Energy Efficiency

Energy efficiency is often referred to as the third fuel type, the other two being fossil fuels and renewable energy. No one definition or measure of energy efficiency is available. However, it is generally agreed that energy efficiency refers to changes that decrease the amount of energy used to produce a unit of a certain output, for example GDP, a production process and so on.

While some regard energy efficiency as merely reducing consumption by behavioural changes such as not using air conditioning, others disagree in the belief that such actions are easily reversible and usually in response to high energy prices, which can fall quickly. The World Energy Council offers two definitions of energy efficiency. Economists define it in a broad sense as ‘changes that result in decreasing the amount of energy used to produce one unit of economic activity’ for example energy used per unit of GDP or value added. Energy efficiency experts say it is the result of an action that ‘aims at reducing the amount of energy used for a given service for example lighting or heating, by the purchase of efficient equipment, retrofitting investment to reduce the consumption of existing buildings and facilities or avoiding unnecessary consumption of energy’.

The advantage of energy efficiency is that it is the often the ‘lowest hanging fruit’, both in terms of meeting CO2 emission reduction targets and reducing energy consumption. It can be used by utilities to defer new investment in energy generation capacity and by electricity consumers to lower their electricity bills. Energy efficiency can be used to delay equipment upgrades and save energy costs.

This report mainly applies the definition used by energy efficiency experts as an improvement in energy efficiency that occurs when energy inputs are reduced for a given service or when a service is increased or enhanced for the same energy input. It then compares countries using the broad economic definition.

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