One of the most important benefits of energy efficiency is job creation. Many measures taken to improve the efficiency of cities, buildings and transport systems are labour intensive.

With clean energy transitions continuing to scale up, energy efficiency jobs have grown steadily in recent years. In some countries, energy efficiency is estimated to be one of the largest employers in the energy sector. Estimates are often uncertain, however. For example, in Australia there are 60 000 to 236 000 efficiency-related jobs, depending on the estimation technique. 

The Covid-19 crisis endangers energy efficiency jobs because of lockdowns, people’s reluctance to allow strangers into their homes and the crisis-induced global recession. In the buildings sector, for example, social distancing requirements have prevented energy efficiency contractors from gaining access to residential properties to perform retrofits, leading to delayed revenue streams.

At the same time, low fuel prices have lengthened the payback periods for efficiency upgrades. Together with reductions in disposable incomes, this is likely to have made energy efficiency investments less attractive. There are also cases of funding for US energy efficiency programmes being cut or redirected to provide bill relief to customers, as utilities have to deal with rising levels of non-payment. 

While business has remained steady in 2020 for energy service companies, thanks to contracts agreed in earlier years, they may face job losses if projected falls in revenue for 2021 eventuate. The situation is highly dependent on government support, however, and the sector involved. For example, a survey of German energy service companies found that while the pandemic has affected certain companies in selected sectors, on the whole business activity is expected to remain healthy until mid-2021, supported by existing contracts and generous government support.1 In Brazil, many energy service companies are small-to-medium sized businesses that rely on support from the country's utility obligation programme to implement projects. Cuts to the pool of funding under this programme threaten to push these companies out of business. In the United States, one of the largest energy efficiency markets, energy service companies have reported furloughing staff or cutting staff salaries. Some companies have had to lay off up to half their staff. Businesses operating in the residential sector have been particularly affected.

In general, efficiency job growth in the United States remained flat in July and unemployment continued to be high, although some energy efficiency employees were able to return to work in summer after months of persistent job declines. However, the data do not include workers who had their hours reduced and are now significantly underemployed.

Worldwide, 4.3 million jobs directly provided by the energy sector as a whole are at risk or have already been lost because of the Covid-19 crisis.2 In the energy efficiency sub-sector, jobs at risk include workers involved in efficient appliances and building materials manufacturing, industrial energy efficiency and building retrofits. Energy efficiency is the second most affected sub-sector in the energy sector, behind vehicle manufacturing.

Due to the labour-intensive nature of many energy efficiency upgrades, USD 1 million spent on energy efficiency is estimated to generate between six and 15 jobs on average, depending on the sector. As energy efficiency investments can also be mobilised quickly, they are one of the most attractive investments in the energy sector for governments seeking to protect existing jobs or generate new jobs during the recession.

Although government stimulus packages are still being developed, announcements to the end of October indicate that spending is being directed to sectors with a high potential to create jobs. Buildings efficiency measures (including new efficient buildings and retrofits) are receiving the bulk of announced efficiency spending. With every USD 1 million spent on buildings efficiency likely to create around 15 jobs on average, spending commitments to date are estimated to create around 3.4 million job-years. This trend may continue as momentum builds through initiatives such as the EU Renovation Wave for Europe.

Building efficiency retrofits – for example, of existing homes, schools, hospitals or municipal facilities – could create a substantial number of jobs in the coming years because they are among the most labour-intensive of clean energy measures. As much as 60% of expenditure on home energy efficiency retrofits could go towards labour, activating local value chains and boosting the economy.

Significant opportunities remain, however, to unlock the job creation potential of energy efficiency. The IEA Sustainable Recovery Plan projects that USD 160 billion of public and private spending on appliance efficiency over three years could protect or create 1.8 million job-years. But recent stimulus announcements have paid little attention to supporting appliance upgrades and customer demand for these upgrades, which may result in a substantial efficiency slowdown and jeopardise jobs in appliance manufacturing. 

While USD 3 billion of public funding has been announced to date for industrial energy efficiency, this is only one-third of the spending opportunities outlined in the IEA Sustainable Recovery Plan. Combined with estimated leveraged private investment, economic stimulus spending on industrial efficiency could protect or create around 2.1 million job-years, compared with the estimated 590 000 estimated from current spending.

The currently committed public stimulus spending related to energy efficiency, combined with the leveraged private investment this is expected to attract, could protect or create over 5 million job-years. While many governments are still in the process of designing energy sector stimulus packages, the IEA Sustainable Recovery Plan shows that nearly 12 million more job-years could be generated if governments commit the additional USD 210 billion required to unlock a further USD 890 billion of private investment.