COP29 emphasises increasing ambition on energy efficiency
COP29 at Baku, Azerbaijan, although being termed a ‘finance COP’, did have initiatives and discussions around the global energy discourse as well. Apart from emphasis on the growth of clean energy through various routes, energy efficiency was also looked upon as an area that has a substantial ground to cover globally. Several initiatives were taken on this crucial intervention and discussions happened highlighting their large scope and the challenges that lie on the way.
At COP28 in Dubai, a global energy efficiency pledge for doubling the global annual average energy efficiency improvement rate from 2 per cent to 4 per cent every year by 2030 was established & was signed by 133 nations. The pledge committed to put the principle of energy efficiency as the ‘first fuel’ at the core of policymaking, planning and making investment decisions. But, this urgency is amplified by the stark reality that energy efficiency gains are currently lagging, with projections for 2024 showing only a 1 per cent improvement in energy intensity—well below the rate of 2 per cent as in 2023 (targeted to 4 per cent every year by 2030).
COP29 energy initiatives
This year at COP29, several initiatives related to energy efficiency were taken to propel the pace towards achieving the maximum potential of this lever, which is often referred to as the ‘low hanging fruit for decarbonisation’.
The UAE unveiled a new alliance—the Global Energy Efficiency Alliance—towards doubling of global energy efficiency growth rates by 2030. This initiative aligns with the ‘UAE Consensus’ from COP28, where all 198 participating countries in COP28, organisations, and companies committed to reducing carbon emissions and minimising natural resource consumption. Sharif Al Olama, UAE’s Energy Undersecretary, emphasised global collaboration to share best practices, drive investments, and deliver financing and technology solutions for energy efficiency, with a focus on supporting African nations.
Another session on ‘Upscaling Energy Efficiency in Africa: Strategies and partnerships for a Net-Zero future’ by European Bank for Reconstruction and Development (EBRD) and International Energy Agency (IEA) already highlighted critical challenges in Africa such as outdated grids, weak regulatory frameworks, limited funding, and low public awareness. It was emphasised that Africa’s energy efficiency progress is vital to achieving the alliance’s global ambitions, making the continent a focal point for collaboration and investment under the alliance.
The European Investment Bank (EIB), in partnership with the Solar Impulse Foundation and supported by the EU’s InvestEU program, launched an initiative to accelerate energy efficiency, aligning with the EU’s 11.7 per cent energy consumption reduction target by 2030. By introducing innovative models like “efficiency-as-a-service”, which enables small and medium enterprises (SME) to pay for outcomes rather than equipment ownership, the initiative removes upfront cost barriers and promotes clean technology adoption. SMEs, responsible for 60 per cent of Europe’s emissions, will benefit from pilot projects and access to over 1,600 certified clean technologies from the Solar Impulse Foundation. This approach is expected to cut energy bills by 30 per cent, halve energy-related CO2 emissions, and drive progress toward the global goal of doubling energy efficiency by 2030.
There were also calls for stronger progress on energy efficiency.
At a Mission Efficiency session, the global coalition—led by RMI and Sustainable Energy for All—emphasised the urgent need to scale up investments in energy efficiency to meet global climate goals.
Global investment in new renewable energy generation is nearly double that of investment in energy efficiency, despite efficiency's crucial role in reducing energy demand. In fact, efficiency improvements in 2022 reduced energy use equal to 3X the amount of solar and wind capacity brought online.
To achieve the target of doubling energy efficiency by 2030, annual investments must triple to $1.8 trillion.
The coalition called for integrating efficiency measures into updated Nationally Determined Contributions (NDC), setting ambitious national targets, and prioritising efficiency in energy planning. Speakers highlighted the potential for $2 trillion in annual savings, reduced peak grid costs, and a fairer energy transition. They urged leaders to recognise energy efficiency as key to managing rising electricity demand and achieving sustainable energy systems. Key asks include:
● Prioritising energy efficiency at COP30.
● Doubling the global energy efficiency improvement rate by 2030.
● Integrating actionable efficiency measures into NDCs.
● Increasing annual investments in efficiency to $1.8 trillion by 2030.
Azerbaijan launched its Energy Efficiency Roadmap. The South Caucasus country placed a newly established Energy Efficiency Fund at the forefront of its strategy to achieve significant efficiency gains by 2040. The Fund promises to provide financial support across various sectors, offering loans between 1,000 and 10 million Azerbaijani manat with terms of up to 15 years. By prioritising strategic energy management, Azerbaijan aims to balance economic growth with efforts to reduce emissions, offering a potential model for other emerging economies.
Another panel on ‘Tracking Efficiency in the Global South’ by Collaborative Labeling and Appliance Standards Program (CLASP), in collaboration with Alliance for an Energy Efficient Economy (AEEE) and Sustainable Energy for All (SE4All) underscored the transformative role of energy efficiency in climate change mitigation, with the potential to cut emissions by over 30 per cent by 2030. Accurate data collection emerged as a major challenge, particularly in the Global South, where informal economies and traditional biomass use complicate tracking. Cooling-related emissions were highlighted as a critical area, with a target of reducing these emissions by 68 per cent by 2050. Discussions emphasised the need for increased investment in tools, systems, and engineering capacity to address data and implementation gaps. Financing mechanisms like energy performance contracts, public-private partnerships, and long-term loans were presented as key solutions to support energy modernisation projects.
Key challenges and actions
These energy efficiency dialogues at COP29 highlighted significant gaps and challenges in achieving the ambitious goal of doubling energy efficiency improvements by 2030. Current progress on energy intensity reductions is insufficient, and without bold, coordinated global action, the world risks falling short of critical climate targets. Developing nations, disproportionately affected by climate impacts, require urgent financial and technical support to bridge these gaps.
There are some key challenges and actions needed for speeding up progress worldwide.
The first is insufficient investment and financing.
Globally, energy efficiency remains underfunded compared to renewable energy. Bridging the $1.8 trillion annual investment gap required to achieve the doubling target by 2030 poses a formidable challenge. Limited access to innovative financing mechanisms further hampers progress. Micro, Small, and Medium Enterprises (MSMEs), which account for a significant share of global emissions, face acute challenges due to limited access to capital and high upfront costs, hindering their ability to adopt energy-efficient technologies.
Another is inconsistent policy integration.
Energy efficiency is not consistently embedded in NDCs and energy policies, creating fragmentation in global climate action. Regulatory reforms and stronger enforcement mechanisms are critical to aligning efforts across nations.
There are regional disparities.
Challenges in energy efficiency vary significantly across regions due to differing levels of economic development, regulatory environments, and infrastructure maturity. Weak governance, insufficient public engagement, and inadequate data tracking are significant obstacles, for emerging economies. Informal economies and a lack of institutional and engineering capacity exacerbate implementation challenges. In advanced economies, while frameworks and financing mechanisms exist, delays in execution and limited sectoral participation persist.
● Africa: Struggles with outdated energy grids, inadequate regulatory frameworks, and limited public awareness impede progress. Access to technology and financing is also a significant hurdle.
● Emerging Economies (Asia & Middle East): Balancing rapid industrial growth with energy efficiency targets is a persistent challenge. These regions face competing priorities of economic expansion and sustainable energy transitions.
● Developed Regions (Europe): Efficiency efforts focus on optimising existing infrastructure and achieving incremental improvements, reflecting the maturity of energy systems. While these economies have resources, they often lack the bold transformations required for significant efficiency gains.
Scale disparities exist as well.
The scale of operations significantly influences energy efficiency solutions:
● Large-Scale Operations (Heavy Industries and Utilities): Require transformative technologies such as smart grids, energy management systems, and large-scale financing to modernize processes and infrastructure.
● SMEs: Responsible for a significant share of emissions, SMEs face unique challenges due to limited access to capital and high upfront costs. Solutions like “efficiency-as-a-service” and financial incentives tailored for smaller-scale operations are essential.
● Residential and Community Scales: Addressing energy efficiency in small-scale settings demands local solutions, such as public awareness campaigns, community-based financing, and improved building codes.
Way forward
Achieving the ambitious goal of doubling energy efficiency improvement rates by 2030 requires a structured and prioritised approach to address global, regional, and national challenges. The discussions at COP29 emphasised upon having some key interventions to ramp up energy efficiency globally, beginning with integrating energy efficiency into national policies and NDCs, supported by robust enforcement mechanisms to ensure compliance and alignment with international goals. Equally critical is the acceleration of financing and investments, with innovative financial instruments designed to unlock the $1.8 trillion annual funding required globally to bridge existing gaps. Strengthening technological capacity and modernising energy infrastructure through advanced systems like smart grids and efficient cooling solutions must also be prioritised, particularly in emerging economies where data tracking and reporting remain significant barriers. Finally, fostering multi-stakeholder collaboration and awareness will amplify progress, with incentives for SMEs, voluntary efforts, and coordinated actions across governments, industries, and civil society to build a unified and impactful response to the energy efficiency challenge. These requirements and strategies may vary as per region, country and the scale of operation.