Accelerating Energy Efficiency: Global Progress, Challenges, And The Road To COP28 Targets – IEA Report

In 2023, nearly 200 nations reached a significant agreement at COP28 to double global energy efficiency progress by 2030. Despite this ambitious goal, actual efficiency progress remains slow, with primary energy intensity expected to improve by only about 1% in 2024, consistent with the rate in 2023. Energy efficiency, a crucial element in transitioning to clean energy, is essential to reducing dependency on fossil fuels and lowering greenhouse gas emissions. A scenario that aligns with net zero targets by 2050 suggests that enhanced energy efficiency could drive over 70% of the projected reduction in oil demand and 50% in gas demand by 2030. Efficiency measures, such as switching to electric vehicles (EVs) and improving the energy performance of buildings, play a significant role in this projected reduction.

Energy intensity measures the energy required per unit of economic output, and global improvements in this area have been slow. Variations across regions also show that emerging economies are holding steady or improving slightly, while advanced economies see slower progress. Although the global energy crisis initially accelerated efficiency in some regions, overall intensity progress has lagged. In the face of rising global temperatures and frequent heatwaves, electricity demand for air conditioning has surged, especially in hot regions like Southeast Asia and Latin America. In these areas, efficient air conditioning can reduce demand spikes and costs, but the availability of affordable, energy-efficient models remains a challenge.

Investment in energy efficiency continues to rise, with a projected total of around USD 660 billion in 2024, the same as in 2022. This investment level reflects nearly 50% growth since 2019, although regional disparities persist. Emerging economies, including Africa and Latin America, are expected to see the fastest growth in efficiency investments this year, even though they still account for a small fraction of global investments compared to North America, Europe, and the Asia-Pacific region. While investment in energy efficiency creates jobs, particularly in sectors like HVAC installation, a shortage of skilled workers may slow progress. Notably, women represent less than 20% of the workforce in energy efficiency roles, highlighting the potential for growth if workforce diversity is improved.

Electrification is emerging as a powerful driver for efficiency gains. Global electrification—powered by increased EV adoption and efficient technologies like heat pumps—has grown at nearly twice the average annual rate seen from 2010 to 2019. China, a leader in electrification, saw rapid advancements, with EVs making up around 60% of global sales in 2023. Electrified technologies are generally more efficient than fossil fuel-based ones, but achieving cost savings depends partly on price differentials between electricity and fossil fuels.

Following the 2022 energy crisis, consumer energy prices have declined but remain high compared to pre-crisis levels, particularly in OECD countries. Governments allocated USD 940 billion in short-term support measures, peaking in 2022, to ease the financial burden on consumers. However, as wholesale energy prices stabilize, many of these support measures are being phased out, pushing consumers to seek efficiency improvements as a means to reduce energy bills. In 2024, several governments, including those in Europe and North America, are prioritizing efficiency policies that target low-income households to address energy affordability.

Emerging and developing economies, which represent an increasing share of global energy demand, are ramping up efforts in efficiency policies to meet climate goals and foster job creation. Countries like India, China, and several in Southeast Asia and Africa are implementing regulations to promote efficient cooling systems and reduce demand for second-hand, inefficient appliances and vehicles. International cooperation has been emphasized as essential to achieving the COP28 goals. Standards harmonization across regions can prevent the dumping of inefficient products in markets with weaker regulations, thus supporting global progress toward efficiency.

The International Energy Agency (IEA) has launched the Energy Efficiency Progress Tracker, a tool to monitor regional and country-level efficiency improvements in areas like energy intensity, electrification, and demand. This tool, alongside the IEA’s policy toolkit, provides policymakers with the means to evaluate and accelerate efficiency efforts. IEA guidance suggests that doubling efficiency progress by 2030 requires a combination of regulations, consumer information, and incentives across sectors, from retrofitting buildings and upgrading appliances to promoting EVs and electric heating solutions.