The Kyoto Protocol ends in 2012 and the author proposes a new mechanism for the post-Kyoto period (post 2012). This has yet to be defined. The Copenhagen Summit did not produce an agreement, just a letter of intentions. Everyone is expecting for the Mexico Summit.
Energy is a major contributor to climate change. What can be the role of energy efficiency in tackling climate change?
As efficiency improves, people or companies can use the same amount of energy to produce more services. This means that the cost of energy for any one service has fallen. This has two effects. The first is that money you would otherwise have spent on energy is released to do something else. The second is that as processes which use a lot of energy become more efficient, they look more financially attractive than they were before. So when you are deciding what to spend your extra money on, you will invest in more energy-intensive processes than you would otherwise have done. The extraordinary result is that, in a free market, energy efficiency could increase energy use.
This is the Khazzoom-Brookes postulate: increased energy efficiency paradoxically tends to lead to increased energy consumption.
The author also refers to a recent analysis by Nick Hanleya of raising energy efficiency in Scotland:
Making more with less intuitively seems to be good for the environment, and this is the presumption of the current UK policy. However, in a system-wide context, improvements in energy efficiency lower the cost of energy in efficiency units and may even stimulate the consumption and production of energy measured in physical units, and increase pollution. Simulations of a computable general equilibrium model of Scotland suggest that an across the board stimulus to energy efficiency there would actually stimulate energy production and consumption and lead to a deterioration in environmental indicators. The implication is that policies directed at stimulating energy efficiency are not, in themselves, sufficient to secure environment improvements: this may require the use of complementary energy policies designed to moderate incentives to increased energy consumption.