Energy Efficiency: Accelerating the Agenda
Energy efficiency is the cornerstone to meeting our climate change goals and in enabling us to meet growing energy needs.
If per capita energy demand continues unabated:
• Energy demand is expected to increase by 40% by 2050.
• Carbon emissions are expected to increase to 34.5 GT CO2 by 2020 and 40.2 GT CO2 by 2030.
• The estimated capital required to meet projected energy demand through to 2030 is huge, amounting in cumulative terms to US$ 26 trillion (in 2008 dollars).
The increasing consensus that we need to limit the global temperature increase to two degrees means that this situation is not sustainable and must be averted. Research by the International Energy Agency (IEA) estimates that to avoid this and cap the earth’s temperature at two degrees, a total reduction of 3.8 GT CO2 by 2020 and 13.8 GT CO2 by 2030 against a 2005 baseline is required. The latter is close to three times as much as the US emits in one year and close to 40% of the expected emissions increase in a business as usual scenario. With the majority of estimated demand increase expected to come from non-OECD countries and 1.5 billion people worldwide still without energy access, a huge challenge presents itself as these countries cannot be denied their development rights. Energy efficiency is therefore recognized to be the most cost-efficient and effective way in which to enable economic growth and competitiveness in both developed and developing nations while meeting rising energy demand and combating climate change.
The World Energy Council (WEC) highlights Europe as an example which has seen significant improvements in energy efficiency from 1990 to 2006, achieving a 40% average decrease in final energy consumption per unit of GDP (a measure often used to calculate energy efficiency). The WEC estimates that if all regions of the world had the same energy efficiency performance as the EU in 2006, a total 420 Mtoe of fuel could have been saved, avoiding 1.3 GT CO2 emissions. The recognition of the potential of energy efficiency is well-known (either as a contribution to energy savings or emissions reduction) and shared across stakeholder groups. Within the public sector over 70% of countries have developed energy efficiency targets and implemented a wide range of policy measures from mandatory targets to incentives and subsidy schemes. International organizations, NGOs and academia have also been instrumental in quantifying the potential and encouraging action with the International Energy Agency (IEA) estimating a potential 8.2 GT CO2 emissions reduction each year by 2030, over half of the potential emissions savings required by 2030. The private sector has also been active with the most energy-intensive industries implementing energy efficiency targets and incorporating it into business decision-making, while other industry players are working to develop innovative business models and capture business opportunities.
US Energy Secretary Steven Chu said in July 2009: “The quickest and easiest way to reduce our carbon emissions is to make our appliances, cars, homes and other buildings more efficient. In fact, energy efficiency is not just low-hanging fruit; it is fruit that is lying on the ground. And energy efficiency means money back in your pocket because you pay less on your energy bills,” recognizing that with the lack of implementation of energy efficiency measures, a significant opportunity is being missed. Indeed, despite the recognized potential of energy efficiency, a gap remains between policy and implementation indicating that capturing this “low-hanging fruit” is not as easy as expected. Policy is not always being implemented with the IEA, identifying that of its 25 policy recommendations only 57% have been fully implemented. Organizations and agencies are still operating at a project level versus a programmatic level and institutional and market failures are preventing the private sector from implementing and investing in energy efficiency at scale. Energy efficiency initiatives are not yet mainstream in all sectors and developing the investment case for efficiency projects at scale remains difficult. While they are independently taking various steps, the public and private sectors are not recognizing and acting on each other’s needs effectively. This report investigates how to bridge this gap and capture this opportunity, scaling up successful energy efficiency implementations globally. The report outcomes are based on interviews conducted across stakeholder groups.
The research identified three clear areas of activity which can capture the opportunity and frame a scalable, public-private energy efficiency initiative for 2011.
• First, to develop a comprehensive energy efficiency ecosystem within and across the main emitter countries by developing a platform that brings together key public, private and expert actors from across the value chain to co-design scalable projects, programmes and policy enablers as well as common metrics and standards. The Clean Energy Ministerial Process could be a useful vehicle in this regard.
• Second, and related to the public-private platform mentioned above, to create a set of action-oriented private sector networks within some key industry sectors, each focused on developing a set of specific actions during 2011 and delivering on them, so as to create a step change in energy efficiency outcomes within their particular sector. A model such as the Cement Sustainability Initiative of the World Business Council for Sustainable Development could be a useful one to work from. An energy-intensive sector may be a good place to start.
• Third, and related to the two activities above, a public-private initiative led by international organizations/NGOs and academia to develop for the corporate sector during 2011 a set of harmonized international standards on measurement and reporting for energy efficiency that can sit alongside carbon emissions reporting.
These ideas will be explored in a private discussion involving business leaders and public sector officials co-hosted by the Forum and the Mexican Government’s Ministry of Foreign Affairs and Ministry of Economy at the Green Solutions event, at the time of the UN-hosted Conference of Parties (COP 16) in early December 2010. The expectation is that they would then be further discussed at the World Economic Forum Annual Meeting 2011 in Davos in January and potentially developed to be launched at the time of the second Clean Energy Ministerial meeting in April 2011. Progress could be reported at the COP 17 in South Africa at the end of 2011. As the summer 2010 meeting of the Forum’s International Business Council recommended that the World Economic Forum develop an institutional initiative on energy efficiency for 2011, the Forum will explore potential partnerships with the international public sector, governments and private sector/expert stakeholders to take these forward or related ideas which may emerge from the Cancun and Davos discussions.
The full report can be downloaded here.