Accelerating Industrial Energy Efficiency for Decarbonization Goals

Slow progress in energy efficiency presents a significant missed opportunity to combat climate change and achieve sustainability goals.

Over the past few years, global energy demand growth has been primarily driven by the industrial sector, which has seen a sharp slowdown in energy intensity improvements. While industrial energy demand continues to rise, the rate of efficiency gains has fallen to below 0.5 percent annually, considerably less than the nearly 2 percent gains of the previous decade. This increase in energy use within industry offsets improvements made in other sectors and hampers overall global efficiency progress.

One of the critical issues is the lag between technological innovation and policy implementation. Many policies have not been updated to reflect the latest technological advancements, leaving substantial savings unexploited. For example, the efficiency of best-in-class lightbulbs has doubled over the last 15 years, yet minimum performance standards have only increased by about 30 percent. Without policy adaptation, consumers continue to pay more and miss potential emissions reductions.

Another key factor is the rising adoption of cooling technologies such as air conditioners. As living standards increase worldwide, more households can afford cooling, which has become the fastest-growing end-use in buildings. However, many consumers choose lower-efficiency units due to lack of awareness or standards, causing excessive electricity consumption. If only the most efficient units had been purchased since 2019, global electricity demand from cooling could have been significantly minimized, preventing growth comparable to data center energy use over the same period.

Furthermore, rising electricity demand is sometimes met by less efficient power generation sources, especially in regions experiencing rapid growth. While renewable energy deployment is increasing, the reliance on older, inefficient fossil fuel plants in some areas contributes to higher primary energy consumption and slower efficiency progress. This underscores the importance of advancing renewable capacity alongside efficiency initiatives, aligning with the objectives of COP28 to triple renewables and double efficiency improvements.

Encouraging signs emerge from recent data indicating policy-making acceleration in several regions. For instance, India is projected to see its energy intensity decrease by more than 4 percent this year. Nevertheless, despite these promising signs, the overall trend remains below the levels needed to meet the ambitious targets set at COP28, emphasizing the need for further accelerated action to unlock the full potential of energy efficiency and decarbonization strategies.