IEA (2019), Multiple Benefits of Energy Efficiency, IEA, Paris https://www.iea.org/reports/multiple-benefits-of-energy-efficiency, Licence: CC BY 4.0
Cost-effective energy efficiency improvements can 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 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.1
Energy efficiency jobs and employment impacts
Energy efficiency can induce job creation. A recent study assessing the impact of the EU's Ecodesign Directive projects that the efficiency measures developed as part of the directive will lead to 0.8 million additional jobs by 2020.2 In addition, the energy services market provides a further source of employment. 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 are the two main players in the sector, which employes more than 1 million people globally.
ESCO Jobs in China, the United States and the European Union (2016)3
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 sector4, and that 288 000 employees are working with automotive components and technologies that contribute to improved fuel efficiency.3
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 125 000.5
Investment in efficiency creates jobs in manufacturing, particularly in the short run
In the industrial sector, counting the portion of industrial employees that are dedicated to making an efficient product, such as a hybrid car or an efficient refrigerator can be difficult. The manufacturing of inefficient cars and refrigerators may involve just as many workers as producing efficient ones. Also a person building the hybrid drivetrain has a genuine efficiency job, whereas a person installing seat belts into the hybrid car arguably has a car industry job with no direct connection to energy efficiency.
In some cases the transition to more efficient products can initiate manufacturing changes that reduce labour intensity. This is the case with light-emitting diode (LED) lighting, which require fewer employees to produce products that each last much longer than their predecessors.