Slowdown in energy efficiency progress jeopardising climate goals, IEA warns

The Covid-19 pandemic has caused energy efficiency investments to tumble while increasing the energy intensity of the global economy, according to the International Energy Agency

Global progress on energy efficiency was stymied through 2020 by the Covid-19 crisis, intensifying the need for stronger government action, according to an International Energy Agency (IEA) report published today.

Global primary energy intensity – a key indicator of how efficiently the world’s economic activity uses energy – is expected to fall by less than one per cent this year, the weakest rate since 2010, the IEA’s annual update on efficiency trends estimates.

That is far below the level of progress needed to achieve the world’s shared goals for addressing climate change, reducing air pollution, and increasing access to energy, according to the IEA.

The downturn is due in part to a plunge in investments in energy-efficient buildings, equipment and vehicles during the pandemic-driven economic crisis, with overall investment in energy efficiency forecast to fall by nine per cent through 2020, the report states.

Purchases of new cars, which are more efficient than older models, have also dropped, while construction of new, more efficient homes and other buildings is also expected to slow. In industry and commercial buildings, lower energy prices have extended payback periods for key efficiency measures by as much as 40 per cent, decimating their attractiveness compared with other investments, the report notes.

Another factor higlighted by IEA is a slowdown in improvements in the energy intensity of the global economy, meaning that every unit of economic output uses more energy that it would do otherwise. That is primarily because energy-intensive industries such as metals manufacturing and chemicals have been less severely impacted by the Covid-19 crisis than other, less energy-intensive parts of the economy, argues the report.

IEA executive director Dr Fatih Birol said he was “very concerned” about the slowdown in “one of the mainstays of global efforts to reach energy and climate goals.”

Improvements in energy efficiency can contribute around half of the reduction in energy-related greenhouse gas emissions that is required over the next two decades to put the world on a path to meeting international energy and climate goals, according to the IEA.

Consequently, it is urging governments to give strong weight to future efficiency trends when designing their economic recovery and stimulus packages. It notes than more than 60 per cent of the funding for energy-efficiency related measures announced to date has focused on either the buildings sector or on accelerating the shift to electric vehicles, leaving many more opportunities untapped.

No announcements have been made to increase uptake of super-efficient appliances, while spending on vehicle efficiency beyond electric vehicles is minimal to date, the report notes.

The planned spending is also imbalanced on a regional basis, with announcements from European countries dwarfing those from other parts of the world, it adds. Announced spending in Europe accounts for 86 per cent of global public stimulus announcements for efficiency, with the remaining 14 per cent split between the Asia-Pacific region and North America.

“For governments that are serious about boosting energy efficiency, the litmus test will be the amount of resources they devote to it in their economic recovery packages, where efficiency measures can help drive economic growth and job creation,” Birol said.”We welcome plans by governments to boost spending on energy efficiency in response to the economic crisis, but what we have seen so far is uneven and far from enough.”

Spending on efficiency-related stimulus measures announced by governments worldwide to date is expected to generate almost two million full-time jobs between 2021 and 2023, mostly in the buildings sector and mainly in Europe, according to IEA analysis. However, previous analysis contained in the IEA’s Sustainable Recovery Plan published in June estimated a job creation potential of four million, if recovery efforts are further targeted at channelling public and private sector investment into buildings, transport and industry.

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