Auditability Costs and benefits of policy instruments

71 ignore the cost to entrepreneurs of applying for the EIA, entrepreneurs can take a package of measures costing between nil and just over €0.80 per gigajoule saved. If we assume that the average investment cost for all companies is in the middle, the investment cost is €0.40 per GJ. Cost effectiveness of the EIA Since there are no other costs of any significance apart from the cost of investment, the cost effectiveness is equal to the investment cost per unit of energy saved: €0.40 per GJ – subject to the assumptions made above. As we will see, this is less expensive than most other measures. Comments However undesirable the existence of free riders in a financial scheme may seem, it is not always possible to prevent them. To start with, the payback times entrepreneurs seek to recover their investment costs differ widely. A strict limit therefore cannot be set to exclude free riders. In general, the lower the grant or tax allowance, the higher the proportion of free riders. If the financial benefit is low, the receipt of a financial incentive will not be a decisive factor in any investment decision. Th is is true of both entrepreneurs and private individuals. To give a fictional example, if double glazing costs €20,000 and a grant is available of €200, few people will make the investment if they werent already planning to do so. If the €200 can be received relatively easily, people who were planning to fit double glazing will apply for the grant. However, if half the investment cost is refunded, i.e. €10,000, many more people will decide to fit double glazing. Moreover, the actual reason why an entrepreneur decides to make an investment cannot be said with certainty. The cost effectiveness of the EIA is reduced by companies using it to pay for measures required under the Environmental Management Act. If the Environmental Management Act were enforced more effectively, this would not occur. It is far from certain, however, that the Act can be enforced properly. €0.25 per m 3 the increase is €27.50 per 1,000 m 3 . Every m 3 is equal to 131.6 gigajoules, i.e. the increase is equal to €0.87 per gigajoule.