Energy Efficiency Could Cut Decarbonizing Costs by $2.8 Trillion

Nov. 25, 2015
Energy efficiency can reduce the cost of decarbonizing the economies of the U.S. Brazil, China, Europe, India, and Mexico by up to $250 billion per year, according to a new report.“How Energy Efficiency Cuts Costs for a 2° C Future.

Energy efficiency can reduce the cost of decarbonizing the economies of the U.S. Brazil, China, Europe, India, and Mexico by up to $250 billion per year, according to a new report.“How Energy Efficiency Cuts Costs for a 2° C Future.”

The report estimates savings of $2.8 trillion by 2030 if the countries use a high energy efficiency pathway to decarbonize. This approach would reduce carbon at no net cost to society, said the report funded by ClimateWorks and conducted by a consortium of groups led by Fraunhofer ISI.

In all, energy efficiency could reduce carbon emissions by 11 billion metric tons in 2030 — roughly two-thirds of the cuts needed to limit warming to 2° C, said the report.

Savings varied by nation, ranging from 0.1 to 0.4 percent of annual GDP. The savings was not sensitive to macroeconomic shifts or to changes in fuel price.

“It is of the utmost importance to address why many of the cost savings due to EE are not yet being realized by markets, private investors and households,” the report said.

Eliminating subsidies for fossil fuels and putting a price on carbon would accelerate use of energy efficiency. The report also suggested using internal rate of return rather than payback to calculate the economics of efficiency measures.

The report also pointed out that by combining energy efficiency and low-cost renewables, for the next 15 years nations could avoid broad use of carbon capture and sequestration – a costly way to reduce carbon in power plants.

On the positive side. the U.S. is poitioned to reduce carbon through fuel economy standards and the Clean Power Plan, the Obama administration’s new rule that requires an 870 million ton cut in carbon from power plants by 2030, a 32 percent drop over 2005 levels. But the nation could do more by creating greater incentives for building retrofits and reductions in fuel use by energy-intensive industries, the report said.

ClimateWorks suggests that the nations apply the cost savings achieved through energy efficiency toward bringing electricity to the energy poor. The World Bank shows that the world can achieve universal access to electricity through investments between $40 billion and $100 billion annually. The $250 billion saved in the regions studied could help finance this critical goal.

“How Energy Efficiency Cuts Costs for a 2° C Future” is available for free download.

Follow us on Twitter @EfficiencyMkts.

About the Author

Elisa Wood | Editor-in-Chief

Elisa Wood is an award-winning writer and editor who specializes in the energy industry. She is chief editor and co-founder of Microgrid Knowledge and serves as co-host of the publication’s popular conference series. She also co-founded RealEnergyWriters.com, where she continues to lead a team of energy writers who produce content for energy companies and advocacy organizations.

She has been writing about energy for more than two decades and is published widely. Her work can be found in prominent energy business journals as well as mainstream publications. She has been quoted by NPR, the Wall Street Journal and other notable media outlets.

“For an especially readable voice in the industry, the most consistent interpreter across these years has been the energy journalist Elisa Wood, whose Microgrid Knowledge (and conference) has aggregated more stories better than any other feed of its time,” wrote Malcolm McCullough, in the book, Downtime on the Microgrid, published by MIT Press in 2020.

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