ESCOs in the NDCs

Energy Service Companies - the energy efficiency accelerator for climate action in Nationally Determined Contributions

December 18, 2019

During the COP25 negotiations in Madrid, the Global ESCO Network invited COP attendees and energy professionals to an event that explored the possibilities of Energy Service Companies (ESCOs) and Energy Performance Contracting for raising the ambitions in Nationally Determined Contributions (NDCs).

By integrating ESCOs in national governments’ NDC development processes the energy industry can help unleashing immense, and profitable, energy efficiency investments supporting the achievement of the goals of the Paris Agreement.

The event gathered ESCOs and ESCO experts from around the globe, highlighting the potentials, but also the challenges facing the ESCO industry. It was co-organised by UNEP DTU Partnership the Spanish National Research Centre on Energy Environment and Technology, CIEMAT, Chile’s National ESCO Association, ANESCO, and Spain’s National ESCO Association, ANESE.

ESCO associations and companies provided prime examples on ESCOs’ ability to realize countries’ and cities’ energy efficiency potential and considerations for the future role of ESCOs in the international climate agenda.

“The finance sector is yet to understand energy efficiency investment,” said CEO Monica Gazmuri during the event supported by others present, underscoring that while the ESCO market is well established in China and the US, most other countries are far from exploiting the full potential of energy efficiency investment through ESCOs.

An important role in raising ambition

The Global ESCO Network was established specifically with the objective to highlight the ESCO as a concrete and functioning instrument that countries may activate in order to raise the ambitions of NDCs. With one year to go before countries are supposed to hand in their updated NDCs for COP26, time is short for this new organization to make its mark.

“ESCOs should be seen as a source of revenue for governments, not as a cost. NDCs lack ambition for many reasons, among these of course also the perception that emissions reduction comes at a cost. ESCOs do not. On the contrary. Therefore they could play an important role in raising ambition,” says Søren Lütken, head of the Global ESCO Network’s Secretariat and Senior Advisor at UNEP DTU Partnership.

The Global ESCO Network was established in June 2019 by a number of ESCO Associations, including APEIA, NAESCO and EU.ESCO. It aims at expanding its global reach, now also initiating a push for ESCOs in Latin America together with ANESCO.

Achieving the full potential of energy efficiency

Energy Service Companies – ESCOs – deploy a business model that responds directly to the global climate change challenge.  It represents the prime implementation instrument of large scale energy efficiency measures. Promotion, development and global deployment of the ESCO approach is therefore essential to achieve the full potential of energy efficiency solutions and thus helping to achieve the goals of many NDCs in a cost efficient manner, ultimately underpinning the fulfillment of the Paris Agreement.

The growing urgency of decisive responses to a rapidly changing climate should imply a prominent role of ESCOs and their promotion, from national and sub-national policies and strategies to the global climate change agenda at the highest UN level. However, this is a role that the ESCO concept is yet to attain.

The COP25 event gathered speakers and participants from Honeywell, Econoler, IPEEC, CIEMAT, SEforALL, ANESE among many others.

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