The current challenges regarding energy security, energy prices and the cost of living have intersected with the climate crisis to remind us that energy efficiency is more indispensable than ever.

The cleanest, cheapest, most reliable source of energy is what countries can avoid using, while still providing full energy services for citizens. That is why the IEA refers to energy efficiency as the “first fuel”. Without early action on efficiency the energy transition to net zero emissions will be more expensive and much more difficult to achieve.

The IEA Net Zero Emissions by 2050 Scenario (NZE) sees the average annual rate of global energy intensity (i.e., energy use per unit of GDP) improvement – a key measure of the economy’s energy efficiency - doubling from around 2% achieved between 2010-2020 to just over 4% from 2020-2030. With accelerated action, the global economy by 2030 could be around one third more energy efficient than in 2020.

Most of the efficiency measures in the Net Zero Scenario, beyond those in the current policy case, are already cost effective and pay for themselves through energy savings, even more so at today’s energy prices. Put simply, a more efficient building, car or industrial facility, requires less energy to perform the same function, with cost savings that are larger than the investment required to achieve them.

The year 2021 saw the largest ever annual increase in global energy related CO2 emissions, around 2 Gt to about 36 Gt of CO2, more than offsetting the decline in 2020. This followed an increase of about 10 Gt, or 45% between 2000 and 2019. During this period, the energy intensity of the global economy improved by around a quarter resulting in avoided emissions of about 8 Gt CO2 in 2019. This means that energy intensity improvements in the economy are offsetting almost half of the emissions growth that could have happened.

In the Net Zero Scenario, by 2030 energy demand falls the most in the buildings sector, however the greatest potential for avoiding energy demand is found in the transport sector. Efficiency-related measures are also crucial for industry with material efficiency in heavy industry and electrification in manufacturing helping moderate otherwise strong energy demand growth by 2030.

In the Net Zero Scenario, energy consumption in buildings falls by over 20% between 2020 and 2030. This is due to a combination of measures including replacing fossil fuel boilers with electric heat pumps and a major effort to replace the traditional use of solid biomass - such as wood and charcoal for cooking - with more efficient and cleaner alternatives. This helps achieve universal access to clean cooking by 2030, a key Sustainable Development Goal with profound social and economic benefits. Traditional use of biomass contributes to household air pollution which is currently linked to around 2.5 million premature deaths a year, mostly affecting women and children.

Enhanced action on a wide spectrum of energy efficiency-related measures covering behaviour change, electrification and other fuel switching, digitalisation and material efficiency can help avoid about 95 EJ per year by 2030. This compares to a scenario based on current efficiency-related policies where energy demand rises around 18% instead of being 5% lower.

Comparing these two scenarios in terms of the fuels used shows the significant contribution that lower demand for fossil fuels makes to improving energy security and reducing exposure to volatile prices.

By 2030, around 55 EJ per year of oil consumption could be avoided. This equates to approximately 30 million barrels of oil per day, around triple Russia’s average production in 2021. These reductions would reduce energy costs by between around USD 400 billion to just over USD 1 trillion, depending on oil prices – with the higher value assuming recent market conditions. The majority of this avoided oil consumption comes from the transport sector with smaller but significant reductions from industry and buildings.

For example, in the NZE Scenario, 20% of all cars are electric in 2030. For traditional cars, strict fuel-economy standards continue to play a crucial role through to 2030 along with behavioural shifts, such as increased use of public transport, walking and cycling, as well as train travel replacing short haul flights.

The next largest reduction in fossil fuel use comes from natural gas with around 23 EJ per year avoided by 2030. This equates to approximately 650 bcm, about four times the European Union’s 2021 imports of gas from Russia. 

Around 17 EJ of energy demand is avoided from coal use, equating to almost 500 megatonnes, equivalent to around 1.5 times China’s total coal imports in 2021. This reduction is mainly in the industrial sector as a result of a substitution towards electricity and modern bioenergy. 

For households alone, enhanced efficiency and related avoided energy demand could help contribute to reducing global household energy bills by at least USD 650 billion a year by 2030 in the NZE.