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

23/10/2024

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.

Policy changes to help accelerate the energy transition

Business leaders are leaning into this challenge, and have set out their proposals in 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:

1. Embed energy efficiency in country transition plans

- Countries are under increasing pressure to develop energy transition plans, for example to support their nationally determined contributions (NDCs).

- These plans need to focus on demand as much as supply, with mentions of energy efficiency present in as low as 30% of NDCs for industrial energy use.

2. Support measures to mobilize to energy efficiency finance

- The IEA estimates that annual funding for energy efficiency will need to triple to $1.9 trillion per year to reach climate goals.

- The majority of climate finance has been focused on energy supply change, while the disaggregated nature of energy demand interventions has led to a relative lack of products and focus.

- Governments can help to drive maturation of the funding landscape through a combination of tax incentives, allocated public funding and regulation to create investable assets.

3. Grow energy productivity in industry

- Industries need clear pathways, and supportive regulation on their activities and their products to support efficiency investment.

- This includes topics such as supporting efficient clustering of businesses, investment in digitalized grid infrastructure, and regulation to support minimum efficiency standards.

4. Strengthen approaches to improve energy efficiency in the built environment

- There need to be clear building codes for both new and existing buildings to encourage change.

- These should be appropriate to country context, with due attention paid to ensuring even enforcement to prevent market distortions.

5. Electrify transport

- Where appropriate, governments can focus on developing an integrated supply-to-wheel ecosystem to capture the efficiency benefits of electrification.

- This can be accelerated through shared standards across borders to increase business certainty for investment.

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.

According to World Economic Forum