In 2023, energy intensity progress is expected to be 1.3%, making it a below average year for energy efficiency. This comes despite a vast number of countries ramping up policy action and the ongoing effects of the energy crisis reverberating in many regions. This makes it particularly important to understand the drivers behind the average year for intensity change in 2023. Three dynamics are considered particularly important and are examined here: regional differences; time lags between policy changes and their impacts; and lifestyle and technology trends.

Global energy intensity changes average out many different regional trends. With China, the United States and the European Union together responsible for more than half of global GDP and energy consumption, analysing developments in these regions can help provide quick assessment of what may be behind the global trends.

The effects of the energy crisis were felt most immediately and strongly in Europe. In the European Union energy intensity progress registered almost 8% in 2022 followed by 5% in 2023 due to continued pressure to conserve energy through the energy crisis as well as the initial effects of incentives from REPowerEU starting to bite. Based on initial data overall energy demand is expected to fall by around 4% in 2023 while the economy grows by less than 1%. While a milder winter, the second warmest on record, contributed to reduced energy demand, this may have been partially offset by an exceptionally hot summer and drought in Europe.

The United States also achieved significant energy intensity progress, posting an improvement of 4% in 2023 . This was driven by high energy prices, especially at the pump, and a warmer winter and cooler summer, while much of the record heat experienced elsewhere missed the country. In the first nine months of 2023 degree days were down 8% for heating and 5% for cooling compared with the same period the year before.

By contrast, China, saw weaker energy intensity progress, which weighed heavily on the overall global energy intensity rating. China returned to trend economic growth in 2023 of around 5% following the end of pandemic restrictions that slowed it to 3% in 2022. The post-Covid-19 rebound also boosted air travel. But a significant buildout of the petrochemical industry in 2023 has sharply increased in oil use in petrochemical feedstocks. This in combination with capped energy prices contributed to early estimates of exceptional energy demand growth of 5% overall, yielding almost unchanged energy intensity levels in the country for 2023.

It takes 40% more energy to fuel GDP in China than in the United States, and almost double the energy to fuel the same growth as in the European Union.  This shift in the balance of global economic activity, along with a slowing of energy intensity progress in China along with that of some other regions, helps explain the slowdown in overall global energy intensity gains this year. Without this effect, intensity progress in the rest of the world would have been around 1.8% in 2023, almost 40% better than the global average for the year.

Implementing stringent efficiency regulations with policies such as Minimum Energy Performance Standards (MEPS) and fuel efficiency standards have significant effects on the energy efficiency of products available in the market. However, due to slow stock turnover and time to incorporate design and production changes, it can take from several years to decades for these changes to turn into significant energy savings at a national level.

IEA analysis in its report Achievements of Energy Efficiency Appliance and Equipment Standards and Labelling Programmes shows it takes time to replace stocks of old, inefficient units with new, more efficient ones, resulting in the annual rate of improvement across the entire stock lagging behind the improvement rate of new appliances.

Slow stock turnover can be observed in many sectors and by equipment types, with different durations depending on the lifetime of the products and their affordability. Since an asset bought today could remain in use for more than 20 years, the promotion and fast incorporation of today’s best available technologies plays a major role in reducing the future energy demand. Additionally, more incentives can accelerate stock turnover, removing aged products by implementing replacement programmes and scrapping bonuses, taking into account lifecycle costs and emissions.

For example, with the case of MEPS introduced for refrigeration appliances in New Zealand in 2005, a reduction of almost 20% for the average energy consumption of new products was observed, bringing the average value of sold refrigerators to 497 kWh/year. However, IEA analysis shows that it took more than 10 years for the stock to renovate in order to reach the same average value.

In Norway, the government has set ambitious targets for the market uptake of zero- and low-emission vehicles in 2025 and 2030, and implemented policies to support this. In 2023, almost 90% of new vehicles sold are electric, but a 90% penetration of ZEVs into the stock of passenger cars is not expected to occur until 2039.

Regulations can also require several steps to enter into force, especially when multiple parties negotiate on the conditions. It is normal for administrative processes to take time to translate announcements and decisions into legislation and active programmes. For example, the European Commission proposed the recast of the EU Energy Efficiency Directive in July 2021, but it took until September 2023 to reach a formal agreement. Implementation into national legislation will take EU countries another two years. Similarly, India's PAT scheme was included in the National Action Plan for Climate Change (NAPCC) launched in 2008, but entered into force only in 2011, with the first cycle starting in 2012.  

Improving the efficiency of homes, vehicles and appliances directly contributes to reducing energy intensity. However, certain consumer choices can offset such efficiency gains. Decomposition of energy demand into efficiency, structure and activity effects allows policy makers to observe trends, which can help inform why, despite strong progress on efficiency, we observe energy consumption continuing to rise in some instances. For example, although the energy consumption of buildings per square metre in many countries has been steadily declining, the average size of a home has increased. Such examples include Brazil and the United States where, as a result, the energy intensity of buildings remained relatively constant while residential energy demand steadily rose between 2010 and 2019. In the United Kingdom, on the other hand, efficiency gains in the residential sector were significantly larger than structural and activity effects, causing residential energy demand to decline in the same decade. 

In the transport sector, fuel economy standards of vehicles have improved rapidly in the last decade. However, cars have been getting larger. In India, shares of SUVs in total car sales doubled in five years, from 24% to 47%. Globally, more than half of all new electric car sales were SUVs in 2022. Cars are also often being used more. In the United States, for example, an increase in passenger per kilometres also more than offset any efficiency gains at the level of the car. Driving more and in bigger cars results in upward pressure on energy demand, despite the savings delivered by efficiency improvements, underscoring the importance of consumer behaviour. This is happening in both advanced economies and in emerging markets and developing economies (EMDE). However, an average person in an EMDE still uses three times less energy in their home and four times less energy for transport compared with an average person in an advanced economy.

While consumer choices and actions are hard to predict as these can be influenced by different factors, such as social norms and current events, including behavioural insights in policy design can help identify, and avoid or minimise, potential pitfalls. Governments need to be aware of issues such as the so-called “moral licencing effect”, which entails households counterbalancing energy-saving behaviour in one area of their lives with an increase in consumption in another. For example, purchasing an electric vehicle could justify driving more, especially when costs are low. In Japan, where government policy stimulates the acquisition of smaller cars, structural changes have positively contributed to reducing energy demand and one can observe a decline in consumption in the transport sector despite some increase in distances travelled.

Furthermore, behavioural insights could be useful in encouraging people to change their mode of transport. The integration of choice architecture, a behavioural tool used to nudge people to make different choices, in policy has been shown to increase engagement and uptake. For example, to encourage cycling, local governments in the Netherlands did not just encourage citizens to use bikes more often but put in place convenient parking garages and dedicated lanes to make the option of cycling more attractive and change behaviour that way. Norway has a Zero-Growth Goal that achieved a reduction in private car travel through spatial planning conducive to biking and walking.

A similar trend can be observed for household appliances such as televisions, refrigerators, and other electrical devices. While efficiency standards are going up, the gains in energy consumption can be partly offset through consumers buying more of them, and in some cases opting for larger models. As more households get access to electricity in EMDEs, the volume of the appliances market will increase further. Similarly, consumers in advanced economies tend to increase the number of appliances they own, thus contributing to upward pressure on demand.