Designing Energy Efficiency Policies to Enhance Affordability

Energy affordability has emerged as a critical concern in the context of rising global energy prices and growing inequality in energy access. Lower-income households spend a significantly higher share of their income on energy than wealthier households, leaving them exposed to price shocks and especially vulnerable when energy prices increase. Energy efficiency can play a key role in delivering lower energy bills, reducing emissions, and enhancing resilience. However, ensuring that all households benefit requires targeted, inclusive policy design.

This issue was a central focus of an IEA workshop held in January 2025 with G7 country representatives, where affordability was identified as a key challenge. In response, this report was developed to provide practical guidance on designing energy efficiency policies that support affordability, particularly in the buildings sector.

As part of this work, the IEA conducted a survey with G7 governments to better understand the obstacles they face. On the consumer side, major challenges include the landlord-tenant split incentive, high upfront costs and administrative complexity. On the supply side, governments identified skills shortages and difficulties in reaching underserved communities.

The report analyses the affordability-focused energy efficiency policies of G7 countries. These include targeted financial support, simplified programme design, strong local delivery models, and better integration with workforce development. Embedding affordability into energy efficiency policy is critical to reducing energy poverty and ensuring people-centred energy transitions.