New International Energy Agency (IEA) analysis shows that progress on efficiency needs to be doubled before 2030 to improve energy security and affordability, while limiting global warming to 1.5°C.
- According to the IEA, ramping up annual energy efficiency progress from 2.2% today to over 4% annually by 2030 would deliver several social and environmental benefits.
- Investments in the sector must increase from $600 billion today to over $1.8 trillion by 2030.
- Policy will have a critical role to play in whether the world delivers on energy efficiency and the IEA released a toolkit for decision-makers.
The Energy Efficiency: The Decade for Action report was published during the IEA’s 8th Annual Global Conference on Energy Efficiency, convening in France 700 people from more than 80 countries, including over 30 ministers and 50 chief executives. To learn more about the many benefits of energy efficiency and why it plays a crucial part in reaching climate goals, read our explainer.
What is the report suggesting?
According to the IEA, ramping up annual energy efficiency progress from 2.2% today to over 4% annually by 2030 would deliver vital reductions in greenhouse gas emissions and at the same time expand energy access, reduce energy bills, decrease air pollution, and diminish countries’ reliance on fossil fuel imports. The job opportunities are plentiful: today, the sector employs tens of millions of people worldwide but there is potential for another 12 million jobs by 2030.
More efficient and lower energy demand supports faster progress towards universal access to modern and affordable energy in emerging and developing economies. The shift toward efficient electrification through the phasing out of the traditional burning of biomass such as charcoal and wood for heating and cooking also brings multiple benefits in terms of improved air quality and health.
The good news is that energy efficiency investment in 2023 is expected to reach record levels, despite a slowdown in year-on-year growth as the high cost of capital weighs heavily on potential new projects. Under current expected and announced policies, efficiency-related investment is projected to rise by a further 50%.
To see annual progress double, however, investments in the sector must increase from $600 billion today to over $1.8 trillion by 2030. Indeed, global energy demand grew by around 1% in 2022, with efficiency progressing by 2.2% – without these improvements, energy demand would have been three times higher.
How do we get there?
The IEA said that policy will have a critical role to play in whether the world delivers on energy efficiency in the short, medium and long term. The RePowerEU plan in Europe, the Inflation Reduction Act in the US and Japan’s Green Transformation initiative are a few examples of efforts to deliver on the energy efficiency agenda. Various emerging and developing economies, including India, Chile and South Africa, have also enacted progressive measures to bring energy efficiency to the fore.
Researchers developed and updated its policy toolkit for governments in two parts: The first is 10 strategic principles, based on the recommendations of the Global Commission for Urgent Action on Energy Efficiency, that bring together key learnings from global experience on how to maximise the impact of all energy efficiency policies and programmes.
The second is a set of sectoral policy packages that highlight key policies available to governments, and how they can be integrated into an effective coherent suite of policies and actions to deliver faster and stronger efficiency gains. The 2023 policy toolkit includes two new policy packages on clean cooking and finance as well as updates to the existing packages.
Urgent action needed now
According to Kim Fausing, president and chief executive at Danfoss, the momentum for building out new energy supply is dwarfing efforts to reduce demand through energy efficiency measures. Calling for an updated narrative about energy efficiency, he said it is much more than simply reducing demand and it will become even more important as the clean energy transition accelerates. The world needs digital solutions such as Internet of Things and artificial intelligence to create the flexibility that our energy systems will require as the share of renewables grows.
He commented: “The IEA has rightly called this decade the decade for action. Energy efficiency 2.0 means using electrification and sector integration to use our energy smarter, matching supply and demand. We know that excess heat – from supermarkets, data centers, industry, wastewater treatment plants – in the EU corresponds to the total energy demand for hot water in residential and service sector buildings. Yet, it’s mostly unutilized. Put simply, there will be no net zero future without energy efficiency.”
Michael Gierges, executive vice president for the global home & distribution division at Schneider Electric, added: “Many people feel helpless in the fight against climate change, but every homeowner and resident can play a part. Technology already exists to help decarbonize homes.”
“We’ve already seen over 70% of consumers change their energy habits at home in response to the energy crisis. It’s important that this isn’t just a short-term reaction, but a sustained lifestyle change that can help futureproof our homes and our planet.”