Image of a single wind turbine standing against a blue sky with a sunset underway.
To maximize the chances of mitigating the worst impacts of climate change, we must reduce the energy needed to sustain current energy consumption by using it more efficiently.

Energy Efficiency Should be the "First Fuel" Powering the Global Climate Initiative

By Andrew Fang, Michael McNeil

On April 23, 2021, the White House called for a Global Climate Ambition Initiative to “support developing countries in... implementing their nationally determined contributions and... enhance and meet their climate goals in ways that further their national development priorities.” According to the International Energy Agency (IEA), energy efficiency must take a leading role as the “first fuel” in climate-related development assistance in order to achieve the dual objective of reducing greenhouse gas (GHG) emissions while catalyzing economic development¹.

Addressing climate change will require a near complete transformation in the ways we generate, distribute, and use energy. While opinions vary about the ultimate strategy for meeting this challenge, there is no doubt that major action is urgently needed. Likewise, there is consensus that energy efficiency is as important as renewable energy,  contributing 40 percent of the energy sector emissions reductions needed to reach global net-zero by 2070, according to the IEA’s Sustainable Development Scenario. To maximize the chances of mitigating the worst impacts of climate change, we must reduce the energy needed to sustain current energy consumption by using it more efficiently. The challenge is not technological, since huge gains could be made now using widely available, cost-effective technologies. Instead, focus should be placed on overcoming market failures that prevent energy efficiency benefits from reaching consumers and on implementation challenges such as low consumer awareness of these benefits and on consumers’ inability to pay more upfront to save energy and money later.

  • Due to its substantial contribution to GHG mitigation, large-scale implementation of energy efficiency should be a top priority in the Global Climate Ambition Initiative.
  • Energy efficiency combines climate action with economic development goals, providing a range of economic, environmental, and health benefits.
  • Energy efficiency is a powerful job creator, and provides large direct financial benefits to households and businesses per unit of GHG mitigated compared to other actions.
  • Targeted energy efficiency programs provide low-income households with access to energy services, improve gender equality, and enhance standards of living and economic self-determination.

Advanced economies, incentivized by the energy crises beginning in the 1970s, have addressed these barriers with large-scale policies such as appliance efficiency standards and energy efficiency building codes, as well as non-regulatory incentives and voluntary standards. Recognizing the value of these programs, large developing countries like China and India now boast extensive and successful energy efficiency programs. However, technical and administrative capacities remain a major issue, especially in smaller and less developed economies, as well as in provincial and municipal governments where some important policies, such as energy efficiency building codes, are administered and enforced. This is unfortunate, since energy efficiency transfers scarce resources from the energy sector, which is often government-owned and/or subsidized, into resource-starved, productive economic sectors. Consequently, energy efficiency policies are well suited for advancing economic development goals, while fostering energy security, air pollution reduction, and direct job creation through economic recovery and infrastructure investments. Just as distributed renewable energy has helped provide access to rural families around the world, targeted energy efficiency programs can enhance access to energy services for low-income populations and micro-businesses, improving quality of life and economic self-determination. Targeted energy efficiency programs toward end-uses that enhance women’s access to energy services also contribute to increasing gender equality.

As climate change comes to the forefront of international economic and political priorities, energy efficiency emerges as the critical tool by which governments, industries, and the organizations that support them can simultaneously reduce the need for GHG-intensive energy sources while providing direct financial benefits in the form of energy bill savings to families and businesses at a scale appropriate to the challenges we face. In addition to these direct effects, energy efficiency reduces the amount of fossil-fuel and renewable energy infrastructure that will be needed to meet rapid growth in energy demands in USAID partner countries. Specifically, by reducing and shifting electricity loads, it can help reduce the intermittency challenges that renewable energy sources such as solar and wind power face, while strengthening the financial health of electricity providers.


Chart showing carbon mitigation costs of renewable energy and energy efficiency, comparing 2019 levels to 2040 projections.
Figure: 2040 Carbon Mitigation Costs of Renewable Energy and Energy Efficiency Mitigation in developing Asia

The graph above shows how energy efficiency contributes to GHG mitigation while providing net financial benefits to consumers. Given a comparable level of investments, energy efficiency can provide as much or more GHG mitigation, while at the same time providing huge benefits to families and businesses in the form of reduced energy bills². Energy efficiency investments create jobs directly in the production of efficient technologies, as well as in infrastructure projects³. Furthermore, the money saved from energy bills feeds back into the economy, thus stimulating economic growth and creating even more jobs. Energy-efficient policies accomplish this cycle of investment, savings, and reinvestment by transforming whole markets through standard and targeted incentives⁴.

To help USAID optimize climate action and economic development in countries struggling to meet climate goals, the Energy Efficiency for Development (EE4D) program is providing energy efficiency solutions that cut costs, improve energy systems productivity, and enable sustainable development in partner countries.

[1] Energy Efficiency as the "first fuel" of economic development is a concept promoted by the International Energy Agency, such as in this publication on Energy Efficient Prosperity.

[2] USAID/Lawrence Berkeley National Laboratory (LBNL) scenario assuming energy efficiency cost of conserved energy of $50/MWh and average electricity tariffs of $150/MWh.

[3] In particular, public investments in energy efficient construction retrofits as part of economic recovery programs have been shown to have been highly effective job-creators, a success that could be replicated as part of COVID-based recovery programs.

[4] A summary of these policies and the technical assistance tools that support them can be found in Scaling Up Energy Efficiency in Developing Countries – The Building Blocks of Energy Efficiency.

Strategic Objective
Emissions, Low Emission Development, Private Sector Engagement, Self-Reliance

Andrew Fang

Andrew is a AAAS Science & Technology Policy Fellow with USAID’s Office of Energy and Infrastructure. His current work focuses on energy sector resilience issues in the Caribbean. Prior to joining USAID, Andrew worked with the World Bank to evaluate integrated urban planning tools for carbon mitigation. Andrew holds a B.S. in Chemical Engineering from Northwestern University, a M.S./M.E. from the University of Michigan School for Environment and Sustainability, and a Ph.D. from the University of Minnesota Humphrey School of Public Affairs in Science, Technology and Environmental Policy.

Michael McNeil

Michael McNeil received a Bachelor’s degree in Physics from U.C. Berkeley in 1990 and a PhD in Physics from U.C. Santa Cruz in 1996. Dr. McNeil joined the Energy Analysis Department at the Lawrence Berkeley National Laboratory in 1999.  Dr. McNeil’s work at the Laboratory has focused on analysis of environmental and financial impacts of energy efficiency policies. In the early 2000s, as a member of the Energy Efficiency Standards Group, he developed innovative analysis tools to evaluate energy, financial and environmental impacts of appliance standards for several products. Since 2005 his research has focused on applying these methods to supporting developing country government efforts to develop effective energy efficiency policies. To date, his research projects have supported policymakers in Mexico, China, India, Uruguay, Brazil, Central America, Argentina, Chile, South Africa, Indonesia and Vietnam.  Dr. McNeil was named as the first Director of Berkeley Lab’s Mexico Energy Initiative and focuses his work on research supporting the clean energy transition in Mexico. He co-developed and leads the U.S. Agency for International Development’s Energy Efficiency for Development Program, which provides technical assistance throughout the world.  Dr. McNeil has authored or co-authored three book chapters, nearly 40 journal articles and numerous conference contributions.

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