Energy efficiency is central to improving the lives of all people. It provides affordable and reliable energy access, bolsters the security of energy supply, accelerates clean energy transitions and supports economic growth and resilience.
What does energy efficiency mean?
Energy efficiency refers to the effective utilization of energy to accomplish a specific task or achieve a desired outcome while minimizing waste and unnecessary consumption. It involves using less energy to provide the same level of service, reducing energy consumption, costs, and environmental impact.
How can energy efficiency be achieved?
Energy efficiency can be achieved by implementing measures including:
- technological advancements,
- behavioral changes
- policy initiatives
All these measures are aimed at optimizing energy use across various sectors such as industry, transportation, buildings, and the use of domestic appliances.
IEA Energy Efficiency Policy Toolkit
At the IEA’s 9th Annual Global Conference on Energy Efficiency, held in Nairobi on 21-22 May, governments from around the world gathered to discuss how to deliver on their commitment to doubling energy efficiency progress, as agreed at COP28. Despite the efforts made by governments in recent years to increase energy efficiency, analysis presented by the IEA reveals that we are falling behind our net zero targets. Faster action must be taken to meet the 2030 deadline.
Achieving energy efficiency NetZero targets requires improving the energy efficiency of the global economy by over 4% on average every year by 2030. However, IEA data reveal that the annual improvement in 2023 slowed from 2% to just over 1%.
On the occasion of the Annual conference IEA published a new Energy Efficiency Policy Toolkit. This Policy Package provide a practical approach to accelerate energy efficiency by guiding governments in the design of effective policy measures.
What are the Energy Efficiency Strategic principles?
Based on the IEA’s analysis of best practices, the following strategic principles can help guide policy makers to enhance and expand their energy efficiency policies and programs, and to accelerate energy efficiency gains through new and stronger policy.
1. Prioritise cross-cutting energy efficiency action for its economic, social and environmental benefits.
2. Act to unlock efficiency’s job creation potential.
3. Create greater demand for energy efficiency solutions.
4. Focus on finance in the wider context of scaling up action.
5. Leverage digital innovation to enhance system-wide efficiency.
6. Lead by example in the public sector.
7. Engage all parts of society.
8. Leverage behavioral insights for more effective policy.
9. Strengthen international collaboration.
10. Raise global energy efficiency ambition.
The Policy Toolkit to drive energy efficiency and trigger financial investments contains instruments that cover different sectors and types of policies. They highlight key actions which should be combined to create strong outcomes across three pillars: regulation, information and incentives.
The focus is on different sectors such as buildings, appliance, industry, vehicle, cities, cooking, financing and heat pumps.
Let’s concentrate on what are the tools and policies outlined in this study for the industry sector.
Industry energy efficiency
The toolkit is a useful guide to understand what is missing to boost energy efficiency in the industry sector. Industrial sector accounts for 37% of final energy consumption globally. To stay on the pathway towards net zero emissions by 2050 and achieve a doubling of global annual energy intensity improvement between now and 2030, industry needs to decouple production of output from energy demand and increase the share of electricity in the sector’s energy consumption from 23% in 2022 to 30% in 2030. The IEA Energy Efficiency toolkit identifies several paths to follow in three different areas to positively impact on energy efficiency growth in the industrial sector:
| REGULATION | INFORMATION | INCENTIVES |
| 1. Minimum Energy Performance Standards (MEPS) for key equipment promote overall industrial efficiency. 2. Regulation extends to areas such as research, energy auditing, consumption reporting, and workforce training. 3. Incorporating life cycle impacts into regulation encourages material-efficient choices. 4. Regulations should be regularly updated and rooted in a good understanding of the local context. | 1. Benchmarking and detailed data tracking allow governments to monitor policy progress and industries to compare energy performance. 2. Digital technologies enable real-time energy monitoring and flexible demand-side response. 3. Sharing best practices through targeted information and industry networking activities fosters ambition and improves energy performance. | 1. Preferential finance, carbon trading links, and tax-based measures incentivize energy-efficient decisions. 2. Free or subsidized energy audits, particularly for SMEs, rapidly increase energy efficiency. 3. Policies supporting Energy Service Companies offer industry access to expertise and financial packages. 4. Incentives for material reuse and recycling reduce the need for higher-emission primary materials production. |
After identifying multiple avenues to positively influence energy efficiency growth in the industrial sector, the IEA introduces the “Doubling Policy Tools.” These tools are concrete example suggested to aid policymakers in implementing effective energy efficiency measures. They can contribute to annual progress while improving living standards, public budgets, energy security and employment, and supporting just and inclusive energy transitions.
Minimum Energy Performance Standards for Industrial Electric Motors:
- Electric motor-driven systems currently account for over 50% of global electricity consumption.
- Implementation of MEPS drive market change and meet global energy efficiency goals.
Industrial Energy Efficiency Networks
- These networks facilitate knowledge exchange among companies and experts, increasing awareness and promoting action on energy management and audits.
- Membership in such networks has been shown to lead to increased energy savings through peer-to-peer learning and enhanced transparency on energy use.
Energy Efficiency Obligation schemes
- EEO schemes drive energy consumption reduction by incentivizing the uptake of energy efficiency measures.
- These schemes can be tailored to target specific sectors, technologies, or population groups.
Minimum energy performance standards
Minimum Energy Performance Standards (MEPS) are regulatory requirements that dictate the minimum level of energy efficiency industrial electric motors must meet to be sold in a specific jurisdiction. These standards typically consider factors such as motor size, type, and application, and motors meeting or exceeding the specified efficiency levels are deemed compliant.
| HOW TO IMPLEMENT | HOW TO MONITOR | BEST PRACTICES |
| Successful EENs are characterized by several key components: experts facilitating exchange, membership based on energy consumption profile, commitment to energy efficiency and emissions reduction, creation of working groups for sharing experiences and challenges, provision of tools and standardized guidelines to lower costs and ensure quality savings, and offering knowledge sharing opportunities and training for network members and participating company staff. | Within the EEN, members must agree to undergo an initial energy review or audit for each site, set short-term and longer-term energy efficiency targets, engage in annual reporting, monitoring, and benchmarking, and conduct an annual review of energy efficiency targets. | Germany: Energy Efficiency and Climate Protection Networks Initiative, introduced in 2014, has seen over 250 EENs registered, with more than 2,000 participating industries. These networks have surpassed their savings targets by over 10%,. Ireland: the Large Industry Energy Network, established in 1995, boasts 205 members and has implemented numerous energy projects, resulting in a 7% reduction in energy intensity. China: collaborated with Germany on the Sino-German Energy Efficiency and Climate Network, aiming to accelerate energy efficiency in the Taicang industrial development zone and achieve a 10% to 15% reduction in CO2 emissions among participating companies. |
Industrial Energy Efficiency Networks
Industrial Energy Efficiency Networks (EENs) facilitate knowledge sharing among energy managers. These networks promote collaboration, information exchange, and goal-setting to align with government policies. With over 1,000 networks globally and increasing, EENs play a vital role in driving industry-wide efficiency improvements and supporting policy development for cost reduction, energy conservation, and emissions reduction.
| HOW TO IMPLEMENT | HOW TO MONITOR | BEST PRACTICES |
| To successfully implement MEPS several key steps are necessary. Firstly, it’s crucial to develop and refine motor test methods and testing capacity to ensure accurate measurement. Secondly, draft the legislation and present it to authorities for approval, adopting MEPS through legislative or regulatory means. Lastly, raise awareness through effective communication strategies, targeting both market stakeholders and end-users about new standards and efficiency gains. | Use standardized testing to ensure compliance. Market factors such as motor availability, delivery, and price can hinder rapid turnover and should be considered during evaluation. | European Union: MEPS were introduced in 2009 and updated periodically to cover a broader range of motors. Canada: established efficiency standards for products like electric motors in 1995, with ongoing updates and the introduction of a Motor Selection Tool. United States: took early steps with MEPS in 1987, advancing to higher levels like IE2 and IE3. Australia: aligned with international standards by implementing MEPS for electric motors, making compliance mandatory for those sold or imported into the market. |
Energy efficiency obligation schemes
Energy Efficiency Obligation schemes (EEOs) are regulatory instruments, often with incentive components, requiring “Obligated Parties” to meet energy or emissions savings targets within their customer portfolio. EEOs are market-based and allow flexibility in how targets are achieved. Some schemes utilize “white certificates” to certify energy or emissions reductions. EEOs are implemented in 31 countries, with their use increasing steadily over the past two decades.
| HOW TO IMPLEMENT | HOW TO MONITOR | BEST PRACTICE EXAMPLES |
| The main components of an EEOs scheme include a robust legal framework, effective scheme administration, and well-defined obligated party delivery models. EEO structures vary across jurisdictions and can be tailored to local contexts. Effective EEOs are characterized by simplicity, sufficient administrative capacity, appropriate obligation levels, and regulatory flexibility. Costs are typically covered by utilities, making EEOs a low-risk and cost-effective tool for governments. | An important element for a successful EEO is having a robust monitoring and verification framework in place. Policymakers will need to be able to evaluate whether the energy saving measures were undertaken as reported. Calculations of energy savings are often done through estimations based on a pre-agreed formula rather than on measured data as it is simpler and cheaper to administrate. Monitoring and evaluation methods are specific to the EEO framework and need to be designed as an integrated part of the policy for each measure. | New South Wales, Australia: both the Energy Savings Scheme and the EEO Peak Demand Reduction Scheme aim to achieve energy savings efficiently, with regular updates to set more ambitious targets. France: the White Certificate Scheme has evolved since 2006 to cover more sectors and establish robust energy-saving targets for suppliers. India: the Perform, Achieve, Trade scheme sets efficiency targets for companies, allowing them to trade energy savings certificates to meet their obligations. |
Financing energy efficiency
Concerning the financing of energy efficiency measures, a stronger policy action can facilitate a tripling of energy efficiency-related investment to almost USD 1.8 trillion per year by 2030 in the IEA Net Zero Scenario. The share of total energy investment related to energy efficiency will need to continue to increase from around 20% of the total today to about 50% in 2050.
Growth in energy efficiency investment is lower than it needs to be, but enacting the right policies delivers social and economic benefits. Suggested measures in the IEA Policy Toolkit are:
| REGULATION | INFORMATION | INCENTIVES |
| 1. Long-term strategies demonstrate government commitment to sustained change, attracting private investment. 2. Energy market structures should enable private actors, like energy service providers, to support ongoing investment. 3. Strong policy and governance frameworks, including transparency regulations, and ESG requirements, attract international investment and ensure long-term capital flow. 4. Utility regulation can encourage investment and innovative financing approaches, such as recouping costs through energy bills. | 1. Training programs and technical assistance help improve understanding of business models, risks and opportunities. 2. Policies and digital tools enhancing data availability and quality, help to improve financiers’ understanding, and to verify energy savings and payback periods. 3. Development of standardised contract templates and terms help create trust, reduce transaction costs and simplify replication. Dedicated information campaigns raise awareness of preferential funding opportunities, and how to access them. | 1. Streamlined and digitised administrative processes for energy efficiency projects, including permits, licenses or subsidies reduce barriers to investment. 2. Public funding can support de-risking mechanisms, like guarantee funds or risk-sharing facilities, helping to attract private capital. 3. Coordination platforms and matchmaking services between project developers and private investors can improve access to funding. 4. Policies promoting innovative mechanisms such as bulk procurement, on-bill financing and leasing models can achieve scale and amplify actions. 5. Energy subsidy reform helps phase out poorly targeted fossil fuel subsidies while boosting direct support for energy efficiency measures, including for vulnerable groups. |
Conclusion
The IEA Energy Efficiency Toolkit outlines a roadmap to achieve the ambitious goal of doubling energy efficiency improvement by 2030. By embracing the strategic principles and comprehensive policy packages outlined by IEA, governments can significantly enhance and expand energy efficiency initiatives.
Robust regulations, informed by real-time data and supported by financial incentives, can drive substantial improvements in energy efficiency, contributing to global sustainability goals and delivering economic and social benefits.
Want to know more about what outlined in the IEA Energy Efficiency Policy Toolkit? Download the complete resource kit here.
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