Energy efficiency is an essential plank of the Government's energy and climate change policies. The Government expect improvements in energy efficiency (that is to say, the more efficient use of delivered energy) not only to be translated into lower energy consumption, and thereby lower greenhouse gas emissions, but simultaneously to contribute to their other energy policy objectives—security of supply, greater competition in energy markets, and the reduction of fuel poverty.

This is a lot to ask, and in placing such weight on energy efficiency the Government appear to have no clear view on how to measure, and thereby manage it. We believe that reduction of the United Kingdom's absolute energy consumption, leading to reductions in emissions, should be the ultimate objective of energy efficiency. We propose a methodology to measure progress towards this objective.

At the same time, while the focus of policy shifts to the use of delivered energy the Government should not lose sight of the importance of enormous wastefulness of the electricity generating industry: in 2003 no less than 61.3 percent of the energy content of the fuel used in power stations was either dispersed into the atmosphere as waste heat or lost as a result of the inherent inefficiency of the generating process.

We recommend simplification of the plethora of departments, policy instruments and agencies involved in promoting energy efficiency. Government have a responsibility to provide clarity and leadership, something they are currently failing to do.

We have analysed in detail the wide range of "carrots and sticks"—regulatory instruments, fiscal incentives, and so on—that the Government are using to promote energy efficiency. Much is already being done, though we believe the Government could do more to develop markets for community heating, to raise product standards, and to sponsor energy research.

The Government should also be encouraging innovation in the construction industry, particularly given the scale of new housing development planned for the south-east. Progressive raising of the standards contained in Part L of Building Regulations (which still lag behind those in many other European countries), better enforcement of these standards, investment in training, skills, and applied construction research—the Government needs to do more in all these areas.

Changing behaviour will be crucial. Gains in energy efficiency are not necessarily translated into reductions in energy use—for instance better insulation may simply be used to provide higher internal temperatures. At the macroeconomic level, it has been argued that improvements in energy efficiency effectively reduce the price of energy, and as a result stimulate economic growth and increased energy consumption. The Government have yet to engage adequately with these behavioural issues.

Energy still figures low on most people's priorities, and consequently as a nation we are profligate in our waste of energy. Long-term reductions in energy use will only be possible if the millions of users—individuals, businesses, schools and other public-sector bodies—are educated, encouraged, and given access to real-time information on their use of energy and its costs, economic and environmental. People can only make good decisions if they have access to good information. We need to become a nation of mature, well-informed energy users.