Energy efficiency moves up the global agenda amid high prices

The International Energy Agency (IEA) noted that many major policies, spending commitments and public campaigns have been launched to improve energy efficiency, albeit not enough to meet climate change targets at the moment.

Global investments in energy efficiency – such as building renovations, public transport and electric car infrastructure – reached $560bn in 2022, an increase of 16 per cent on 2021, according to the IEA’s latest market report, Energy Efficiency 2022.

Preliminary data indicates that in 2022 the global economy used energy 2 per cent more efficiently than it did in 2021, a rate of improvement almost four times that of the past two years, and almost double the rate of the past five years.

If the current rate of progress can be built upon further in the coming years, then 2022 could mark “a vital turning point for efficiency”, the report said, which is one of the key areas for international efforts to reach net zero emissions by 2050.

The IEA analysis found that, thanks to energy efficiency actions taken since 2000, total energy bills in IEA countries in 2022 are set to be $680bn less than they would have been otherwise – or around 15 per cent of their total energy expenditure this year – with past investments in building insulation and efficient cars saving many consumers thousands of dollars each year.

The global energy crisis sparked by Russia’s invasion of Ukraine has dramatically escalated concerns over energy security and the inflationary impact of higher energy prices on economies and people’s livelihoods around the world.

“The oil shocks of the 1970s led to a massive push by governments on energy efficiency, resulting in substantial improvements in the energy efficiency of cars, appliances and buildings,” said IEA executive director Fatih Birol. “Amid today’s energy crisis, we are seeing signs that energy efficiency is once again being prioritised. Energy efficiency is essential for dealing with today’s crisis, with its huge potential to help tackle the challenges of energy affordability, energy security and climate change.”

This year’s improvement comes after Covid-19 led to two of the worst years ever for global energy efficiency progress, with annual gains falling to around 0.5 per cent in 2020 and 2021.

Key factors included a higher share of energy-intensive industry in energy demand as other sectors contracted and a slowing pace of retrofits and upgrades in buildings and factories.

Energy efficiency progress had already slowed before the onset of the pandemic, with the global rate of improvement falling from 2 per cent in the first half of the last decade to 1.3 per cent in the second half.

Efficiency improvements need to average about 4 per cent a year this decade to align with the IEA’s Net Zero Emission by 2050 Scenario.

The electrification of transport and heating is accelerating, with one in every eight cars sold globally now electric, and almost 3 million heat pumps set to be sold in 2022 in Europe alone – up from 1.5 million in 2019 – as they become an increasingly cost-effective heating source.

Existing building codes are being strengthened and new ones are being introduced in emerging and developing economies, while a rising wave of energy-saving awareness campaigns is helping millions of citizens better manage their energy use.

All governments in South-East Asia, for example, are now developing policies for efficient cooling, vital for a region with one of the fastest rates of growth in electricity demand, the report said.