Powering more with less: How energy efficiency drives growth and jobs

This blog was originally published on World Bank Blogs.

Picture two houses—one with old windows, no insulation, and older appliances, and the other featuring simple energy-efficient upgrades and equipment. The difference between these neighboring houses is more than just aesthetics. Those living in the first house could ending up paying up to five times more for heating in winter than the better-off family just around the corner with the more energy-efficient home.

The proof is in the bills: Inefficient use of energy results in higher costs for low-income families, who pay considerably more for less. Poorer households already spend a significant portion of their income on energy and other essentials. For many, energy efficiency is beyond their reach, either because they can’t afford it or due to a lack information on what energy-efficient products are available. It is a vicious cycle. When heating becomes unaffordable, households are often left with two unappealing choices: Turn down the heater or revert to dirtier fuels like firewood or coal. The same is also true for cooling, which remains too expensive for many people.

The energy efficiency challenge extends beyond heating and cooling and is a global concern. Two-thirds of energy worldwide is wasted, representing a loss of nearly 5 percent of global gross domestic product. In developing countries, where energy demand is set to surge by over 30 percent by 2050, we must ask: can we grow without wasting? The solution lies in energy efficiency.

Unfortunately, energy efficiency is not a high priority for most governments, making up only a small fraction of energy investments in emerging economies. Supportive policies are often missing and inadequate financing and unreliable information also hinder progress. As a result, many governments are overspending on new energy supplies, importing more fuels, and taking on more debt for their energy sectors. The burden of these higher costs is eventually passed on to consumers and businesses. The opportunity cost for economic growth, jobs and the environment are immense. 

This needs to change. Our new report highlights that global annual investment for energy efficiency must triple to nearly $2 trillion through 2030 if we are to meet the rising demand for energy sustainably. This is especially critical for developing countries, where the benefits of energy efficiency are far-reaching, including lower energy bills, improved air quality, reduced emissions, more resilient infrastructure, and millions of new jobs. For every dollar invested, it yields $3 to $5 in returns. 

In 2022, energy efficiency was the biggest source of employment across the energy sector, supporting nearly 11 million people globally. In Poland, for instance, the national Clean Air Priority Program, which is designed to upgrade heating in around 2.5 million homes, is expected to generate over 100,000 jobs. In India, Energy Efficiency Services Ltd—a public-sector initiative to scale up efficient lighting, appliances, and electric vehicles—created almost 700 direct jobs and thousands of indirect jobs. 

The World Bank Group is committed to supporting countries to put energy efficiency at the heart of their development strategies. Through our “LEAP” approach (leverage, empower, advocacy and programmatic), we focus on helping countries, donors, and the private sector scale up successful models.