Energy efficiency has the potential of enhancing energy security of countries in addition to delivering significant mitigation actions. However, markets for energy efficiency require explicit government interventions in forms of robust regulatory and policy framework, measures to reduce risks and overcome barriers, and reduced transaction costs, to name a few. Energy efficiency is usually an interdisciplinary subject and therefore requires the right packaging with due alignment of incentives of each stakeholder to attract private investments. The package must include a robust legal framework, policy and regulatory certainty, strong institutional structure, identification of sector-specific barriers and implementation of measures to overcome them, consultations with key stakeholders, enhanced awareness and information dissemination, and proactive approach to risk mitigation and reduced transaction costs. The implementation of the household efficient lighting program in India by leveraging Clean Development Mechanism (CDM) revenues is a successful example of attractively packaging the business model that ringfences risks and aligns the incentives of all stakeholders. Effective use Programme of Activities (PoA), an instrument of CDM, has stimulated private sector investment. PoA enabled bundling of projects and thereby reducing transaction costs. As of now about 25 million CFLs have been installed and an investment worth $60 million has been made during the last one year. The well-defined medium-term action plan announced by Bureau of Energy Efficiency in the backdrop of the robust legal, regulatory, and institutional structure has helped enhance investors comfort and thereby investment flows.
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