New report calls for increased energy productivity to drive economic growth

Reading time: 4 minutes
27 January 2017

LONDON: A new report was launched this week by the Energy Transitions Commission and Vivid Economics, calling for increased energy productivity improvements across key sectors in order to spur economic growth.

The report, Economic growth in a low carbon world: How to reconcile growth and climate through energy productivity, which makes the case for energy productivity improvements to drive demand-side energy transition.

According to the report, energy productivity improvements of 2.5% - 3% per year are necessary in order for economic growth to continue.  

Crucially, the report highlights that reduced energy demand does not mean reduced economic growth, with low carbon scenarios achieving annual GDP growth comparable to high carbon scenarios.

The pathway to emissions reduction

Whilst decarbonization of global energy supply has been the main pathway to emissions reductions, the report identifies that improvements in energy productivity account for as much as 45% of gross carbon emissions reductions in low carbon scenarios.

To realize the necessary reductions in energy demand, the report recommends that energy productivity ambition needs to be ‘stretched’, with the most ambitious scenarios achieving 50-100% more demand reduction than less aggressive scenarios.

In this ‘stretch’ scenario, global energy demand in 2050 is 60% lower than the average reference case, with reductions across the transport, industry and buildings/other sectors being roughly equal.

Structural and behavioral changes

The newly published report highlights energy efficiency as the main driver of reductions in energy demand, but it notes that structural and behavioral changes can add to this by generating greater economic output from a given level of service.

There are significant opportunities to reduce energy demand across these sectors, which can be achieved through appropriate energy productivity improvements as outlined below:

  • Transport: By 2050, energy demand falls by 70% in the stretch scenario compared to the reference case for the same year with two-thirds of this reduction coming from non-Organisation for Economic Co-operation and Development (OECD) countries and primarily through switching modes of transport and improving efficiency, largely through electrification of passenger vehicles.
  • Industry: By 2050 demand is two times lower than the reference case, with 36% of reductions coming from China as industry shifts to newly industrializing countries. Improved processes and retirement of less efficient capacity would result in a 50% reduction in energy demand from the industrial sector. Newly industrialized countries and those still yet to develop will need to adopt best practices from day one.
  • Buildings: In the stretch scenario, demand is three times lower by 2050 compared to the reference case, with 34% of reductions coming from OECD countries and resulting from significant decreases in energy use per unit of space and level of comfort. Improving new building codes and rapid refurbishments will contribute large reductions.

One of the key takeaways from the reports is the importance of early action - in order to limit warming to well below the threshold 2 degrees Celsius as mapped out in the Paris Agreement, there needs to be an imminent and significant reduction in energy demand growth.

The report suggests that larger reductions in demand later on are simply not sufficient to divert scenarios to a below 2 degrees pathway. It also states that energy productivity will be a primary driver in reducing energy demand and will augment decarbonization efforts to enable sustained economic growth.

Furthermore, the corporate sector has a vital role in driving energy productivity improvements globally across key sectors. Launched in 2016, the EP100 campaign, led by The Climate Group in partnership with the Global Alliance for Energy Productivity, showcases leadings companies who commit to doubling their energy productivity within 25 years of a chosen baseline year.

For more information on EP100 please contact Head of Energy Productivity Initiatives, Jenny Chu: JChu@TheClimateGroup.org

by Grace Gosling

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