Energy Efficiency

12 Jul 2019

Energy Efficiency is the Most Cost-effective Way to Achieve Economic Growth

12 Jul 2019  by Kim Fausing   

What is energy efficiency? Energy efficiency, means using less energy to provide the same level of energy. It is therefore one method to reduce human greenhouse gas emissions. 

Energy efficiency is the most cost-effective way to achieve economic growth, decarbonise economies and meet the goals of the Paris Climate Agreement, write Kim Fausing and Rachel Kyte.

Kim Fausing is the CEO of Danfoss. Rachel Kyte is the CEO and special representative of the UN Secretary-General for Sustainable Energy for All.

As the world increasingly benefits from the price revolution in renewable energy and the world’s largest investors come to grips with the phase-down of fossil fuels, it has become clearer that we have the technology and the finance necessary to realise the Paris Climate Agreement.

Despite this opportunity, we are not acting with the urgency that the global climate emergency requires. Already, the economic and human costs of 1°C of warming are painfully apparent in the form of longer, severer droughts, life-threatening heatwaves, and ravaging climate fires.

Last year the Intergovernmental Panel on Climate Change Special Report on global warming left no place for policymakers to hide. The failing report card delivered by the IPCC warned that if we’re to limit warming to 1.5°C we must cut emissions by nearly half by 2030, and achieve net-zero carbon emissions by 2050.

These stark findings sparked a global reaction, with citizens of the world demanding urgent action instead of the insufficient incremental efforts we have seen thus far. Our responsibility is clear. We must manage the growth of the global economy, provide hope and nourishment to all people and deeply decarbonise by 2050.

To achieve this, we need energy systems that support our climate goals, and which provide people with reliable, affordable and clean energy from the streets of Copenhagen to the villages of the Sahel.

The energy-efficient opportunity

The good news is that there are clear next steps, each laden with opportunity, that we can all take to support faster progress. Energy efficiency is that starting point.

Despite not grabbing headlines the same way as renewable energy, and far too often ignored in governments energy planning, energy efficiency can deliver 40% of the CO2 abatement necessary to achieve the Paris Agreement.

Energy efficiency is the “fifth fuel” that every country possesses – a universal means to decouple economic growth from energy demand. By being more productive with every unit of energy we make, we can also help deliver the Sustainable Development Goals with cleaner air, more nutritious food, comfortable classrooms, and livable cities.

If you need evidence of energy efficiency’s role as an enabler of the energy transition, look no further than building retrofits. According to the Rocky Mountain Institute, increasing the rate at which we retrofit buildings for energy efficiency from 1% to 5% per year makes it possible to power 550 million electric vehicles on the road by 2040 without new energy demand.

It is in the built environments, in our transport systems, and in our cold chains where energy efficiency can bend the curve of our energy systems, and in turn improve the quality of life for millions.

Take buildings as an example. Every day we waste valuable energy by overheating and overcooling buildings, and every week we build new floor space equivalent to the size of Paris. Between 2017 and 2037, more than half of the new buildings that will exist in 2060 will be constructed – with two-thirds in countries without building codes.

Continuing to ignore the basic principles of resource efficiency and basing procurement decisions on upfront rather than lifecycle costs is perverse. What we should see as an investment in our future is treated as a cost.

We should also keep in mind that energy efficiency is good business, both for those implementing it and for the green industry providing the solutions, creating hundreds of thousands of jobs.

Governments have a responsibility to prioritise energy efficiency

In this moment of urgency, determined leadership is necessary to set us on the critical path to achieving the Paris Agreement and the global goal on sustainable energy, SDG7. Yet, despite cost-effective savings and wide-ranging health and environmental benefits, few countries have yet embraced the true opportunity of energy efficiency in their policy.

Our message to governments and cities is simple: put energy efficiency first.

How? Start with ambition and set a binding national target. Then, achieve it by putting energy efficiency on equal footing with other energy goals such as energy security and develop sector-specific targets that are championed at the highest levels and strategies that are implemented by delivery units.

The opportunities for energy efficiency are not just in developed economies. For the developing world, particularly city leaders, inclusive economic growth relies on making every unit of reliable, affordable and clean energy work harder.

Energy efficiency enables a future that delivers economic growth alongside clean air, productive workplaces, and cooled classrooms. We can help people realise their aspirations with less power than before.

If we are going to live up to our promise to leave no one behind, we should embrace the fact that energy efficiency is the most cost-effective way to achieve economic growth and decarbonise economies at the same time.

Long overlooked by policymakers, the ugly duckling of energy interventions at this time of climate emergency may be our swan.

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