World Energy Outlook 2012: Energy Efficiency

The International Energy Agency (IEA) has published World Energy Outlook 2012 (WEO 2012), which analyzes expected trends in energy consumption, trade, and investment through 2035. This report discusses the implications these trends have for global economies, climate change, and energy dependence particularly emphasizing the role of energy efficiency.

Possible Energy Efficiency Scenarios

In recent years several of the world’s largest energy consumers have made commitments to reducing their energy intensity. New policies include China’s goal to reduce its energy intensity by 16% between 2011 and 2015 and new U.S. vehicle fuel efficiency standards. WEO 2012 explains that while these are positive steps, many opportunities for energy efficiency gains remain unmet.[1] This report examines two main scenarios for 2010-2035: the New Policies Scenario and an Efficient World Scenario. The New Policies Scenario bases projections on the assumption that all recently adopted energy efficiency policies are implemented. The Efficient World Scenario assumes that additional policies are implemented to overcome major market barriers so that the full potential of energy efficiency can be realized.[2]

Projections under the New Policies Scenario

Energy efficiency initiatives are essential for energy security and economic growth. Between 1980 and 2010, energy efficiency investments delivered a 1% annual reduction in energy intensity -- the amount of energy needed to produce a unit of gross domestic product (GDP). WEO 2012 found that without this reduction, global energy needs would have been 35% greater in 2010.[3] Annual decreases in energy intensity are slowing, but under the New Policies Scenario, annual energy intensity improvements would increase to 1.8% between 2010 and 2035.[4] While total energy demand will continue to grow during this period, energy efficiency is expected to blunt that growth by 70% in 2035, or the equivalent of 1060 million metric tons of oil (Mtoe), relative to what it otherwise would have been.[5]

By curbing energy consumption, efficiency measures also help mitigate greenhouse gas emissions. In the New Policies Scenario, 65% of total carbon dioxide (COs) emissions savings from the energy sector in 2035 or about 4.6 gigatons, is attributable to energy efficiency.[6]

Barriers and Policy Action

The New World Scenario posits large energy savings, but it is only a fraction of the potential energy efficiency gains that could be achieved by 2035. IEA estimates that four-fifths of the energy efficiency potential in the buildings sector, and over one-half of the potential in the industrial sector will not be achieved.[7].

WEO 2012 outlines six major barriers to implementing energy efficiency and discusses policies that could help overcome them:

• Inadequate metrics affect the visibility of energy efficiency, but this can be improved through appropriate testing and disclosure.[8]
• Traditionally, energy efficiency has not been a priority. Raising awareness and facilitating communication could help decision makers better understand the value efficiency.[9]
• An uneven playing field in energy markets and insufficient finance options affect the perceived affordability of energy efficiency. Policy makers can address this by eliminating energy subsidies that encourage consumption and by supporting mechanisms that incentivize energy efficiency investments.[10]
• A fragmented market place and business models can favor energy supply over providing energy services more efficiently. Regulations that reward efficient energy services, create minimum energy performance standards, and allow for market integration can normalize energy efficiency solutions and make them the standard practice.[11]
• Today, energy efficiency gains often lack verification. Better monitoring can enhance the credibility of efficiency outcomes and will encourage further application of efficiency measures and compliance with applicable standards.[12]
• Finally, the capacity for energy efficiency progress must be improved. This can be achieved by increasing training and education so workers and decision makers will have the skills to better implement energy efficiency measures and more efficiently operate equipment and facilities.[13]

IEA’s Energy Efficient World

Over the course of the 25 year outlook period, additional investments of $11.8 trillion would be needed to realize energy efficiency benefits in full, but this would be offset by the substantial gains in economic output and reduced energy consumption.[14] If all economically viable measures are implemented as suggested under the Efficient World Scenario, global benefits - compared to the New Policies Scenario - in 2035 are projected to be:

• $17.5 trillion reduction in fuel expenditures and $5.9 trillion cut in supply side investment, [15]
• Rate of energy demand growth is halved [16] ; equivalent to 14% reduced use in 2035, [17]
• 0.4% increase in global GDP, and a
• Additional decrease in daily oil consumption by 13 million barrels in 2035. [18]

In 2035, the United States would realize a 15% decrease in energy demand relative to 2010 and a 1.7% increase in GDP as compared to the New Policies Scenario. Also, American consumers could save $2.5 trillion over 2012 to 2035.[19] Finally, the rapid deployment of suggested energy efficiency policies could substantially reduce greenhouse gas emissions, allowing greater time to develop mitigation and adaptation policies.[20]

Energy Efficiency by Sector

Global primary energy demand for 2035 is reduced by an additional 2,350 Mtoe in the Efficient World Scenario, compared to the estimated reduction of 1,479 Mtoe in the New Policies Scenario. [21] WEO 2012 notes that “energy efficiency measures in end-uses” account for 85% of this reduction.[22] Improvements in appliance and equipment efficiency in the buildings sector makes up 41% of reductions. Efficiency gains in the industry sector, made possible through better management and the retirement of inefficient facilities, account for 23%. The transportation sector accounts for 21%, due to policies such as improved fuel economy standards for heavy trucks. Finally, efficiency and emission standards in the power sector are responsible for 8% of the end-use efficiency gains.[23]

Conclusion

Energy efficiency plays a significant role in reducing energy demand and costs, energy imports, air pollution, and carbon dioxide emissions. While energy efficiency already delivers extensive benefits, large potential remains untapped because of barriers that make investments seem undesirable or risky. The rapid deployment of effective energy policies can overcome such barriers and enable the world to realize extensive economic, energy security, and environmental gains.

Footnotes

[1] International Energy Agency (IEA), “World Energy Outlook 2012,” 284, 24.

[2] Ibid.

[3] Ibid., 269.

[4] Ibid., 271, 269.

[5] Ibid., 282.

[6] Ibid., 289.

[7] Ibid., 290.

[8] Ibid., 280.

[9] Ibid.

[10] Ibid.

[11] Ibid., 280, 324.

[12] Ibid., 280, 325.

[13] Ibid.

[14] Ibid., 297.

[15] Ibid., 297.

[16] Ibid., 297.

[17] Ibid.,302

[18] Ibid., 3.

[19] Ibid., 364.

[20] Ibid., 241.

[21] Ibid., 282, 327.

[22] Ibid., 327.

[23] Ibid., 327.

Alliance Policy Intern Christina Ospina contributed to this resource.