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IEA (2024), Energy Efficiency Policy Toolkit 2024, IEA, Paris https://www.iea.org/reports/energy-efficiency-policy-toolkit-2024, Licence: CC BY 4.0
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Energy Efficiency Policy Toolkit 2024: From Versailles to Nairobi
Introduction
Energy efficiency is central to improving the lives of all people. It provides affordable and reliable energy access, bolsters the security of energy supply, accelerates clean energy transitions and supports economic growth and resilience. For these reasons, energy efficiency policies can deliver many benefits to people – lowering energy bills, improving health outcomes, and creating new jobs, while ensuring these benefits are shared by all. A strong, early focus on energy efficiency is essential to achieve net zero emissions by 2050.
To accelerate action on energy efficiency, the International Energy Agency (IEA) created this Policy Toolkit for governments on the occasion of the 9th Annual Global Conference on Energy Efficiency. This Global Conference in Nairobi is co-hosted by the IEA Executive Director Fatih Birol and the Kenya’s Minister of Energy and Petroleum Davis Chirchir. The Policy Toolkit will help governments contribute to the global target of doubling energy efficiency progress by 2030, as agreed in the UAE Consensus reached at COP28 in Dubai and the Versailles Statement from the IEA’s 8th Annual Global Conference on Energy Efficiency in 2023.
The Toolkit builds on the IEA’s Policy Packages, which were launched at the IEA’s 7th Annual Global Conference on Energy Efficiency in Sønderborg. These Policy Packages provide a practical approach to accelerate energy efficiency by guiding governments in the design of effective policy measures. They highlight key policies which should be combined to create strong outcomes across three pillars: regulation, information and incentives. They were updated for the Versailles Conference in 2023.
The 2024 Policy Toolkit focuses on how the doubling goal can be achieved with concrete tools or specific instruments found in the Policy Packages. The “Doubling Policy Tools” are meant to help policymakers with the implementation of energy efficiency policies that can contribute to annual progress while improving living standards, public budgets, energy security and employment, and while supporting just and inclusive energy transitions.
This document is created as an accessible overview on policy instruments and includes useful links to more detailed information. For the 9th Global Conference, the IEA has developed 12 initial “doubling tools” that address the efficiency of buildings, appliances, industry and vehicles. It will be updated as more tools are added throughout the year.
Ten strategic principles
Based on the IEA’s analysis of best practices and the work of the Global Commission for Urgent Action on Energy Efficiency, the following strategic principles can help guide policy makers to enhance and expand their energy efficiency policies and programmes, and to accelerate energy efficiency gains through new and stronger policy.
- Prioritise cross-cutting energy efficiency action for its economic, social and environmental benefits.
- Act to unlock efficiency's job creation potential.
- Create greater demand for energy efficiency solutions.
- Focus on finance in the wider context of scaling up action.
- Leverage digital innovation to enhance system-wide efficiency.
- Lead by example in the public sector.
- Engage all parts of society.
- Leverage behavioural insights for more effective policy.
- Strengthen international collaboration.
- Raise global energy efficiency ambition.
Policy Packages for Energy Efficiency
In all sector the greatest efficiency gains are achieved by a package of policies that combine three main types of mechanisms: Regulation, information, and incentives. Careful design and implementation will deliver efficiency's full potential to enhance energy security, create jobs, increase living standards, cut energy bills and reduce emissions.
Targets
Policies are more effective
when they are set in the context of clear strategies and targets
Essential elements
Regulation is essential to exclude the worst performing equipment and practices from the market, to drive average efficiency levels up and to set rules for measurements of performance.
Information helps people make more efficient choices in what they buy and how they use energy.
Incentives make efficient options more attractive and speed up the upgrade and replacement of appliances, buildings and vehicles. They also encourage the use of new technologies and practices.
Implementation
is as important as policy design.
Ensure that the resources are in place to put policies into action.
Address vital elements such as capacity building, enforcement and monitoring.
It is important to assess policies and programmes so as to keep up to date with technology developments.
Getting started
The Energy Efficiency Policy Packages contain instruments that cover different sectors and types of policies. While countries should work towards a framework that includes different instruments and covers multiple sectors, in the short term, it can be useful to prioritise. Some policies are quicker to implement or can have larger effects. This depends on national circumstances, such as the existing policy mix, the structure and size of the economy, available fiscal space and the country’s institutions. The following questions aim to help policymakers identify first steps, given their specific situation:
- Which sectors contribute the most to national energy consumption? Identifying the energy consumption of different sectors can help policymakers determine what to focus on. If the industrial sector is responsible for half of the country’s energy demand, it can be useful to first spend effort on the Policy Package for industry. Strong data and reporting is essential to adequately analyse sectoral consumption.
- What are the national climate and energy policy goals? Determining the targets and time horizons is important to identify potential policy instruments. For instance, countries expecting to expand their building stock can benefit from regulation and incentives for new buildings, while other countries might prioritise retrofits or other sectors. Policy targets in 2030 can require strengthening existing instruments, while new instruments can be considered for longer-term targets. It is also important to take existing national and international obligations and commitments into account.
- What are the existing energy efficiency policies? Setting up new policy measures can take time. It can be more time-efficient to strengthen existing policies rather than developing and implementing new legislation or regulation.
- Which type of policy instruments should be the focus? If a country already has a lot of incentives in a sector, additional incentives might not lead to as significant energy efficiency improvements as exploring other types of instruments such as regulation or information tools.
- What are the necessary resources and capacity? The implementation of policy instruments might require skilled personnel, funding and time. Depending on these resources, countries can choose the best policy instruments for their context. Countries with limited fiscal space might consider regulatory or informational tools first, as incentives can sometimes be costly. Similarly, regulations require institutions to monitor and enforce them, which need to be in place before a regulation is implemented.
- Which policy measures can complement or strengthen the existing energy efficiency policy mix? Many of the policy measures in the packages can reinforce each other. For example, a country with an existing labelling scheme might consider minimum energy performance standards, since a lot of the necessary infrastructure is already in place.
Policy Packages - Buildings Energy Efficiency
Replacing fossil fuel boilers with high efficiency heat pumps can reduce energy use by up to 75%.
In the IEA Net Zero Scenario milestones, from 2030 all new buildings are zero-carbon-ready and every year at least 2% of the building stock is retrofitted to be zero-carbon-ready.
Implementing all energy efficient measures, electrification and low- carbon energy could reduce total CO2 emissions from the sector by more than 95% by 2050.
Regulation
- Targets for energy efficiency in buildings, including for renovation rates, fosters market growth and facilitates long-term investment decisions.
- Building energy codes for new and existing buildings are essential to accelerate the transition to zero-carbon-ready buildings. It is important that they are regularly updated to increase coverage and stringency.
- Minimum energy efficiency requirements for existing buildings help guarantee performance and accelerate the process of renovation through instruments such as the standardisation of processes.
- Regulations can ensure that buildings are equipped with smart interactive technologies and can become demand response ready.
Information
- Information on building performance allows consumers to identify the most efficient options when buying or renovating buildings. Examples include energy performance certificates, disclosure programmes, one-stop shops for upgrades and renovation passports.
- Smart interactive technologies can show real-time energy performance, help adjust occupants’ behaviour and optimise energy use based on signals from the grid.
- Training and education programmes for building sector workers are important to ensure a suitably skilled workforce.
- Public awareness campaigns designed to include behavioural insights encourage low-cost actions, such as thermostat adjustment and use of smart technologies.
Incentives
- Financial incentives such as green mortgages, energy performance-based preferential loans and tax rebates and grants can motivate consumers and developers to increase investment in energy efficient solutions.
- Expedited administrative procedures, including accelerated permitting, targeted at high performing new build or retrofit projects, encourage the implementation of energy efficient measures.
- Award and recognition programmes encourage the development of highly energy efficient buildings.
Policy Packages – Appliance Energy Efficiency
In most cases, it is possible to buy appliances that are twice as efficient as those typically purchased.
In the IEA Net Zero Scenario milestone for 2030 the average appliance will consume 25% less energy.
Long-term appliance policies can halve the consumption of appliances without raising their purchase cost.
Regulation
- Minimum Energy Performance Standards exclude the least efficient products from the market. They should be in line with international best practices, while reflecting local circumstances; and be regularly updated. Regulations are essential for moving the market towards the best available technology in line with achieving net zero targets.
- Regulation can ensure that new appliances are demand response ready in order to offer flexibility to the end-user and the overall system, and reduce peak demand.
- Regulating the import and performance of used appliances appliances can help avoid inefficient appliances entering the market.
Information
- Comparative labels help consumers, to identify the most efficient appliances and encourage purchases based on lifetime costs. Ensuring labels are appropriately displayed is also key.
- High Efficiency Performance Specifications identify the best performing products and are often used as the basis for labels and incentives.
- Education and capacity building encourage industry and retailers to produce and supply more efficient products.
- Consumer information campaigns help people make informed decisions. These are most effective when based on behavioural insights and targeted strategies.
Incentives
- Rebates, grants and other financial offers motivate consumers to buy highly efficient appliances. These could come directly from governments or schemes such as energy efficiency obligations.
- Finance or taxation measures on sales and imports can encourage manufacturers to produce appliances that are more efficient.
- Dynamic electricity pricing helps incentivise flexible demand.
- Product lists help companies and households identify efficient products which are eligible for loans, tax reductions, or other financial incentives.
- Awards promote the most efficient appliances and equipment.
Policy Packages – Industry Energy Efficiency
Implementing better energy management practices has been shown to deliver savings up to 15% in the first 1-2 years, with little or no capital investment.
Heavy industry accounts for over two-thirds of global industrial emissions, while over 70% of short-term industrial energy efficiency savings are in light industry and SMEs.
Electrification is key to the decarbonisation of industry. In the IEA Net Zero Scenario the share of electricity in total industrial consumption increases from 21% to 46% by 2050.
Regulation
- Minimum Energy Performance Standards for key equipment, such as motors and pumps, can drive up overall industrial efficiency levels.
- Regulation extends beyond technology to target areas such as research and development, energy auditing, mandatory consumption reporting, energy management systems, and upskilling of the workforce. Incorporating life cycle impacts into regulation helps promote material efficient choices at the design stage.
- Regulatory instruments yield best results when rooted in a good understanding of local context and include ambitious, regularly updated, standards.
- Regulations to ensure demand side response capabilities help provide flexibility to the grid.
Information
- Benchmarking, indicators and other forms of detailed data allow governments to track the progress of policies and allow industries to compare their energy performance with that of their peers.
- Digital technologies enable industries to track energy use in real time and help ensure flexible demand side response, resulting in energy optimisation and cost saving opportunities.
- Sharing information on energy efficiency best practice through targeted information and industry networking activities helps industries raise ambition and improve energy performance.
Incentives
- Incentives such as preferential finance, links to carbon trading, obligations and tax-based measures can motivate crucial energy efficient decisions at the process design and equipment selection stage, supporting industry’s transition to near zero emission technologies.
- Free or subsidised energy audits, often targeted at SMEs and other sectors of strategic importance, can help rapidly increase energy efficiency.
- Policies to foster Energy Service Companies provide industry with access to significant external energy expertise and attractive structured financial packages.
- Incentives for the reuse and recycling of materials reduce the need for higher-emission primary materials production.
Policy Packages – Vehicle Energy Efficiency
Significant fuel savings are achievable through behavioural actions including the adoption of best practices for driving and vehicle maintenance, and lower speeds.
In the IEA Net Zero Scenario milestones for 2030, electric cars are 60% of sales and the average fuel consumption of the conventional heavy trucks fleet reduces by nearly 20%.
Efficiency improvement rates for cars are 60% faster in countries with fuel economy regulations and purchase incentives than in those without.
Regulation
- Vehicle fuel economy standards result in greatly reduced fuel use provided they are kept up to date, well monitored and properly enforced.
- Regulating the import and export of used vehicles can help improve fleet fuel economy and ensure road safety and air quality benefits.
- Regulatory and market signals, such as through stringent standards and target setting, help bring electric vehicles to the market, by providing an impetus to manufacturers to develop these technologies.
- Regulation can also help ensure the required infrastructure, such as standardised charging, is in place.
Information
- Information campaigns on carsharing practices and more fuel-efficient driving help people take informed action relating to energy and cost savings. Campaigns are more effective when based on behavioural insights and targeted strategies.
- Labels inform consumers, identifying the most efficient vehicles allowing people to choose vehicles that cost less to run. Labels for new and used vehicles help ensure benefits for all vehicle purchasers.
Incentives
- Incentives can make vehicle costs cheaper at point of purchase, such as through grants or lower registration fees. They can also reduce on-going costs, through for example free parking and exemptions from congestion tolls.
- Government grants for strategic charging infrastructure, such as charging stations in homes and workplaces or fast charging along expressways, encourage the adoption of electric vehicles reflecting that purchase decisions are influenced by the availability of infrastructure.
- Such incentives facilitate the early adoption of electric vehicles and can be phased out as uptake grows.
- Vehicle taxation and duties, can be structured to incentivise the purchase of more efficient vehicles.
Policy Packages - Energy Efficient Cities
Regulation
- National governments help create the environment for cities to take action through setting an overall vision including plans and targets.
- Local regulations and codes incorporating solutions such as smart data and metering help unlock system-wide efficiencies.
- Planning should be integrated and cross sectoral, taking a long-term view.
- International standards and benchmarks are important in enabling seamless communication across technologies and applications, critical for efficient urban energy systems.
- National action that facilitates business models for clean urban energy services, such as Public Private Partnerships and ESCOs, unlock new sources of finance.
Information
- National initiatives can be used to build energy efficiency capacity in cities through creating training opportunities and partnerships, informed by international best practices.
- Digitalisation creates new sources of data e.g. on-air quality, energy consumption and traffic. Analysis and communication of this data can improve the operation of urban energy systems.
- Digital solutions for energy efficiency in cities, require open, transparent access to data, with privacy protected. National governments can facilitate this by developing guidelines and mechanisms to enable data use and sharing across sectors and levels of government.
- Sharing information on energy efficiency best practices and proven cost-effective technologies can help cities better understand and implement efficiency opportunities to improve performance.
Incentives
- Investing in city level action and enabling funding to flow from the national to local level, through targeted funding models, can give the best returns on investment and accelerate inclusive clean energy transitions.
- National governments can use their influence to leverage international programmes aimed at cities, for example by creating innovation areas to attract digital and clean energy technology talent.
- Seed funding and complementary finance from national government, can mobilise and help scale up private capital for investment in energy efficient cities.
- Green procurement for example through the incorporation of energy efficiency performance criteria into municipal tenders, mobilises the purchase power of public bodies, acting as a major driver for market deployment of efficient products.
Policy Packages – Clean Efficient Cooking
A successful strategy to achieve clean cooking goals needs to consider all available technologies and fuels.
For rural communities, replacing traditional stoves with improved solid fuel stoves is an important first step to better population health.
In the IEA Net Zero Scenario universal access to clean cooking is achieved by 2030. This can reduce GHG emissions by 870 Mt CO2-eq equivalent to double Brazil’s total annual CO2-eq emissions from energy today.
Globally long-term policies prioritise electrical cooking appliances to reach climate goals. By 2050 reduced indoor air pollution due to clean cooking will result in 2.3 million fewer premature deaths per year.
Regulation
- Strong government regulation of energy markets can help ensure clean energy supplies are available for consumers.
- Minimum Energy Performance Standards for clean cooking stoves and other cooking equipment remove the least efficient products from the market.
- Targeted subsidies for the most vulnerable consumers can help ensure equal access to clean cooking, such as efficient LPG or electric cooking.
- Building codes and obligations on landlords can ensure adequate ventilation and other health and safety requirements are met.
Information
- Consumer information campaigns help people make more informed decisions. They are most effective when based on behavioural insights and targeted strategies.
- Local information provision through field offices in rural areas and advisory centres can improve the standing of programmes among the local population.
- Demonstrations highlighting traditional dishes successfully cooked using new technologies can help transform perceptions.
- Labelling and certification help consumers to identify the most energy-efficient clean cooking technologies. This can create a market for efficient technologies and provides motivation for manufacturers to improve the efficiency of their products.
Incentives
- Measures such as rebates, grants and tax reductions motivate consumers to choose efficient clean cooking appliances.
- Appliance replacement programmes encourage households to replace their old, inefficient cooking stoves with more efficient models including induction stoves.
- Clean cooking initiatives can be included in carbon credit and offset schemes.
- Restructuring energy tariffs, including those for electricity, to include provisions favouring clean cooking can incentivise consumers to switch from traditional biomass and other fossil fuels.
Policy Packages – Financing Energy Efficiency
Growth in energy efficiency investment is lower than it needs to be, but enacting the right policies delivers social and economic benefits promptly, such as doubling the number of energy efficiency related jobs by 2030.
Stronger policy action can facilitate a tripling of energy efficiency-related investment to almost USD 1.8 trillion per year by 2030 in the IEA Net Zero Scenario.
Reaching net zero emissions requires an unprecedented acceleration in action. The share of total energy investment related to energy efficiency will need to continue to increase from around 20% of the total today to about 50% in 2050.
Regulation
- Long-term strategies, targets and planning emphasise government commitments to sustained change, attracting private investment.
- Energy market structures can facilitate the participation of private actors, including energy service providers, supporting investment over time.
- Strong policy and governance frameworks including transparency regulations, Minimum Energy Performance Standards and ESG (Environmental, Social and Governance) requirements, can attract international investment and ensure the long-term flow of capital.
- Utility regulation can spur investment and enable innovative financing approaches e.g. where outlay is recouped through energy bills.
Information
- Training programmes and technical assistance for financial institutions and project developers help improve understanding of business models, risks and opportunities.
- Policies and digital tools enhancing data availability and quality, including energy performance certificates, help to improve financiers’ understanding, and to verify energy savings and payback periods.
- Development of standardised contract templates and terms help create trust, reduce transaction costs and simplify replication.
- Dedicated information campaigns raise awareness of preferential funding opportunities, and how to access them.
Incentives
- Streamlined and digitised administrative processes for energy efficiency projects, including permits, licences or subsidies and one-stop shops reduce barriers to investment.
- Public funding can support de-risking mechanisms, like guarantee funds or risk-sharing facilities, helping to attract private capital.
- Coordination platforms and matchmaking services between project developers and private investors can improve access to funding.
- Policies promoting innovative mechanisms such as bulk procurement, on-bill financing and leasing models can achieve scale and amplify actions.
- Energy subsidy reform helps phase out poorly targeted fossil fuel subsidies while boosting direct support for energy efficiency measures, including for vulnerable groups.
Heat Pumps Policy Package for Buildings
The expansion of heat pump manufacturing and installations has the potential to reduce CO2 emissions, improve air quality, and generate employment.
In the Announced Pledges Scenario for 2050 in China, decentralised heat pumps meet 25% of space heating needs in buildings
Incorporate favourable policies for heat pumps and other clean heating solutions into medium- and long-term targets and roadmaps
Regulation
- Introduce stringent Minimum Energy Performance Standards (MEPS) to ensure that heating solutions including heat pumps adhere to high-efficiency requirements.
- Mandate that new heat pumps are equipped with connected controls, providing flexibility to end-users and the overall energy system, contributing to reducing peak demand.
- Establish regulations, including building codes, facilitating the integration of heat pumps. This includes adjustments related to thermal performance, and building permissions, as well as refining decision-making protocols in multi-owner buildings.
- Introduce long-term policy support and regulatory certainty with transparency on upcoming changes and providing opportunities for industry input.
Information
- Harmonise labels to inform consumers about the energy efficiency of heating solutions.
- Promote consumer information campaigns, informed by behavioural insights, to empower individuals to make informed decisions.
- Create one‐stop‐shop platforms for supporting consumers in the uptake of heating equipment.
- Promote upskilling through accreditation for heat pump specialists and integration ofheat pump content into educational curricula at all levels.
- Provide criteria to define clean heat and improve heat pumps market data collection and data accessibility to inform policy decision-making.
Incentives
- Introduce rebates, grants and other financial offers to motivate consumers to buy highly efficient heat pumps.
- Introduce finance or taxation benefits to encourage manufacturers to scale up heat pump production.
- Establish well-designed procurement processes to increase market share of heat pumps and drive innovation.
- Adjust the price of electricity to make the operating costs of heat pumps more favourable.
- Offer dynamic electricity pricing to help incentivise flexible demand and new business models.