Energy efficiency is at the heart of any strategy to guarantee secure, sustainable and inclusive economic growth. It is one of the most cost-effective ways to enhance security of energy supply, to boost competitiveness and welfare, and to reduce the environmental footprint of the energy system.

In the Stated Policies Scenario, primary energy demand expands by around a quarter between 2018 and 2040 at an average annual growth rate of 1%. This rate is slower than in the past (it was 1.4% between 2010 and 2018, and 2.7% in the preceding decade) as energy consumption and economic growth continue to decouple. In the Sustainable Development Scenario, energy demand in 2040 is 25% lower than in the Stated Policies Scenario.

Additional energy efficiency improvements are the biggest factor that keeps final consumption in end-use sectors in the Sustainable Development Scenario below the levels seen in the Stated Policies Scenario, responsible for 60% of the savings. Almost half of these energy efficiency savings come from industry, with major contributions also from transport and buildings.

Energy intensity improves in the Stated Policies Scenario by 2.3% annually to 2040. This is a slightly higher rate than in the period since 2010 and about twice the rate in 2000-2010. The link between GDP growth and energy demand growth continues to weaken by 2040. The largest improvements are projected in China, India and European Union. Energy intensity in the Sustainable Development Scenario improves much faster at a rate of 3.6% a year on average. The biggest improvements are in India, China and Africa.

An energy sector transformation of the scale and pace required to achieve the Sustainable Development Scenario depends upon fundamental changes to the way energy is produced and consumed.

A sharp pick-up in efficiency improvements is the single most important element that brings the world towards the Sustainable Development Scenario. Energy efficiency is the primary “fuel” of choice in most regions because of its cost-effectiveness. Energy efficiency measures generally offer an attractive payback, although the barriers to their deployment such as access to finance or lack of information have to be successfully addressed.

As the electrification of economies progresses and the share of variable renewables in generation increases, the carbon footprint of electricity use increasingly fluctuates depending on the time of day or night. In India, our analysis indicates that, when the share of variable renewables reaches 50%, average CO₂ emissions from using electricity at midday or 23:00 differ by a factor of seven. In Europe, the difference is a factor of three.

In 2018, the industry sector accounted for 29% of final consumption and 42% of direct CO2 energy-related and process emissions. Demand for materials and industrial products plays a central role in shaping energy consumption and CO₂ emissions in industry.

In the face of demand growth, the policies so far implemented or announced will not halt a future increase in industry emissions, which grow by 16% in 2040 in the Stated Policies Scenario.

The energy transformation in the Sustainable Development Scenario implies changes in demand for materials, some of them counter-intuitive, including more steel for renewable energy infrastructure and more aluminium for electric vehicles. Greater emphasis on materials efficiency and materials recycling, reuse and substitution succeeds in reversing the historic trend of growing emissions for steel and cement, leading to a stronger decline in industrial CO₂ emissions.