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Energy efficiency is a crucial aspect of the energy transition, as it can help reduce energy consumption and mitigate the risks associated with stranded assets. |
The effects of material efficiency and consumer preferences on energy demand are challenging to model, but it is essential to consider these factors in order to develop effective energy-saving strategies. |
There are multiple benefits to energy efficiency, including reduced greenhouse gas emissions, improved air quality, and lower energy costs. |
Fossil fuel subsidy reforms can help prepare the ground for saving energy by reducing the financial incentives that encourage excessive energy consumption. |
Effective minimum energy performance standards can deliver significant energy savings by promoting the adoption of more efficient technologies. |
The cost of increased efficiency is an important consideration in determining the feasibility of energy-saving initiatives. |
Australia's Co-operative Research Centres have played a key role in advancing our understanding of energy-efficient technologies and strategies. |
Alternative sustainable transport futures are possible through modal shift and urbanisation, which can reduce the need for personal vehicles and promote more efficient transportation systems. |
Green tagging can help overcome asymmetric information by providing consumers with clear and comparable information about the environmental impacts of different products and services. |
Energy efficiency investment barriers can be a significant obstacle to the adoption of energy-efficient technologies, but they can be addressed through a range of strategies including policy interventions, education and awareness campaigns, and financial incentives. |
Energy efficiency is the cornerstone of any transition to a cleaner, more secure and more sustainable energy future. This report analyses two clean energy transition scenarios and shows that energy efficiency is just as important in a scenario combining climate change goals with other sustainable development objectives – such as achieving universal energy access and reducing air pollution – as it is in a scenario focusing only on the transition to a low-carbon energy system. |
Although end-use energy efficiency alone is not sufficient to meet the temperature goals of the Paris Agreement, it can deliver 35% of the cumulative CO2 savings required by 2050. While there are differences in the outlook for specific fuels between these scenarios, the widespread and comprehensive adoption of energy efficiency measures across all end-use sectors is a central pillar of both. |
Global energy efficiency improvements slowed dramatically in 2017, one of the key reasons for an annual increase in global energy-related CO2 emissions – the first increase after three years without emissions growth. Global energy intensity improved by only 1.7% in 2017, much lower than the annual average of 2.3% over the last three years, and well below the 3% annual average required through 2050 to reach the goals of the clean energy transition scenarios. |
Strengthening efficiency is not only fundamental to meeting climate change goals, but also to strengthen energy security, improve access to energy and reduce local air pollution. In the 66% 2°C Scenario – a rapid low-carbon transition scenario that is the main focus of this report – efficiency measures would be the key to reducing energy demand in end-use sectors. |
Overall electricity demand growth would nonetheless be at the same level as in the New Policies Scenario, contained by energy efficiency. |
Realising these potential efficiency gains would require a substantial shift in the balance of energy sector investment from the supply-side to the demand-side. Realising these potential efficiency gains would require a substantial shift in the balance of energy sector investment from the supply-side to the demand-side. |
The economic case of energy efficiency is compelling in all end-use sectors In buildings, the additional energy efficiency efforts in the 66% 2 °C Scenario would be sufficient to almost completely offset the increases in the demand for energy services out to 2050. Energy savings in 20 50 in the 66% 2 °C Scenario, relative to the New Policies Scenario, would total around 950 million tonnes of oil equivalent (Mtoe), equivalent to one-third of today's energy consumption in buildings. |
The bulk of savings would come from increasing energy efficiency in space heating (more than one-third of energy savings) and cooling (almost one-quarter). Despite this, electricity demand would be contained by energy efficiency measures, with demand in the 66% 2 °C Scenario in 20 50 some 16% below the level in the New Policies Scenario. |
Universal adoption of mandatory and stringent energy-related building codes for new residential and services sector buildings, and the extension of codes to existing buildings, would be important measures to improve building envelope performance. Minimum energy performance standards (MEPS) would be critical to incentivise accelerated adoption of the best available end-use technologies. |
In industry, a wide range of low-carbon technologies and processes would need to be adopted at a faster pace and larger scale than before if the sector is to meet the ambition of the 66% 2°C Scenario. CO2 emissions from fuel combustion in industry would be reduced by two-thirds in 2050 compared with the New Policies Scenario, and by more than half compared with today’s levels. |
Key energy-intensive subsectors driving down energy demand would be iron and steel (almost one-quarter of the total savings by 2050) and chemicals (one-fifth). While the share of heat from electricity would more than triple by 2050 from today’s level, further deployment of efficient electric motor systems would counteract the increase, contributing 2 700 terawatt-hours (TWh) of electricity savings in 2050. |
Energy efficiency investment of about USD 130 billion per year through 2050 would be needed across industry in the 66% 2°C Scenario. Light industry sectors would make an important contribution to energy savings, and the majority of those energy efficiency investments would pay back within three years, while energy-intensive sectors require slightly longer average payback periods. |
Across industry, an important policy challenge is to trigger investment in efficiency options with short payback periods by overcoming non-economic barriers to their deployment. Even more stringent mandatory MEPS than those in the New Policies Scenario, as well as supporting measures for systematic implementation of energy management systems, would be important for the large-scale and rapid deployment of efficient technologies and processes. |
Energy efficiency improvements in conventional engines are a key driver of energy demand savings in transport, although the economic case diminishes over time, particularly for cars, as the incremental costs of further efficiency improvements rise and render electric cars more competitive. In the 66% 2°C Scenario, transport energy demand would peak by the mid-2020s and decline at 0.8% per year thereafter to 2050. |
Road transport would account for 70% of transport energy efficiency savings, 60% of which would come from light-duty vehicles that would see their average specific on-road consumption in 2050 reduced by a factor of more than three, compared with today. There is great potential for more efficient trucks to contribute to energy savings as only five countries have adopted fuel-economy standards for heavy-duty vehicles today. |
Transport electricity demand would increase by more than 8,000 TWh in the 66% 2°C Scenario in 2050, relative to today, four-times the level in the New Policies Scenario and compensating declines in other sectors. The required energy efficiency investment in transport, at USD 375 billion per year through 2050, would pay back over the lifetime of all vehicles. |
The combination of economic and non-economic barriers to efficiency means that delivering the energy efficiency gains in the 66% 2 °C scenario would be an enormous policy challenge. |
Ramping up energy efficiency will require a strategic approach to efficiency policy: a clear long-term government commitment, combined with well-designed packages of efficiency policies reinforced by adequate capacity for implementation and sufficient enforcement. |
Delivering the highest possible contribution of energy efficiency to clean energy transitions, in the sectors where it can have the most benefit, requires decisive, consistent and effective policies, underscored by political will and good governance. |
The policy solutions for energy efficiency are well known, including regulations and standards, market-based incentives and innovative financing models. Regulatory approaches are crucial in many sectors. |
Policy success in energy efficiency relies on strong institutional capacity and good governance. Implementation and enforcement capacity needs to be enhanced in many countries to enable rapid deployment of effective efficiency measures. This means not only increasing governments’ capacity to implement policies, but also to operate them effectively as part of ongoing programmes. Effective evaluation, monitoring, verification and enforcement are critical for ensuring policy measures deliver, especially with regard to long-term efficiency targets. This requires detailed energy use data, in order to better understand how and why energy is being used. |
Energy efficiency is the first fuel and can make the energy transition affordable, faster and more beneficial across all sectors of our economies. Any energy transition strategy must be led by energy efficiency, and the IEA is ready to continue to support governments in reaping the multiple benefits of energy efficiency through detailed analysis, sharing of policy best-practices and training activities. |
The global energy sector is undergoing a rapidly accelerating transition. Investment patterns are changing, prompted by a multitude of drivers, including technological change, evolving consumer preferences and policy measures. Policies affecting the energy sec tor are motivated by a range of objectives. Tackling climate change is a critical consideration among those objectives, but governments continually are faced with other priorities such as ensuring affordable energy supply, improving energy security, delivering universal energy access and reducing air pollution. |
The energy sector – production, transformation and use of energy – is central to the climate change challenge. The sector accounts for around two-thirds of global greenhouse gas (GHG) emissions and about 90% of carbon dioxide (CO2) emissions, the most prevalent GHG. Therefore the energy sector features prominently in countries’ Nationally Determined Contributions (NDC) to the Paris Agreement on climate change, the 2015 landmark international accord that entered into force in November 2016. |
The Paris Agreement also recognises that tackling climate change must be done in the context of sustainable development and efforts to eradicate poverty. The 17 Sustainable Development Goals (SDGs) of the United Nations, also agreed internationally in 2015, set broad and ambitious targets for making progress on sustainable development by 2030. Energy is central for achievement of many of the SDGs. |
Understanding where governments can do more to stimulate the necessary investment and to drive more rapid transformation of the energy sector therefore is important, both for climate change and broader sustainable development objectives. |
energy efficiency across the global economy the result of those efficiency gains is that total investment in the supply side would remain at nearly the same level of investment as today however supply side investment would be significantly reoriented away from fossil fuels towards renewable energy resources understanding the nature of these demand side investments particularly for energy efficiency and successfully mobilising the necessary financing are essential to trigger an accelerated energy sector transition |
to take stock of progress towards a low carbon energy sector and provide further insights on the role that efficient energy end uses can play in achieving deep decarbonisation this report focuses on the role of energy efficiency as a critical enabler of the clean energy transition in the buildings transport and industry sectors |
the sustainable development scenario is an integrated scenario that combines the low carbon energy transition with meeting energy access goals and reducing air pollution seen through the lens of the sdgs the 66% 2 °c scenario represents a low carbon transition of exceptional scope depth and speed to meet climate goals – a global co 2 trajectory with a high chance of meeting long term temperature targets without relying on global co 2 emissions becoming negative this century |
the energy sector carries direct costs for the economy relative to a continuation of current trends but the transition could have a positive impact on economic growth over the long term provided that the push for low carbon investments is carried out in parallel with strong pro growth structural reforms themselves strongly aligned with climate objectives |
Perspectives for the Energy Transition: The Role of Energy Efficiency introduces the scenarios, and discusses the role of energy efficiency and the required investment to achieve climate goals across these scenarios. |
Analysis of the two clean energy transition scenarios identifies the importance of energy efficiency for the low-carbon transition across end-use sectors and finds that the efficiency component in both scenarios is similar. Comparing this with the New Policies Scenario highlights the gaps in current policy ambition and technology status which provides a basis for policy recommendations. |
Chapter 2 provides detailed insights on the needed energy efficiency investment by sector. Given the similar energy efficiency contributions in the two clean energy transition scenarios, it focuses on the 66% 2 °C Scenario. The chapter presents the outlook for energy intensity in the period to 2050 by way of detailed analysis by end-use sectors. It draws new findings on payback periods in the sectors and across time periods. The analysis then zooms out to shed light on how efficiency is characterised at a system's level. |
Chapter 3 provides policy insights based on the analysis. It focuses on how specific policy measures can be tailored to improve energy efficiency across end-use sectors and explores broad strategic approaches to increase energy efficiency. |
Energy efficiency is an integral part of countries’ climate change strategies. Nearly two-thirds of the Nationally Determined Contributions (NDCs) pledged under the Paris Agreement contain specific energy efficiency targets. |
Existing and announced policies lead global energy demand to grow nearly 40% by 2050 in the New Policies Scenario. Without those measures, energy demand growth would be nearly twice as large. |
Progressively stronger energy efficiency policies see the energy consumed per dollar of GDP decline by an annual average rate of 2.1% in the New Policies Scenario. This rate is significantly accelerated in the two clean energy transition scenarios to nearly 3% per year through 2050, emphasising the importance of energy efficiency. |
In both clean energy transition scenarios, energy-related CO2 emissions peak before 2020 then fall rapidly in the period to 2050. Energy efficiency, including the contribution of electric vehicles, provides around a third of the emissions abatement in both scenarios, relative to the New Policies Scenario. |
The New Policies Scenario requires an annual average investment of USD 2.7 trillion (United States dollar) in the energy sector between 2017 and 2050, well above current levels. Incremental investment required by the clean energy scenarios is relatively modest, but does require a major reallocation towards clean energy on the supply side, as well as to investment in end-use sectors. |
Recent years have seen important energy sector developments with ramifications for its transition towards a low-carbon footprint. Changes in policy, technology costs and macroeconomic conditions have influenced how energy sector investment and operations are evolving. This section reviews these developments and examines the consequences for energy-related CO2 and air pollution emissions. |
In 2016, total energy investment worldwide decreased 12% in real terms from the previous year, to around USD 1.7 trillion, having already decreased by about 8% from 2014 to 2015 (IEA, 2017a). The biggest declines have been in upstream oil and gas, down 36% in the two years to 2016. |
Total investment in the power sector also declined by around 1% relative to the previous year, due to both lower thermal power generation investment and continued falling capital costs for renewables, notably solar photovoltaics (PV). However, lower capital costs mean that the total investment numbers belie strong capacity increases in renewables. For example, solar PV capacity additions reached more than 74 gigawatts (GW) in 2016, a 50% increase from the previous year. |
Investment in electricity networks – an important enabler for the clean energy transition – continued to rise in 2016, as it has for the past several years. Investment in the expansion, modernisation and digitalisation of networks and storage amounted to USD $277 billion, 30% of which was in the People's Republic of China (hereafter "China"). As a result, renewables and networks increased their share of power investment to 80%. The combination of low-carbon generation and electricity networks saw their investment share grow by twelve percentage points to 43% from 2014 to 2016, closer to the total for fossil fuel supply investment. |
Today electricity is the largest component of global energy investment and together with efficiency accounts for well over half of total investment. |
Even with persistent low energy prices, energy efficiency was the fastest growing element in terms of energy investment in 2016. Global energy efficiency investment rose to USD 231 billion, an increase of 9% on the previous year. Europe remains the largest region for energy efficiency investment though China is catching up rapidly as the fastest growing region accounting for 62% of growth in energy efficiency investment. |
The buildings sector continues to be the largest recipient of energy efficiency investment, making up more than half of the total and growing by 12% in the year to 2016. Improved building envelopes, including insulation, accounted for nearly half of total investment in efficiency in the buildings sector, while the other half was spread fairly evenly across heating, ventilation and cooling (HVAC), lighting and appliances. |
In the transport sector, combined investment in electric vehicles – which can be considered an efficiency technology – and more efficient conventional vehicles increased 5% in 2016 from the previous year. Around one-third of the growth was for electric vehicles, while the remainder was largely attributable to investment in more efficient passenger vehicles in China. Investment in other regions, on average, was broadly flat with lower overall vehicle sales acting to mask an increased share of efficient vehicles. |
Total investment in energy efficiency in 2016 in the industry sector rose by 5% from the previous year. |
This was in line with increased production and brisk spending on industrial energy management systems, including software, especially in emerging and developing economies. |
Research and development (R&D) is a critical element of energy investment as it is essential for the innovation required to transform the sector. |
Spending on R&D for general energy technology or specific for clean energy technology has not increased in the past four years. |
Shifts in the allocation of energy investment worldwide have slowed the rate of growth of global energy-related CO2 emissions over the past decade. |
There are encouraging signs of a decoupling between economic growth and CO2 emissions, which is even more apparent for emissions of air pollutants. |
The energy sector is the main source of many air pollutants that can lead to severe human health consequences, as well as local and regional environmental damage. |
Dampening the rise of global CO2 emissions in a period of accelerated global economic growth is a positive indicator. |
However, it is not sufficient to deliver the internationally agreed climate change goals of the Paris Agreement, especially given the resumption of growth in 2017. |
Energy efficiency is an important component in the decoupling of economic growth and energy-related emissions. |
It is useful to look at the metrics of energy consumed per unit of economic output (energy intensity) and the CO2 emitted per unit of energy. |
the rate of change is linked to both GDP per capita and energy use per capita which has implications for policy discussed below and in Chapter 3 |
Developments in energy efficiency policy The importance of energy intensity and carbon intensity in determining CO2 emissions underscores the need for policy measures that influence both factors in the short and long term Energy efficiency needs to be an integral part of climate change policy packages Energy efficiency takes many forms and can be applied at many levels Box 1.1 |
At the heart of the Paris Agreement are countries’ pledges in the form of their NDCs Almost all NDCs include coverage of energy sector emissions sometimes accompanied by targets or measures to address them The most common energy-related ones are increased renewable energy deployment and nearly two-thirds of the NDCs mention specific plans to improve energy efficiency Countries are taking steps to implement their pledges However many NDCs are not yet fully aligned with domestic energy policies Governments increasingly value that energy efficiency measures can deliver multiple benefits to the economy including cost savings improved productivity and energy security |
A good illustration is the proportion of global final energy consumption covered by mandatory efficiency standards that expanded from 11% in 2000 to 21% in 2010 and climbed to 31.5% in 2016 Figure 1.5 |
Mandatory energy efficiency standards have been increasingly adopted in recent years, though the coverage varies considerably among end-use categories. |
Energy efficiency means achieving the same level of service (measured as economic output, production quantity or distance travelled) while consuming less energy. Typically, energy efficiency is considered in the end-use sectors (transport, buildings, industry). For example, if a new model of a gasoline car uses less fuel than the previous model to drive the same distance, the new car is more energy efficient. |
There are many ways to improve end-use energy efficiency, including both switching to more efficient technologies and employing behavioural and operational changes that make smarter use of existing technologies. |
The digitalization of the energy system offers further opportunity for energy efficiency improvements. For example, ships and planes are being equipped with thousands of sensors that enable big data analytics for route planning and fuel reduction (IEA, 2017c). |
Energy efficiency is challenging to measure. Energy intensity – a measure of energy use per unit of production or economic output - is frequently used as a proxy for energy efficiency, though where data are adequate, more detailed indicators can provide useful metrics. |
It is also challenging to quantify the contribution of energy efficiency to aggregate energy savings and emission reductions: this entails a decomposition analysis to consider what the case might have been in the absence of more efficient technology or practice. |
Energy efficiency standards for equipment used in the non-residential portion of the buildings sector applied to 45% of the sector’s energy demand in 2016. |
In addition to extending the coverage of energy efficiency standards to a wide array of products and processes, over time the levels of standards need to be assessed and adjusted if needed to spur technological innovation and reap the benefits of energy efficiency. |
While mandatory energy efficiency policies have been applied more broadly in the last decade, the increase in both coverage and stringency appears to have slowed in recent years. |
In addition to standards, regulations and other policies specifically targeting energy efficiency, a variety of other policies also directly or indirectly affect energy efficiency. |
Reflecting continued efforts at reform and lower prices for the main fuels, the estimated value of fossil fuel consumption subsidies continued its decline by 18% in 2016 from the previous year to USD 260 billion worldwide. |
Argentina strengthened its MEPs for cooling devices, washing machines and fluorescent lamps in 2014. |
Brazil increased funding for its National Electricity Conservation Programme and introduced efficiency certification for all public lighting, with a ban on incandescent bulbs starting from 2016. |
Canada implemented energy performance standards for 20 product categories, including lighting, appliances, water heaters, and electric motors in 2016. Federal building energy codes were also published in support of the Pan-Canadian Framework on Clean Growth and Climate Change as guidance for provinces in 2016. |
China set targets to reach 15% of total primary energy demand from non-fossil fuels by 2020 and reduce carbon emissions per unit of GDP by 18% below 2015 levels. The country also aims to reduce NOX and PM2.5 emissions by 15% by 2020, with a corporate average fuel consumption limit for new cars of 5 litres/100 km in 2020. |
European Union's overall target is an increase in energy savings by 27-30% by 2030, with energy suppliers obligated to improve energy efficiency by 1.5% per year as from 2020. The EU also agreed on updates to the Energy Performance of Buildings Directive requiring existing buildings to be nearly zero-energy by 2050. |
France's energy transition law sets targets to reduce final energy consumption by 20% by 2030 and halve it by 2050 from 2012 levels. |
Germany upgraded its energy efficiency schemes, enhancing building modernization programs, supporting efficient heating systems, and introducing competitive tenders for electricity-saving projects. The country also supported cross-cutting technologies and waste heat recovery in industry, with a pilot program for advanced digital meters. |
India's National Mission on Enhanced Energy Efficiency includes the Perform Achieve and Trade market-based scheme targeting energy-intensive industries and facilities, with a goal to reduce energy consumption by 17% by 2025 compared to BAU. |
United Kingdom Requirement for privately-owned rented buildings to achieve minimum energy performance rating of “E” on an Energy Performance Certificate, taking effect in 2018. 2017 United States State-level renewable portfolio standards with the option of using energy efficiency as a means of compliance. |
Energy Efficiency Improvement Act including voluntary certification programme for building owners and tenants, regulation of electric-resistance water heaters and requirement for federal government leased buildings to disclose energy usage data. 2015 |
A scenario-based approach is a powerful tool to analyse where existing policies and markets seem to be taking the energy sector and to illustrate how the course of the energy system might be affected by changing some of the key variables, including energy policies adopted by governments around the world. |
This report examines three scenarios. The New Policies Scenario describes where existing policies and announced intentions might lead the energy system, in the anticipation that this will inform decision makers as they seek to improve on this outcome. |
The other two scenarios depict pathways towards a clean energy transition. The Sustainable Development Scenario is an integrated scenario that shows how the energy sector needs to change to meet three energy-related sustainable development goals as specified in the UN SDGs. |
Perspectives for the Energy Transition: The Role of Energy Efficiency emphasis onto near-term emissions reductions. The result is that the 66% 2 °C Scenario – so named because it is based on a carbon budget originally calculated to provide an estimated two-thirds chance of holding global temperature rise below 2 °C by 2100 – portrays an energy sector transition of exceptional scope, depth and speed. |
Energy is at the heart of sustainable development. Access to modern energy services – both electricity and facilities for clean cooking – is a fundamental prerequisite for social and economic development in countries where people still lack access. Where modern energy services are in place, minimising the environmental and health impacts of energy production and transformation is a critical part of sustainability. |
The UN SDGs provide a comprehensive framework for measuring progress towards sustainable development. The 17 goals, comprising 169 specific targets, cover many aspects of social, economic and environmental development. The SDGs integrate multiple policy objectives within the framework, recognising, for example, that ending poverty must go hand-in-hand with strategies that build economic growth and address a range of social needs, while also tackling climate change and strengthening environmental protection. |
While energy underpins many of the social and economic SDGs, it is fundamental for three goals in particular. SDG 7 aims to ensure access to affordable, reliable, sustainable and modern energy for all by 2030. SDG 3 on health, and specifically SDG target 3.9, seeks to substantially reduce the number of deaths and illnesses from air pollution, of which the energy sector is the major contributor. |