Legislation is important to support public and private financing for energy efficiency, primarily because it links national goals and priorities.
Governments provide funds and direct public agencies to administer energy efficiency programs and encourage private investment in energy efficiency projects through legislation. More information on policies that support energy efficiency can be found in the Policy Technical Guide.
Public Energy Efficiency Program Funding
Governments can use legislation to designate public funding so that it is exclusively used for energy efficiency initiatives. They can also direct ministries or agencies to administer this funding. For example, India’s Energy Conservation Act (2001) (ECA) led to the 2002 creation of the Bureau of Energy Efficiency (BEE) under the Ministry of Power. BEE carries out several of the ECA objectives. It also specifies equipment energy use categories, prohibits importing products that do not meet specific energy consumption standards, and directs consumers to comply with energy consumption standards. By establishing legislative responsibility for energy efficiency, a government can begin the process to establish energy efficiency programs, as well as provide financial resources for those programs.
Prioritized Lending Designations
In many countries, certain types of projects and organizations can receive special designations from the government that provide special benefits, including tax exemptions, priority loans, and low-interest loans. These designations can also be used to fast-track energy efficiency financing. For example, the Reserve Bank of India has made certain sectors, like information technology and education, eligible for priority lending because these sectors do not have a formal banking channel. Further, these sectors are critical to achieve other national objectives, such as poverty alleviation and increased employment. Along the same line, the Indian government created the National Mission for Enhanced Energy Efficiency, which could lead to energy efficiency receiving prioritized sector designation in the future.
In Thailand, the Energy Efficiency Revolving Fund, which is collected through a tax on petroleum, is administered by banks. It covers transaction costs, such as feasibility studies and other technical assistance. The fund created energy efficiency credit lines for six major commercial banks. Under this fund, the banks received 0% interest loans and then re-issued the loans to customers at 4% interest.
Learn about overcoming barriers to energy efficiency financing.
Bobby Neptune / USAID