Energy Efficiency: The Overlooked Way to Curb Emissions
‘Energy efficiency is not just low hanging fruit; it is fruit that is lying on the ground,’ US Secretary of Energy Stephen Chu noted in 2009. Energy efficiency means using less energy to produce the same output, or producing more with the same energy input. It seems like a simple solution, so why is it so easily overlooked?
Energy accounts for 3/4 of the world’s total greenhouse gas (GHG) emissions. And as economic growth relentlessly expands worldwide, energy demand will increase. Yet, this demand comes at a time when the climate crisis demands we do the opposite – reduce emissions.
While fossil fuels still generate 61% of global electricity, reducing energy consumption is more important than ever. One often overlooked way to bring down global emissions is through energy efficiency.
At COP 28 in 2023, global policymakers agreed to double energy efficiency progress by 2030. This agreement put the potential of untapped energy savings on the agenda, but energy efficiency still is not receiving the attention it should. The energy crisis from 2022 led to substantial efforts to improve energy efficiency in many countries. The Climate Change Performance Index (CCPI) aims to capture progress in energy efficiency in its Energy Use category, which is a challenging task (see below).
Action needed in the building, industry, and transport sectors
The building sector, owing to its high energy savings potential, is at the heart of many countries’ energy efficiency efforts. Improvements in this sector range from installing better heating and cooling systems to improving insulation and using LED lighting. Governments can also implement performance standards for energy-intensive appliances, such as air conditioners. In Germany, for instance, one-third of all households are classified as ‘worst performing buildings,’ meaning they have very high energy demand, often due to insufficient insulation.
In the industry sector, processes such as steel, aluminium, chemical, and cement production are resource-intensive and emit heavy CO₂ emissions. This sector thus accounts for 1/3 of the current global total final energy consumption. Fuel switching, material substitutions, and advanced energy management are among the potential ways to save energy in this sector.
In the transport sector, the shift to electric vehicles is crucial and the ever-growing fleet of SUVs must not undermine progress in that shift.
How energy efficiency does more than just lower emissions
Some benefits of energy efficiency are clear. Energy efficiency policies bring economic advantages by reducing public and household energy expenditures and creating jobs. And, in the short term, energy efficiency might even be the most important and cost-effective way to lower emissions. The International Energy Agency (IEA) estimates energy efficiency accounting for up 50% of emissions reductions by 2030, which will help countries satisfy their nationally determined contributions (NDCs).
Energy savings lead to higher competitiveness through lower production costs. According to the IEA: ‘Doubling efficiency progress could cut energy bills by a third.’
Beyond that, energy efficiency policies can enhance energy systems’ security. Using less energy decreases pressure on the power grid, leading to fewer power disruptions. Countries also become less dependent on conflict-prone fossil fuel-producing nations.
On a human level, fuel poverty can contribute to stress and depression. Improving energy efficiency therefore may help mental health and reduce public health expenditures.
We must keep in mind that low-income countries are expected to experience a significant increase in energy efficiency demand in the future. The high rate of energy loss during transmission and the difficulties in implementing effective policies pose challenges for these countries.
Energy efficiency can enable more households to access energy from a single power source in countries that have yet to achieve universal access to energy. Improved energy efficiency can also boost residents’ health by improving indoor air quality through changes in fuel (e.g. from wood to electricity), thereby reducing respiratory diseases.
Energy efficiency’s potential pitfalls
Energy efficiency improvements should not be an excuse for accelerating energy use. Those in developed countries must acknowledge that energy improvements can bring a misleading belief that energy consumption can continue at current levels. Certain notions of comfort, mobility, and convenience are unsustainable in the long run.
Sufficiency emphasizes the need to reduce overall energy demand, while energy efficiency aims to deliver the same amount of energy with less input.
The ‘rebound effect’ poses a particular challenge. This effect describes when energy efficiency improvements are not used to lower GHG emissions but rather to increase activities such as production. The result is that energy consumption is not actually reduced. Cars, for example, have become more efficient, but the market for high-power vehicles also has grown. This trade-off cannot be a solution.
How the CCPI measures energy efficiency
So then, how do you measure energy that has not been used and is essentially a negative quantity? In the CCPI, we measure energy efficiency improvements in the Energy Use category, which makes up 20% of the overall index score. No sector-by-sector, globally comparable data are currently available. Therefore, we use total primary energy supply per person (TPES/capita) as an indicator. This means we assess the average energy of each person in a country and measure progress in this category.
Next to the current level of energy use, the CCPI considers the past trend, compares the current level with a well-below-2°C pathway, and evaluates how the country’s target aligns with this pathway. This approach aims to provide a comprehensive picture of energy efficiency progress. Based on the IPCCs Sixth Assessment report, per capita global energy use must be reduced by about 20% in 2020–2050. With this, the compatible benchmark is at ~60 gigajoules per capita in TPES in 2050. For instance, India, with its large population and low energy use per capita is ranked 10th and could still increase its energy use. However, countries like Canada (ranked last at 67th) and the United States (62nd ) have exorbitant energy use that must be reduced.
Major emitters addressing energy efficiency in their policies
Large economies are accompanied by high energy consumption: China, the United States, and Europe are collectively responsible for over half of global energy use. The US Inflation Reduction Act, passed in 2022 addressed this issue and includes USD 86 billion for energy efficiency actions – an unprecedented measure.
China presents a mixed picture. While being the largest energy consumer worldwide, it can also boast substantial efforts in energy efficiency. Policies on building standards have been crucial in its improved energy efficiency, but the Chinese transport and industry sectors still have large energy-savings potential.
As for Europe, the EU raised its ambitions in March 2023 when policymakers agreed to set energy-saving targets across the EU to 11.7% by 2030 versus a baseline forecast from 2020. The EU energy directive is binding as well, fulfilling one criterion of a good climate policy.
The future of energy efficiency
The historical record shows increased economic output going hand in hand with increased energy demand. Thus, investing in energy efficiency is critical, especially given the ongoing dependence on fossil fuels.
The IEA found that countries can get near the COP28 goal of doubling energy efficiency only through implementing existing policies and speeding up the deployment of existing technologies. While the COP28 agreement was an initial step in the right direction, implementation must take place on the national level to fully unlock the potential of lowering emissions through energy efficiency.
Merle Clara Riebandt