These environmental challenges and legacies are linked to several structural problems and shortcomings. Examples include price distortions typically in the form of low electricity and fuel prices combined with a lack of consumption-based billing practices. There is furthermore, a general lack of administrative capacity and accountability related to energy efficiency in public buildings or efficiency among municipal heat and cooling utilities. Finally, market based mechanisms or solutions are often under-developed in many parts of the EBRD region, which dampens competition and potential innovation in the sector
Price distortions can be addressed by bringing energy tariffs towards a fully cost reflective level. While electricity tariffs may be controlled centrally, district heating prices are more often within municipal control. Removal of price subsidies could for instance provide better incentives to reduce heat consumption or to invest in energy efficient buildings and solutions. Price corrections can also include subsidies to encourage renewable energy solutions at household and institutional levels such as subsidies for households to install solar panels on their roofs.
Administrative capacity and accountability can be pursued through different arrangements. Establishing a municipal energy agency to inform, prioritise and eventually procure energy efficiency solutions on behalf of the city administration, can be a cost efficient way forward. Clearly defined agreements with energy related key performance indicators is another approach.
Market based mechanisms can further help the rollout of energy efficient solutions. Such mechanisms may include better energy certification and its impact on property prices; it can further include the use of energy contracts with private servicing companies and finally, it may involve commercial banks and funds to finance energy efficiency investments, contracts or groups of borrowers.
Throughout the process of promoting more energy efficient solutions, information campaigns and awareness raising will play a critical role in order to ensure buy-in and trust among the different stakeholders.
The above mentioned challenges and relevant policy instruments are described and illustrated in more details in this section and linked to the following three objectives: (i) More energy-efficient buildings, (ii) more energy-conscious consumption patterns, and (iii) more efficient and decarbonised provision of heat and electricity.