Free-rider phenomenon | Energy Efficiency Directive Article 7 | Energy Efficiency Directive | ENSPOL | Energy Saving Policies and Energy Efficiency Obligation Schemes | article7eed.eu

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Free rider phenomenon

Definition - “parties that would implement efficiency measures even in the absence of the scheme and take direct advantage of it”.

Any EEO shall be equipped with a reliable system of measuring energy savings, and only savings of good quality shall be eligible. This ensures the environmental integrity of the EEO scheme. Ideally an EEO should take into consideration factors such as free riders and spill-over effects.

For consideration:

  • It is important to have an independent evaluator to assess the functioning of the scheme on a regular basis in Member States with EEOs in place, bringing added value to the system.
  • Regulators and operators must decide what share of free riders is acceptable. To accept free riders or to exclude their effects completely is not feasible for a monitoring point of view. Regulators and operators must also decide how much additionality there should be in the scheme. 
  • Identifying free riders can be a issue. Identifying them based on surveys can be unreliable because the share of free riders for policy instruments is often unknown. Although there are statistical methods to measure the effect, they are rarely used in the evaluation of policy instruments. One option is to look at the historic market and to develop a business-as-usual scenario from that. 
  • Ways to reduce the number of free riders are:
    • the introduction of dynamic baselines
    • high energy saving targets in an EEO
    • cost of the energy efficiency measures - the higher the cost of the eligible measures the fewer free riders

Sources and further reference:

 

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