The government's Energy Review is not just about the nuclear option - a watershed in domestic energy efficiency is also on the agenda.

Nuclear power and the fact that it's "back with a vengeance" as Tony Blair recently put it, grabbed the headlines generated by the government's Energy Review this month. However the prospects for domestic energy efficiency include another option that would equally count as a watershed in the UK's attitude towards energy - the government has said it will explore an emissions trading scheme for household consumer supply.

The Energy Efficiency Commitment (EEC) on energy suppliers to support energy savings among consumers remains the cornerstone of energy efficiency policy for existing homes. The scheme is currently in its second phase (2005-08) and is regarded as relatively successful at achieving savings through simple measures such as energy efficient light bulbs and loft insulation, with around half of all measures directed at low income households.

Looking forward the government has already indicated that energy suppliers will be expected to deliver 50-100% more savings in the next phase (2008-11) and will continue to be under some form of household obligation until at least 2020.

Discussions on the future shape of the EEC is already under way. The Partnership held a joint event with Defra in March and  the Energy Review reveals that the government plans to consult this summer on how it might extend the range of EEC activities, wider options having been opened up by the recent passing of the Climate Change and Sustainable Energy Act. The Partnership and Defra will also be holding a wider stakeholder event in October.

The government's aim is to incentivise energy suppliers to influence consumer behaviour. The Review suggests that the way forward will be to shift the emphasis from simple energy delivery to the supply of energy services, so that consumers purchase heating, lighting and other power in the most effective way. And the option offered by the Review is for tradable targets to be given to energy suppliers, effectively putting a cap on each company's total domestic supply.

This "upstream" (supply side) version of an emissions trading scheme for domestic energy use would be the first step towards capping householder energy use. As the UK domestic energy market is dominated by just six major suppliers, such a scheme should be easy to administer.

The Energy Review states that energy suppliers have already indicated that they are willing to move in this direction, given a suitable policy framework, which could allow the trading scheme to effectively replace the third phase of the EEC from 2011 onwards. As the Review says, this is a major shift in thinking.

Better consumer information

In the shorter term the main plank of domestic policy is better information for consumers. The government proposes improvements to billing information to be introduced from next year, starting with mandatory graphical displays of historical energy use to show consumers how their energy use has changed. Bills would also offer information on energy efficiency. Consultation with suppliers is scheduled for the autumn.

Real-time electricity displays are also accepted as an effective means of checking energy use and encouraging savings; their potential can be expected to move up the agenda next year when Powergen reports on the domestic trials currently underway.

A residential trial of "smart meters", which allow suppliers to take remote meter readings, will be trialled next winter in an exercise jointly funded by energy companies and the Treasury. However the Review is already sounding a note a caution here, suggesting that a full-scale smart metering roll-out could increase annual gas and electricity costs by £20 each for ten years.

On the domestic appliance front, the government is continuing to work with major retailers and the Energy Saving Trust to introduce voluntary schemes to raise the efficiency of goods. However at the international and EU level the Review reveals a willingness of the UK government to work towards the forcible removal of the least energy efficient products from the market - is this the beginning of the end for the incandescent light bulb?

New building standards

The government is able to claim real progress on the energy efficiency of new buildings, having pushed through two revisions of Building Regulations since 2002 that have together improved energy performance by around 40%. The next test of how quickly the government wishes move ahead will be the standards it sets for its forthcoming Code for Sustainable Homes.

The Code got off to bad start. In March this year, as soon as consultation ended amid a chorus of accusations that objectives had been watered down, ministers agreed to strengthen the Code significantly.

The Review confirms that the Code's five levels will be announced later this year and that the lowest level will require energy standards to be better than those demanded by statutory Building Regulations (the draft did not!).

All publicly-funded housing projects already have to meet Level 3 of the Code, although in the absence of a Code this was initially set as equivalent to the relatively undemanding EcoHomes "Very Good" standard to avoid delays.

The government has already made it clear that the Code will be used to forewarn the construction industry of future revisions to Building Regulations. Level 5 of the Code will be for carbon neutral homes, now officially the government's long term goal, although the Review offers no timetable here.

The Review also seizes on a number of recent announcements by ministers on renewable energy and microgeneration.

Planning minister Yvette Cooper recently issued a parliamentary statement to add authority to government calls for renewable energy policies to be included in all local authority development plans, and she is expected to launch new planning policy guidance strengthening the case for renewables later this year. All planning departments will be expected to demand that a proportion of the energy needs of new developments should come from onsite renewable energy generation.

The DCLG is already consulting on changes to permitted development rights that will allow householders to install small scale renewable energy devices on their homes without planning permission. David Cameron's recent success in getting planning permission for a micro wind turbine and solar panels on his west London home suggests that such reforms should survive any future change of government.

Exemplars for the future

Also highlighted in the Review is DCLG's recent announcement of a design competition, to be run by English Partherships, for the development of a series of sustainable "eco-communities" - the aim is to challenge housebuilders to develop low cost, low and zero carbon homes in the context of whole developments - and a forthcoming feasibility study into how the Thames Gateway housing growth area could become a "low carbon development area" within a decade.

With these "exemplar" projects in the pipeline, the DCLG is also promising to set out new incentives for local authorities to take action on climate change in a Local Government White Paper due this autumn.

All energy efficiency policies, of course, will be seen in the context of the EU Emissions Trading Scheme from now on, with the ETS market's "carbon price" underpinning future efforts by the business sector and major energy suppliers.

The Review makes clear the government's commitment to reinforce the operation of the EU ETS, but significantly the discussion is already moving to talk of how a third phase might introduce more challenging targets across Europe from 2013, that is before member states have even agreed targets for the second phase.

Headline writers continue to prefer the nuclear option to energy efficiency. But as many organisations have pointed out in their responses to the Review the energy statistics tell their own story.

The Review suggests that by the end of the next decade, the most optimistic view is that only one new nuclear reactor would be operating, delivering just over one million tonnes of carbon savings. On another page the Review declares that energy efficiency measures could be saving 25 million tonnes by 2020.

To read the Review click here.

A number of organisation have published responses to the Review including the following:

Energywatch

Friends of the Earth 

Greenpeace 

NEA 

Ofgem 

Sustainable Development Commission