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a grant did not score markedly higher than companies that did not receive a grant see table 4. This is probably an indication of a free rider
effect: this category of company would probably have acquired energy efficient technology or improved their production processes without a
grant. Within the group that does not have a positive corporate culture towards energy saving, grants have a perceptible effect: more small and
large companies in this group acquire energy efficient technology if they can benefit from a scheme than if they cannot.
Energy saving attributable to the EIA During the period audited, the EIA lowered investment costs by about
10-20. If we make the optimistic assumption that the long-term price elasticity is applicable -0.1 to
–0.2, such an investment grant over several years the depreciation term of the equipment and machinery
would produce an energy saving of between 1 and 4.
42
On 900 PJ in
2008, this is equal to between 9 and 36 PJ. A comparison with existing
data and studies suggests that the upper limit of this margin is the most likely, i.e. 36 PJ. This is related to the percentage of free riders see audit
methodology. We therefore estimate the energy saving attributable to the EIA from the beginning of 1997 to the end of 2008 to be 36 PJ.
Cost of the EIA The EIA cost the government €499 million in lost tax income in the period
from 1997 to 2008.
43
Given the percentage of free riders, some €350 million 70 of this cost may not have had an effect.
44
In total, €149 million of the EIAs cost to the government may have been effective, just
over €14 million per annum. The implementation costs borne by the government are so low as to be negligible.
Assuming that entrepreneurs generally act rationally, it could be said that they will usually not spend more than the benefit provided by the
investment allowance. For entrepreneurs, the EIA makes measures profitable up to a price of just over €0.80 per gigajoule saved.
45
If we
42
Price incentive times price elasticity, i.e. at least 10 times 0.1 and at m ost 20 times 0.2.
43
Calculated by CE Delft on the basis of an evaluation of the EIA by Aalbers et al. Aalbers et al., 2007 and data from SenterNovem SenterNovem, 2009 by applying the percentage of amounts
approved for all EIA applications to the percentage of applications in the manufacturing sector relating to energy efficiency. For a more detailed explanation, see the separate report to be issued
by CE Delft shortly after the publication of this report Davidson et al., 2011.
44
From a national perspective not only the government but the government, companies and individual citizens, this is not a cost: what the government spends is received by the companies.
45
The maximum benefit of the EIA is approximately 11 44 allowance on 25.5 corporation tax, which is roughly equal to an 11 increase in the price of energy. With a natural gas price of
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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.
