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World's "First Fuel" - Energy Efficiency - Coming Out of Hiding

Sheryl Carter, Co-Director, Energy Program, San Francisco

The International Energy Agency (IEA) just released its second annual Energy Efficiency Market Report 2014 confirming energy efficiency’s place as the world’s “first fuel” and estimating the value of the energy efficiency market at between $310 and $360 billion and growing. A related report released by IEA in September, Capturing The Multiple Benefits of Energy Efficiency, focused on its benefits beyond just reducing energy use and emissions, including overall sustainability, economic and social development, and increasing prosperity.

Both reports provide clear evidence of the enormous value of using energy smarter.

The Energy Efficiency Market Is Strong, Valuable and Growing

 The new EE Market Report confirms findings from last year’s report (that I wrote about here) that the global savings from energy efficiency are greater than the output from any other single fuel source – including coal, oil, nuclear, and gas, making it the world’s first fuel. We’ve also written about how it is America’s Greatest Resource.

The EE Market Report makes a number of other impressive findings with regard to energy efficiency, including:

  • Without improvements in the efficiency of cars, homes, heating, appliances and industry, total energy use in the 11 IEA member countries* would have been 60% more in 2012 – greater than the total energy consumption of the European Union or Asia (excluding China). Energy efficiency was the most important factor reducing energy demand.
  • While energy prices have risen between 11% and 52% between 2001 and 2011, energy efficiency and increasing incomes have moderated the impact on households.
  • Investment in efficiency was larger than supply-side investment in renewable electricity or in coal, oil, and gas electricity generation and around half the size of upstream oil and gas investment.

This is just small sample of the highlights. If you are interested in learning more, including country-specific findings, take a look at the report – or at least the summary.

Energy Efficiency Has Many (Mostly Unsung) Benefits

 The Multiple Benefits report highlighted the fact that “Macroeconomists have stated that energy efficiency is the surest energy supply that exists.” Among just a few of its findings:

  • IEA projections to 2035 show that as much as two-thirds of energy efficiency potential will remain untapped unless policies change. The report also noted the many barriers to investment that necessitate these policies, such as lack of information or financing.
  • It listed at least 15 benefits of energy efficiency, including energy and greenhouse gas reductions, increased jobs, poverty alleviation, and increased health and well-being. The broader impacts have not been systematically assessed and better data is needed to calculate and communicate the full value of energy efficiency.
  • The report recommended a multiple benefits approach that “could accelerate the shift of energy efficiency from its status as the “hidden fuel” to its emerging role as the “first fuel”.”

Both of these IEA reports strongly endorse the value and benefits of energy efficiency, our cheapest, quickest way to reduce the climate-changing pollution generated when we burn fossil fuels to produce energy.

Which is Why an October 8 New York Times Opinion Piece Was Puzzling

 A NYT opinion piece “The Problem with Energy Efficiency” wrongly argued that energy efficiency advances only encourage more global energy consumption and cannot make much difference in curbing climate change. This is puzzling because numerous studies, including the two studies the authors themselves cite (and mischaracterize) – the IEA Multiple Benefits Study discussed above and a 2014 IPCC Working Group Report – and one they didn’t by NRDC, refute their claim that energy efficiency causes large “rebounds,” or increases in consumption.

If such a significant “rebound” existed, U.S. energy use growth rates would exceed those of our economy, but the opposite is true over more than three decades – thanks in large part to efficiency. In fact, the IEA and IPCC reports considered the “rebound” possibility and still overwhelmingly endorsed efficiency’s ability to cut energy use and pollution without stifling the standard of living for developing areas.

Thumbnail image for 132_LED Bulb.jpg

One example, thanks to Nobel Prize winners recognized this week, is the LED bulbs that sip so little energy they can be powered by tiny solar panels and replace kerosene lamps emitting harmful particulates. In short, energy efficiency — combined with other clean, safe, renewable resources like wind and solar — represent the best solution for eliminating the fossil fuel-fired power generation harming our planet. 

The Message That Energy Efficiency Is Our First Fuel Is Clear

The message from both IEA Reports, the IPCC report is clear. Energy Efficiency has delivered the goods, and holds enormous additional potential to decrease energy use and emissions, increase jobs, and improve our economies and standard of living around the world. What are we waiting for?

* The 11 countries IEA examined are: Australia, Denmark, Finland, France, Germany, Italy, Japan, the Netherlands, Sweden, the United Kingdom and the United States.

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Keith Pickering's picture
Keith Pickering on Oct 18, 2014 3:30 pm GMT


We seem to be chasing around this tree a lot on TEC in recent days. The economic benefits of energy efficiency are manifest and undisputed. But efficiency cannot reduced overall demand for energy, and therefore cannot reduce greenhouse emissions, because of rebound effects. This has been formally demonstrated in a thermodynamic framework.

Neither EIA nor NRDC has taken into account the recent very important work by Timothy J. Garrett which treats civilization as a whole as a thermodynamic engine, and applies the laws of thermodynamics to civilization as a whole. This work clearly shows that increasing energy efficiency increases economic growth, and therefore overall energy use. Thus efficiency, while economically advantageous, cannot work as a strategy for emissions reductions.

When informed of this evidence in the comment thread of a recent TEC post, NRDC’s own resident physicist David Goldstein has not raised an objection to it (as of this writing).

The relevant papers overlooked by EIA and NRDC are:

Garrett, T. J. (2011). Are there basic physical constraints on future anthropogenic emissions of carbon dioxide?Climatic change104(3-4), 437-455.

Garrett, T.J. (2012) No way out? The double-bind in seeking global prosperity alongside mitigated climate change. Earth System Dynamics 3, 1-17, doi:10.5194/esd-3-1-2012.

The takeaway point from Garrett’s work is that only rapid decarbonization of our energy supplies can be an effective strategy for emissions reductions. That is where we need to concentrate our efforts.

Hops Gegangen's picture
Hops Gegangen on Oct 18, 2014 6:09 pm GMT


I suppose Garrett’s analysis assumes that whatever energy is saved is used to extract more fossil fuels, in which case it doesn’t improve the situation. 

But if the saved energy is used to create infrastructure to harvest renewable energy, then it is a win, right?

I buy LED bulbs. My electric bill, and bill for replacement bulbs, goes down. I use the savings to buy solar panels. Bye bye grid, bye bye coal…

To me, the big thing about efficiency is that is allows me to say “so what?” if the cost per KWh goes up a little due to a carbon tax.


Bob Meinetz's picture
Bob Meinetz on Oct 18, 2014 9:28 pm GMT

Sheryl, there are a couple of problems with your dismissal of the so-called “rebound effect” (a terrible label, “value effect” would be better). You write:

If such a significant “rebound” existed, U.S. energy use growth rates would exceed those of our economy, but the opposite is true over more than three decades – thanks in large part to efficiency.

The rate of U.S. energy use is not striclty correlated with the economy one way or the other (a fact you allude to by only allocating a “large part” to efficiency). In fact, efficiency probably plays a smaller part than the price of fuels, technological advances which allow businesses to forgo travel, population distribution, and other factors not pegged to the economy.

Secondly, the 11 countries the report examines represent the crème de la crème of world economies – where the cost of energy plays a minor role in consumption choices, and waste is rampant. Shellenberger and Nordhaus:

Both reports note that rebound is highest in poor but rapidly developing countries where growth in energy consumption is high — and where the bulk of the 21st century’s carbon emissions will come from.

These are the countries whose citizens can ill-afford to waste anything – and by first-world standards are energy starved. They will be most likely to take advantage of efficiency to increase consumption, and “get more for their money”.

Keith Pickering's picture
Keith Pickering on Oct 19, 2014 6:05 am GMT

Garrett’s analysis doesn’t assume anything, other than that civilization can be considered as a thermodynamic engine, and therefore is subject to thermodynamic laws. In fact, whether fuels are fossil or not doesn’t appear in his equations.

What his work does show is that energy efficiency is directly tied to economic growth, which feeds back to increased energy use. Thus energy efficiency can never reduce energy use: its effect is just the opposite.

Bob Meinetz's picture
Bob Meinetz on Oct 19, 2014 5:37 pm GMT

Oliver, at this point there probably is no solution to the problem of climate change. Nonetheless, it can and will be mitigated. The strategy will undoubtedly include both making carbon more expensive as well as preventing additional carbon from entering the atmosphere.

It’s important to differentiate between carbon fuels and fossil fuels. Though fossil fuels are carbon-based, burning them releases carbon which has been stored deep underground, disrupting a biosphere carbon balance which has existed for millions of years. Carbon-based biofuels use carbon that’s already here, essential acting as a storage medium for solar energy. Moreover, there is tremendous potential for using nuclear to synthesize gasoline, methane, ammonia, and other carbon fuels from ambient CO2, which would allow us to maintain current modes of transportation without any increase in atmospheric carbon whatsoever.

CCS and geoengineering are superficial bandaids which will provide no real assistance in slowing climate change. False hope derived from them will likely even exacerbate the problem.

I and others see tremendous potential in aggressive deployment of nuclear. It would permit robust increases in trade, productivity, and quality of life with far less environmental impact than fossil fuels. There are indeed serious technological hurdles and expenses to be faced, but none as serious or expensive as the damage which will unquestionably be wrought by climate change.

Jeffrey Miller's picture
Jeffrey Miller on Oct 22, 2014 7:37 pm GMT


I haven’t read your papers carefully, so perhaps this comment is totally off base.

You observed that the ratio of annual world energy consumption (E(T)) to the inflation adjusted sum of global GDP (sum_t P(t) )  is roughly constant over the last ~42 years.

While that’s an interesting observation, you aren’t claiming that your hypothosis (  E(T) = lambda * sum_t(0,T)  P(t) with lambda constant) is a fundamental law, are you?

It is certainly not a consequence of physical law as I am sure you will agree and, even as an empirical economic relation, it seems rather odd to me. For example, it obviously would not hold in a steady state economy where there was no technological innovation and no growth (that is, where E(t) and P(t) are both constant in time) since the sum of P(t) (right side of the equation)  would in this scenario grow linearly with time, while energy use (left side of the equation) is constant.

To give another example, let’s suppose there is a global multi-year pandemic which kills off a large fraction, say 1/3, of the world’s population. GDP would almost certainly fall a lot, but your equation would predict (since lambda is constant) that annual energy consumption would keep growing, albeit at a slower rate. That seems extremely implausible doesn’t it?

In general, equations where terms from the far past are given as much weight as terms from the recent past seem highly suspect (in physics terms, they are non-local). The recent past is much more “with us” than the far past. Wouldn’t you agree?

(Your relation could be made self consistent if you put in some kind of Green’s function
E(T) ~ lambda * sum_t G(T-t) * P(t) where G(x) -> 0 as x gets large but then this requires a model for G…)

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