Energy efficiency, or energy use per unit of activity, is often considered the “first fuel” or “hidden fuel.” It has the potential to mitigate over 40% of energy-related greenhouse gas (GHG) emissions by 2040 across all sectors.
Much of today’s industrial technology is far less energy-efficient than the best available systems. Updating and retrofitting industrial plants to become more efficient can reduce between 10–20% of industrial emissions while also delivering economic benefits through reduced fuel expenditures.
In the International Energy Agency (IEA)’s Net-Zero 2050 Scenario, industrial energy consumption increases by 16% by 2030 (relative to 2020) when energy efficiency gains are not considered. With energy efficiency gains incorporated, the industrial energy consumption increases by 8% by 2030 (relative to 2020).
Most of the efficiency-related improvements needed are in developing countries and economies in transition, where relatively inefficient equipment is widely used and where most of the growth in energy demand is expected to occur. However, there are some exceptions, such as in the cement sector, where countries like India and China are leading in energy efficiency with a younger technology stock compared to Europe.
Concerted efforts necessary to accelerate the adoption of best available technologies
Public policies to accelerate the adoption of best available technologies and practices through a combination of measures range from financial incentives to audits to capacity building through information and training, but these have had limited success. Distorted energy prices, lack of capacity, and lack of access to capital are key barriers. A combination of four solutions — regulations, information and training, energy audits and digital management systems, and financial incentives — can help to boost industrial efficiency.
Enforcing existing policies and regulations is just as critical as adopting more ambitious regulations. Initiatives such as India’s Perform, Achieve and Trade (PAT) scheme, which sets energy intensity targets, and China’s Top-1,000 and Top-10,000 programs, which require industry to implement energy-saving strategies, are among recent examples of policies covering large energy users in the sector.
Efficiency gains need to be accompanied by long-term decarbonization technologies
Energy efficiency can make an important contribution in terms of short-term, cumulative emission reductions and lowered energy demand. At the same time, energy efficiency gains and emissions reductions from retrofits in the near term should be balanced with the adoption of new decarbonization technologies in the long term — particularly in industrial plants with long expected lifetimes, such as steel plants.