Multiple Benefits of Energy Efficiency

Macroeconomic Development

Cost-effective energy efficiency improvements have positive macroeconomic impacts, boosting economic activity and often leading to increased employment. Energy efficiency reduces the amount of energy needed to deliver services, such as mobility, lighting, heating and cooling.  Lowering the cost of energy services frees up resources for households, businesses and governments. 

The conventional relationship between energy and economic growth poses a challenge to measuring efficiency gains

Macroeconomic assessment is a mainstream branch of economic analysis that has built up a large body of knowledge and evidence over many years; however, the impact of energy efficiency policies on macroeconomic performance still needs to be better understood and systematically measured. Energy efficiency improvements can deliver benefits across the whole economy, with direct and indirect impacts on economic activity (measured through gross domestic product [GDP]), employment, trade balances and energy prices.

Energy efficiency’s potential positive impact on GDP

In 2017, the European Commission modelled four different scenarios that assess increased targets for the EU’s 2030 energy efficiency target. The analysis estimates the impacts of improvements in energy efficiency of at various levels of ambition by 2030 compared to a 2007 baseline. In terms of GDP impact, each scenario modelled resulted in a positive change, ranging from 0.1% increase in GDP in the least ambitious scenario, up to 2.0% increase in most ambitious scenario of increased energy efficiency (European Commission, 2017).

Energy efficiency jobs and employment impacts

Energy efficiency can induce job creation by (1) redirecting energy cost savings toward expanding the labour force, and (2) by creating jobs directly or indirectly to implement efficiency measures. Studies suggest that a USD 1 million annual investment in building renovation and installation of equipment designed to improve the energy efficiency of the building would support 10-20 direct jobs and an additional 10-20 indirect jobs.

The energy efficiency services sector plays a relatively small role in energy efficiency investment but is the only area where units of energy efficiency are bought and sold directly. The main actors are energy service companies (ESCOs) that are contracted to provide energy efficiency benefits to customers on a continuing basis and energy utilities that are obligated to deliver energy efficiency by policy makers. More than 1 million people are employed within the global ESCO market.

Table. 1 ESCO Jobs in China, the United States and the European Union (2016) (IEA, 2017)

Region

ESCO employment

China

652 000

United States

387 000

European Union

100 000

Fuel economy standards and employment

Two recent studies consider the employment impact of the corporate average fuel efficiency (CAFE) standards in the US automotive industry. They estimate that nearly 500 000 employees are working on component parts that increase the fuel economy of vehicles out of a total of 1.1 million workers in the component parts sector (US DOE, 2017), and that 288 000 employees are working with automotive components and technologies that contribute to improved fuel efficiency (IEA, 2017).

Energy efficiency and employee productivity in all sectors

Employee productivity is largely affected by the physical work environment – specifically, temperature, air quality, and lighting. Energy efficiency measures can positively affect each of these categories. A healthier, more comfortable work environment improves productivity and decreases employee absenteeism. A study from the US Department of Labour reported that in the private sector the rate of employee absenteeism annually is 3% (62.4 hours a year), and 4% in the public sector (83 hours). Financially, an employer could lose up to USD 2 500 per employee annually. In an organization of 50 employees, this could mean a loss of over USD 125 000 (Terrapin Bright Green, 2012).