

Subsidies for energy audits, development of energy conservation plans

Subsidies for institutional development

Tax exemptions or tax reduction, e.g. on corporate income tax andimport/export tax as mentioned in the Law on Energy Efficiency and

Conservation, or on new taxes introduced especially in relation to the VA

programme


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Recommended Early depreciation options and/or soft loans for investment in energy

efficiency measures Administrative support in permitting and reducing duplicate reporting

requirements

The threat of imposing other more stringent regulation instead of the VA

programme

Preferential treatment in public procurement

Public recognition of good performance and naming & shaming of laggards

Loss of access to incentives available under the VA programme and the

Law on Energy Efficiency and Conservation


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Dian Phylipsen


Phone: +31 6 55 80 46 19



www.SQConsult.com

D Ph li @SQC lt

mailto:[email protected]://www.sqconsult.com/mailto:[email protected]:[email protected]://www.sqconsult.com/mailto:[email protected]

EE VA WS 05June13 in English

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