Five policy actions to help countries double energy efficiency and meet climate goals

Countries need to act to double the rate of energy efficiency improvement globally in order to meet their climate goals and maintain competitiveness in a transitioning world.

One way in which this can be achieved is through policy change – in particular, policies focused on transition planning, financing for efficiency, and sector-specific policies in buildings, industry and transport.

The world is currently undergoing a dramatic energy transition. We are moving from a linear energy system where fossil fuels are extracted and burnt or refined to deliver to energy users, to a complex interconnected web of producers, transmission and consumers of energy that use a variety of energy sources, with key roles played by infrastructure, financiers, and technology.

In order to succeed with minimal disruption, this transition needs to balance energy security, sustainability and affordability.

Achieving this smooth transition is highly complex, not least because as we attempt to rapidly transition an energy system that took over 100 years to build, energy demand continues to rise, with some estimates that energy demand will increase by up to 33% by 2050.

This has potential to be further accelerated by the growth of energy-intense technologies such as artificial intelligence, whose growth has the potential to add the equivalent of the energy demand of Australia by 2030.

This is not inherently a bad outcome, as it represents the expansion of economic activity, access to energy and improvement in living standards.

However, it does create a ‘moving target’ for the transition as a whole, putting strain on existing power networks, and slowing transition by taking up the limited supply of renewables energy to meet the new demand, rather than decarbonizing the existing system.

At the same time, this resulting ‘bumpy’ transition leads to a lack of certainty for businesses, restricting their ability to invest and grow.

Businesses can act and are acting on this already, through focusing on reducing their energy intensity (energy used per unit of output produced).

As set out by the International Business Council (IBC), a group of 120 CEOs whose businesses represent 3% of global energy use, in their Transforming Energy Demand Initiative, there are many case studies of businesses rapidly decreasing their intensity through energy savings, energy efficiency and value chain collaborations.

However, there is more that can be done, with the Initiative’s Transforming Energy Demand white paper identifying existing technology could be used to reduce energy consumption by up to 31% with no loss of economic output. If this were to be delivered by 2030, it would result in savings for the global economy of up to $2 trillion per year.

To drive this acceleration, there needs to be support from policy-makers. This is high on the international agenda, with the UAE Consensus at COP28 seeing more than 130 countries signing up to double the rate of energy efficiency improvement globally by 2030. The next step is identifying how to deliver this goal.

Business leaders are leaning into this challenge, and have set out their proposals in the Nairobi Business Leaders’ Action Plan at the International Energy Agency’s (IEA) 9^th Annual Global Energy Efficiency Conference.

This action plan covers five key policy requests that can be delivered through private-public partnership:

To drive this, businesses will continue to engage with policy-makers on this topic year-round to accelerate action at multilateral processes such as Climate Week New York, and COP29.

By doing this we can move a step closer to delivering a sustainable, secure and affordable energy system, and a smooth transition by slowing the rise in energy demand, bringing that ‘moving target’ a little closer. This is a win-win for business and the public sector, and one that will require a global collaboration to drive forward.

We therefore have one message for all businesses and policy-makers: Get ready to act on energy efficiency to meet global climate goals and achieve an effective energy transition.

Read the IEA Chair's conference statement here and the summary of the Nairobi Action Plan here.