Energy Efficiency
Why is it important?
Energy efficiency is called the “first fuel” in clean energy transitions, as it provides some of the quickest and most cost-effective CO2 mitigation options while lowering energy bills and strengthening energy security. Together, efficiency, electrification, behavioural change and digitalisation shape global energy intensity – the amount of energy required to produce a unit of GDP, a key measure of energy efficiency of the economy.
What is the role in clean energy transitions?
Energy efficiency is the single largest measure to avoid energy demand in the Net Zero Emissions by 2050 Scenario. Furthermore, most efficiency measures result in cost savings to consumers, lowering energy bills and helping cushion the effects of unexpected price spikes, such as occurred after Russia’s invasion of Ukraine.
Where do we need to go?
While efficiency investment has recently been increasing to reach new record levels, the pace of global energy intensity improvements had noticeably slowed in the second half of the last decade and virtually stalled during the first two years of Covid-19. The energy crisis saw energy intensity progress in 2022 accelerate to 2%. Doubling the global pace of energy efficiency progress from this level to 4% per year on average this decade is a key step in efforts to reach net zero emissions. However, since 2022 progress has halved to around 1% per year.
Tracking Energy Efficiency
is called the “first fuel” in clean energy transitions, as it provides some of the quickest and most cost-effective CO2 mitigation options while lowering energy bills and strengthening energy security. Energy efficiency is the single largest measure to avoid energy demand in the Net Zero Emissions by 2050 (NZE) Scenario, along with the closely related measures of electrification, behavioural change, digitalisation and material efficiency. All together these measures shape global energy intensity – the amount of energy required to produce a unit of GDP. Global energy intensity falls by around 4% per year on average this decade in the Net Zero Scenario, double the rate achieved last decade between 2010-2019. While all measures to avoid energy demand help improve energy intensity, and many do overlap, the energy performance of specific technologies is the main focus of this page.
Energy efficiency policies have been strengthened globally in the past year
Energy efficiency policies have been strengthened globally in the past year
Countries representing more than 70% of the world’s energy consumption have introduced new or strengthened efficiency policies since the start of the current energy crisis:
- The European Union adopted the revised Energy Performance of Buildings Directive in May 2024, mandating zero-emission new buildings by 2030, introducing MEPS for non-residential buildings, and mandatory long-term renovation strategies. This legislation comes on top of the stronger targets and policies in the revised Energy Efficiency Directive that was adopted at the end of 2023.
- The United States updated standards for passenger cars in 2024. The new proposal sets out a 2% increase in Corporate Average Fuel Economy (CAFE) targets for passenger cars from model years 2027 through 2032. The country also tightened standards to reduce emissions from heavy-duty vehicles beginning in 2027. These depend on the vehicle type and are 40-60% stronger than before. The regulations are expected to result in sales of zero emissions vehicles (ZEV) representing up to 60% of total car sales by 2032.
- The People’s Republic of China (hereafter, “China”) issued a 2024-2025 Energy Conservation and Carbon Reduction Action Plan in May 2024. This includes a target to improve national energy intensity by 2.5% for 2024, with a higher goal of 3.5% specifically in large-scale industries. Overall, the action plan aims to deliver energy savings over the two years equivalent to 100 Mt of coal (2.9 EJ). The plan was followed by specific energy and carbon reduction plans in 2024-2025 for the cement, steel, synthetic ammonia, electrolytic aluminium, data centres, and petrochemicals industries.
- India launched the PM Electric Drive Revolution in Innovative Vehicle Enhancement (PM E-DRIVE) scheme in September 2024 to promote the rollout of electric vehicles. A successor to the Faster Adoption and Manufacturing of Electric Vehicles (FAME) programme, it supports the development of charging infrastructure and the deployment of electric two-wheelers, three-wheelers and electric buses through purchase incentives. To attract global EV manufacturers to set up production facilities in India, the government also announced the Scheme to Promote Manufacturing of Electric Passenger Cars in India in 2024.
Progress on efficiency has accelerated over the past two decades but needs to double for net zero emissions
Progress on efficiency has accelerated over the past two decades but needs to double for net zero emissions
Over the past two decades, improvements in the energy intensity of the economy have halved the CO2 emissions that would otherwise have resulted from increasing global population and income. Energy intensity improvement accelerated from 0.8% per year from 2000-2010 to around 1.8% between 2010-2022 with associated avoided emissions accumulated over each period of 2.5 Gt of CO2 from 2000 to 2010 and 7 Gt CO2 from 2010 to 2022.
Accelerating energy efficiency improvements could deliver over a third of all CO2 emission reductions between now and 2030 in a pathway aligned with reaching net zero emissions by 2050. This involves speeding up electrification, improvements in technical efficiency and promoting behaviour change.
Energy efficiency progress is also crucial for the transition away from fossil fuels. In a pathway aligned with the IEA’s scenario for achieving net zero energy sector emissions by 2050, accelerating energy efficiency improvements can deliver over two-thirds of the projected decline in oil demand and half of the reduction in natural gas demand by 2030. This oil demand reduction, which would be roughly equivalent to total oil use in China in 2024, comes in large part from technical efficiency gains, such as improving the fuel efficiency of vehicles, and electrification, including switching to EVs. The reduction in natural gas demand related to efficiency, which would be more than Europe’s total natural gas use in 2024, comes largely from measures such as insulating buildings and the electrification of heating.
For every year of slower progress on energy efficiency, the level of energy consumption and CO2 emissions in the global economy is higher and the decarbonisation task facing clean energy technologies becomes harder and more costly.
Global energy-related CO2 emissions and drivers, 2000-2022, and in the Net Zero Scenario, 2030
OpenStrong energy demand growth sees energy intensity progress slow
Strong energy demand growth sees energy intensity progress slow
Energy intensity progress has slowed since 2022 due to faster-than-average growth in energy demand combined with slower-than-average economic growth. In 2023 the world saw a rate of energy intensity progress of just 1% while in 2024 preliminary estimates suggest that a similar result is expected. This means the world is not yet on track to achieve the goal to double progress set at COP28 in Dubai in late 2023. These recent results compare with a 2% energy intensity improvement achieved in 2022 and across the 2010-2019 period.
Strong global primary energy demand (TES) growth of around 2% was seen in 2023, with initial estimates suggesting that a similar result is expected in 2024. This occurred even as global economic growth slowed to around 3% each year. This compares with a long-term average TES growth of 1.4% per year between 2010-2019, where economic growth averaged around 3.5% per year. TES grew by 1.3% in 2022, accompanied by 3.5% economic growth.
Annual change in total final energy consumption, by sector and scenario, 2000-2030
OpenOne of the main drivers of slower global energy intensity progress in recent years has been the strong growth of energy consumption in the industrial sector. Industry accounted for around 75% of final energy demand growth during the years shaped by Covid-19 (2020-2021). After a short pause in 2022 during the energy crisis where industrial demand stabilised due to high natural gas prices, energy use in industry from manufacturing sectors has recovered.
Between 2000 and 2023, energy intensity at the sector level improved most in buildings and for cars (light duty vehicles) with the amount of energy consumed per unit of floor area and energy used per passenger kilometre travelled both falling by around 25%. Efficiency progress has been slowest for heavy vehicles and in the industrial sector with the amount of energy needed to transport a tonne one kilometre by truck falling by only around 10% since 2000 and the energy used to produce a unit of industrial value added falling by about 15%.
During the second half of the last decade and in 2020 and 2021 there was a notable slowdown in efficiency progress in all sectors except transport. During this time efficiency progress in residential buildings stalled, and energy intensity in industry actually increased during the pandemic.
To reach the energy savings milestones in the Net Zero Scenario, efficiency will need to improve by around a third in buildings and cars and by just over 15% for trucks and in industry by the end of the decade. This means that gains which took around two decades in the past will need to be achieved in less than a decade, highlighting the need for technological innovation and accelerated deployment.
Global energy intensity improvement by sector in the Net Zero Scenario, 2000-2030
OpenAccelerating the replacement of old, inefficient equipment with new, compliant appliances can speed up progress
Accelerating the replacement of old, inefficient equipment with new, compliant appliances can speed up progress
Energy performance standards and labels now apply to more than 100 types of appliances and equipment in the commercial, industrial and residential sectors. Almost all countries have put in place mandatory Minimum Energy Performance Standards for the most common appliances.
Programmes running for over 20 years have helped to more than halve the average energy consumption of the typical air conditioner, refrigerator, electric lamp and television in use today. The energy savings from these programmes are lower in countries with more recent, less mature programmes, as it takes time for old, inefficient equipment to be replaced with equipment that meets the new standards.
Mandatory standards and labels cover around 90% of global energy consumption of major end uses such as space cooling and refrigeration, and around 80% in the case of lighting. Coverage of electric motor and vehicle efficiency standards is less well-developed, with around 50% of global energy use not covered by any scheme.
In the Net Zero Scenario the average appliance in use consumes 25% less energy by 2030 compared with 2020. To get on track with the Net Zero Scenario, most appliances and equipment being sold in 2035 need to match today’s best available technology, but this does not necessarily require the development of new technologies. Meanwhile, in the Net Scenario all new buildings will need to use 50% less energy for heating and cooling by 2030 compared with 2020. This can be achieved through measures including better insulation and more efficient air conditioners, space and water heating systems.
Energy savings from energy efficiency standards and labels, by length of programme
OpenEnergy efficiency investment holding steady but needs to triple by 2030 for net zero
Energy efficiency investment holding steady but needs to triple by 2030 for net zero
Combined public and private investment in end-use sectors on efficiency, including electrification, is set to increase slightly by nearly 4% in 2024, matching the all-time high in annual investment of about USD 660 billion set in 2022. This is around 10% more than all upstream oil and gas investment in 2024. Investment has risen by a strong 45% since 2019, as the energy crisis and Covid-19 pandemic prompted massive government spending to stimulate consumer investment in energy efficiency. Since 2019, end-use investment in transport risen by an estimated 77%, followed by 34% for buildings and 13% in industry.
More recently, investment trends have been more mixed. Between 2022 and 2024, investment is estimated to have declined by 7% in the buildings sector and risen by 14% in transport, while it stayed steady in the industrial sector. Spending on efficient electrification is rising rapidly, primarily through EVs in China, Europe and North America. However, most other areas of efficiency spending are declining from recent highs as the effects of high energy prices ease and Covid-19 stimulus spending winds down. As a result, overall global end-use investment has plateaued over the last two years, with higher inflation and interest rates making it more expensive to implement and finance energy efficiency upgrades.
Global energy efficiency-related end-use investment in the Net Zero Scenario, 2019-2030
OpenIn the Net Zero Scenario, investment in end uses such as more efficient buildings, transportation and industry triples from around USD 650 billion per year today to about USD 1.9 trillion per year by 2030. In emerging economies, where many people are getting access to new modern accommodation and appliances for the first time, investments in technical efficiency dominate this rise. This involves improving the performance of buildings through better insulation and appliances, including heating and cooling. Transport electrification also plays a role, particularly through electric motorbikes and three-wheelers. In sub-Saharan Africa, the switch to clean cooking fuels dominates the mitigation measures.
In advanced economies, the bulk of efficiency improvements come from replacing older infrastructure with newer, more efficient and increasingly electricity-dominated systems. This includes a large-scale diffusion of electric vehicles and charging infrastructure as well as heat pumps in buildings and industry. Retrofits of energy-intensive buildings – such as hospitals, shopping malls, office buildings, schools, and universities – as well as district heating and cooling also offer quick wins to accelerate energy efficiency progress. Behavioural change also plays an important role and can be supported through investments in public transport systems and digitally-enabled devices such as smart thermostats.
Higher energy prices and energy security threats have added to climate concerns, increasing the urgency of efficiency policy
Higher energy prices and energy security threats have added to climate concerns, increasing the urgency of efficiency policy
The last few years have seen severe shock to global energy markets, including higher energy prices and risks to energy supply and security, next to more frequent extreme temperatures and heatwaves in many parts of the world. As a result, governments are more aware than ever about the urgency of efficiency policy. At COP28, they turned this awareness into ambition with the collective goal to double the global average annual rate of energy efficiency improvements by 2030. To reach the collective doubling target many governments are now turning this ambition into action with 2024 seeing the implementation of new or updated efficiency policies in many regions:
Europe: The European Union adopted the revised Energy Performance of Buildings Directive in May 2024, mandating zero-emission new buildings by 2030, introducing MEPS for non-residential buildings, and mandatory long-term renovation strategies. This legislation comes on top of the revised targets and policies in the revised Energy Efficiency Directive that was adopted at the end of 2023. The United Kingdom’s Public Sector Decarbonisation Scheme commits almost USD 680 million to support efficiency in schools, hospitals and public buildings.
North America: The United States updated standards for passenger cars in 2024. The new proposal sets out a 2% increase in Corporate Average Fuel Economy (CAFE) targets for passenger cars from model years 2027 through 2032. The country also tightened standards to reduce emissions from heavy-duty vehicles beginning in 2027. These depend on the vehicle type and are 40-60% stronger than before. The regulations are expected to result in sales of zero emissions vehicles (ZEV) representing up to 60% of total car sales by 2032. Canada released the Canada Green Building Strategy that includes almost USD 600 million to accelerate retrofits and a regulatory framework that allows the phase out of oil heating in new buildings as early as 2028. Mexico published a draft new standard for central air conditioners.
China issued a 2024-2025 Energy Conservation and Carbon Reduction Action Plan in May 2024. This includes a target to improve national energy intensity by 2.5% for 2024, with a higher goal of 3.5% specifically in large-scale industries. Overall, the action plan aims to deliver energy savings over the two years equivalent to 100 Mt of coal (2.9 EJ). The plan was followed by specific energy and carbon reduction plans in 2024-2025 for the cement, steel, synthetic ammonia, electrolytic aluminium, data centres, and petrochemicals industries.
India launched the PM Electric Drive Revolution in Innovative Vehicle Enhancement (PM E-DRIVE) scheme in September 2024 to promote the rollout of electric vehicles. A successor to the Faster Adoption and Manufacturing of Electric Vehicles (FAME) programme, it supports the development of charging infrastructure and the deployment of electric two-wheelers, three-wheelers and electric buses through purchase incentives. To attract global EV manufacturers to set up production facilities in India, the government also announced the Scheme to Promote Manufacturing of Electric Passenger Cars in India in 2024.
Asia-Pacific: Japan announced a Strategy for Energy Efficiency and Transition to Non-Fossil Energy 2024, prioritising energy-saving technologies on efficient heat use in industry and buildings, and enhanced data processing and vehicle performance. Korea launched the Energy Intensity Target Management Programme for medium and large buildings, setting energy use targets per unit area and assigning ratings based on the achievement of these relative goals. Australia implemented a New Vehicle Efficiency Standard, aiming to reduce emissions from new passenger vehicles by over 60% and halve the emissions of new light commercial vehicles by 2030. Singapore introduced a USD 225 (SGD 300) voucher for many households to purchase energy and water-efficient appliances. Indonesia is currently developing fuel economy standards for heavy duty vehicles, with the support of the IEA
South America: Brazil implemented regulation on Energy Efficiency Indexes for refrigerators, targeting a 17% increase in efficiency for products in the market from 2028. Chile’s new energy efficiency standard for light vehicles came into effect, targeting a 45% increase in efficiency for new vehicles.
Africa: The Southern African Development Community approved MEPS for air conditioners and refrigeration, aiming to cut consumer bills by USD 840 million per year. South Africa enacted the Climate Change Act to boost energy efficiency across the nation with sectoral emission targets. Kenya updated its building energy code to make efficiency requirements for new buildings mandatory.
View all energy efficiency policies
An international goal to double the global rate of energy efficiency improvements by 2030
An international goal to double the global rate of energy efficiency improvements by 2030
At the COP28 summit, countries committed to work together to collectively double the global rate of energy efficiency improvements by 2030 and recognised the role of energy efficiency as the “first fuel” in the clean energy transition. This global doubling goal is the strongest recognition yet by governments of energy efficiency’s central role in clean energy transitions. The goal was agreed alongside several other 2030 energy system goals, such as a target to triple renewables capacity and significantly reduce methane emissions from the energy sector. The COP28 agreement has brought into sharp focus the steps that governments need to take to achieve the target.
In 2024, several international agreements built on the COP28 outcome on energy efficiency. In the G7 Climate, Energy and Environment Ministers’ Communiqué, for example, political leaders reaffirmed the goal and called on governments to take additional steps towards achieving the COP28 ambition. Similarly, in the Ministerial Outcome Statement from the G20 Energy Transitions Ministerial Meeting in Brazil in October 2024, the ministers of G20 countries agreed to support the implementation of efforts to double the global average annual rate of energy efficiency improvements and improve energy efficiency and energy savings as the first fuel.
The doubling energy efficiency goal was also the focus of other international meetings across 2024. In May, more than 650 people from over 70 countries gathered in Nairobi, Kenya, for the IEA 9th Annual Global Conference on Energy Efficiency. The joint statement of the Conference co-chairs, Kenya’s Minister of Energy and Petroleum Davis Chirchir and IEA Executive Director Fatih Birol, urged governments to implement policy action towards the doubling goal as part of Nationally Determined Contributions and wider energy transition plans. In 2025, the IEA will build on this momentum and host the 10th annual global conference on energy efficiency, where ministers and high-level representatives can come together to discuss progress towards the global doubling goal.
Recommendations
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In all sectors the greatest efficiency gains are achieved with a package of policies. This includes the following considerations:
- A combination of three main mechanisms should be used: regulation, information and incentives (each elaborated below).
- Public R&D funding, including through industry partnerships, is fundamental to technological innovation in energy efficiency.
- Policies are more effective when they are set in the context of clear strategies and targets and are supported by adequate resources for implementation through capacity building, enforcement and monitoring.
- Recent supply chain pressures highlight the need to take market capacity into consideration, such as the availability of key materials, equipment and skilled workers to carry out efficiency actions.
- It is important to continually assess policies and programmes to keep up to date with technology and market developments. To ensure progress can be tracked, governments can collect appropriate data on energy consumption in different sectors to help with the policy cycle of implementation, monitoring and evaluation.
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Regulation is essential to exclude the worst-performing equipment and practices from the market, to drive up average efficiency levels, and to set rules for measurement of performance. If regulations are regularly updated to reflect the latest improvements to technology, such as in the case of Japan’s TopRunner Programme, they can also bring breakthrough innovations to market faster.
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Providing clear and accessible information about the efficiency implications of technology options is vital in helping consumers make informed choices about the energy costs of what they buy and how they use energy. Consumer behaviour is also an essential lever to respond to current energy security and climate concerns.
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Incentives make efficient options more attractive and speed up the upgrade and replacement of appliances, buildings and vehicles. They also encourage the use of new technologies and practices. While high energy prices provide a powerful motivation to enhance efficiency, the first and best solution is to minimise the impact on households of high energy prices by supporting the installation of efficient technologies. It is also important that government support to lessen the impacts of high energy prices is targeted at vulnerable groups, where affordability and access to energy services can be challenging.
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Inspecting existing buildings and commercial facilities through an in-house or external energy and CO2 audit is often the first step in identifying energy efficiency opportunities. Energy service and carbon management companies can help users identify, finance and implement projects by helping reduce the upfront capital cost of actions and provide access to commercial finance and government programmes.
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With high energy prices putting pressure on margins for businesses around the world, modernising industrial processes with the latest more efficient equipment and processes can bring major cost savings and support profitability. Businesses can also prioritise the efficiency of buildings when leasing space or when retrofitting their inefficient commercial building stock to save energy, reduce emissions and lower costs.
Programmes and partnerships
Authors and contributors
Lead authors
Nicholas Howarth
Lucas Boehlé