Thu. Jan 20th, 2022

First the good news. Global investment in energy efficiency is recovering.

The Covid pandemic has dampened economic activity and cut capital spending on environmental projects over the past two years. But recovery programs across major economies are now increasing spending on measures designed to deliver energy savings.

The latest detailed report on the subject, published by the International Energy Agency last month, proposes that public and private investment in energy efficiency is expected to increase by 10 percent worldwide, to just over $ 290 billion – a record level – with much of it concentrated on the transportation and construction sectors (see below).

Chart showing investment in energy efficiency, 2019 ($ bn)

More is to come. Data collected by the agency until the end of October suggest that the amount of capital mobilized by clean energy recovery recovery schemes will increase by an average of $ 400 billion a year in the three years to 2023.

More than half of this increase is expected to be spent on energy efficiency measures in buildings, industries and cleaner low-carbon transport.

Chart showing total energy efficiency-related government spending on clean energy recovery, 2021 and beyond ($ billion)

Now, the bad news. Existing spending levels need to double again to meet the ambitions set out by the Paris Climate Agreement and reinforced by last month’s UN COP26 summit in Glasgow.

And while global progress in energy efficiency has recovered to its pre-pandemic rate, it remains far too short of what would be needed to keep the world on track to avoid mid-century climate disasters, according to the report.

As coronavirus spread around the world, 2020 became the worst year in a decade in terms of slowing energy consumption. In very large economies, the Covid pandemic has shifted the weight of economic activity away from services hit by constraints and to more energy-intensive industries. However, the rate of improvement in global energy intensity – an indication of how much energy is needed to drive economic activity – is expected to recover to 1.9 percent.

In unveiling the report, Nick Howarth, a senior policy analyst at the IEA, said: “While it’s good to see energy efficiency trends picking up again this year, there is still a way to go to meet climate targets. fit – with the rate of improvement having to double on average over the next 10 years to be in line with the 4.2 [per cent] annual improvement that will align the IEA net zero by 2050 scenario. ”

Graph showing improvement in primary energy intensity (%)

Fatih Birol, the IEA’s executive director, said it was imperative that policymakers double their efforts to curb energy demand – particularly that of fossil fuels – over the full range of economic activity.

“A step-by-step change in energy efficiency will give us a chance to fight off the worst effects of climate change, while creating millions of decent jobs and lowering energy bills,” he said when the report was published. “We consider energy efficiency as the ‘first fuel’ as it is still the cleanest and in most cases the cheapest way to meet our energy needs.”

So far, there has been steady progress in the amounts spent on research on energy efficiency in the richer countries that support the IEA. The shock of the 2008 financial crisis has also led some governments to throw more money behind energy-saving efforts, as part of their recovery plans (see below).

Government's energy efficiency RD & D spending in IEA member countries

Research suggests that public and private investment in efficiency schemes has already reduced carbon emissions and energy bills around the world.

Without action to improve efficiency, the world would have used 13 percent last year more energy than two decades ago and energy-related carbon emissions would have been 14 percent higher.

Looking to the IEA, the IEA argues that if the world were to implement the cost-effective energy efficiency opportunities available today, energy demand could be reduced by 15 percent by 2040. The transportation sector (38 percent) is responsible for most of the future energy savings, followed by buildings and appliances (33 percent), and industry (29 percent).

In fact, the report suggests that the overall impact of maximizing energy efficiency schemes in the coming decades will have more impact than the deployment of renewable energy, or the use of low-carbon nuclear power generation, or the development of carbon capture and storage, or the implementation of any emission reduction tactic (see below).

graph showing energy-related C02 emissions and C02 emission reductions according to benchmark in IEA's Sustainable Development Scenario (GtC02)

However, the IEA notes that the commitments to achieve these gains remain unclear around the world. “Approved spending on energy efficiency by governments is regionally unbalanced, with the majority of spending coming from advanced economies,” it says.

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