As we all know energy efficiency is central to energy transition and decarbonization strategies all over the world. That is why the IEA calls it the “first fuel” as it offers the cheapest, fastest, and cleanest resource for clean energy transition while addressing the immediate and significant threats posed by climate change.

Just for you to have an idea, demand side efficiency improvements represent nearly half of the total emissions reduction opportunity to deliver the Paris Agreement greenhouse gas emission reduction goals of limiting the global temperature rise this century on 1.5°C or well below 2°C, particularly in the near term.

But despite energy efficiency’s tremendous potential, the world is still struggling to capture its full benefits. Global energy demand continues to increase, and CO2 emissions are at record levels. While carbon pricing and the removal of fossil-fuel subsidies are important to create a more equitable framework for energy efficiency, they are far from enough to steer the world in the right direction.

In light of these worrying trends, there is a growing recognition by governments and leaders across the globe that efficiency efforts need to be stepped up.

The Three Percent Club

According to an IEA analysis, under the right efficiency policies, using the existing technologies and with cost-effective investments, a 3% improvement rate in energy intensity can deliver a significant part of the greenhouse gas emissions reductions needed to meet the goals of the Paris Agreement.

Unfortunately, while GDP and total primary energy supply grew exponentially, the rate of improvement in energy intensity (the amount of energy used to generate a unit of GDP) has declined for three years in a row, leaving it well below the 3% minimum improvement that IEA analysis shows is central.

Image 1 – Global energy productivity bonus, actual and if energy efficiency had improved 3% Source: IEA

And just out of curiosity, if the world had achieved this rate of improvement over that period, it could have generated an additional 2.6 trillion USD of economic output – close to the size of the entire French economy – for the same amount of energy.

So, time is ticking, and with growing pressure for stronger action a new coalition of countries, companies and international organizations answered the call from IEA and joined last year and formed a club. They have committed to strengthen their ambition and to use the best levers available to them to put the world on a path to 3% annual efficiency improvement.

This includes incorporating specific efficiency actions and commitments in national plans consistent with achieving a 3% annual energy efficiency improvement and to participate in a coalition of international organizations that will support each other in policy development and project implementation through technical and financial assistance and national engagement.

They are the Three Percent Club.

The 15 countries participating in the Three Percent Club coalition are Argentina, Colombia, Denmark, Estonia, Ethiopia, Ghana, Honduras, Hungary, India, Ireland, Italy, Kenya, Portugal, Senegal, and the United Kingdom. Most recently, in July, Canada joined the club as well.

A big number of major corporations and supporting organizations – including Danfoss, EDP, Johnson Controls, LeasePlan, Saint-Gobain, Signify, Thermo King, Trane, and the Global Green Growth Initiative – are also part of the club.

And of course the club counts on the resources and expertise of many international organizations namely the IEA, the Sustainable Energy for All Energy Efficiency Accelerators and Hub, the United Nations Environment Programme, the European Bank for Reconstruction and Development, the Global Environment Facility, and the Energy Efficiency Global Alliance.

In an attempt to narrow the improvement rate gap, the club has decided to concentrate on accelerating the deployment of available energy-efficient technology and solutions in industry, buildings, transportation, appliances, lighting, and district energy.

Regarding not only Portugal, but also the remaining European countries in this club, this initiative might be seen has coming hand-to-hand with their National Energy and Climate Plan (PNEC 2030) and their Energy Efficiency Directive (Diretiva 2018/2002) as through all the expertise involved within the club, they will be able to find extra support and guidance on better achieving the EU transition goals.

In Portugal, for example, efficiency incentives are already being implemented:

Let us just not forget that while forming a club and planning in a direction is a good step, but until there is an execution from all the direction takes place, an aim remains an aim.

So here are some examples of actions being taken by one of the members:

  • On September 2, 2020, the Portuguese government launched a new energy-efficiency program. The “Programa de Apoio Edifícios mais Sustentáveis” includes various incentives to promote the energy efficiency of buildings and their decarbonization, such as thermal insulation, air conditioning and heating systems, renewable energy, and water efficiency systems. The allocation for this Incentive has a total volume of EUR 4.5 million, of which EUR 1.75 million is to be implemented in 2020 and the remaining EUR 2.75 million in 2021.
  • On October 7, 2020, EDP announced that is going to coordinate a 4-year project in Terceira Island, Azores named “IANOS” that aims to create an energy community and demonstrate, through direct interventions on the ground, the potential for increasing the use of renewable sources in insular spaces, overcoming the challenges of grid management while also increasing energy efficiency. This project involves 34 European partners and has secured an EU investment of €7 million from the Horizon 2020 Program.

On this note, could the Club be better prepared for the recovery?

By the end of 2019, climate change was widely considered humanity’s biggest challenge and it looked like things were finally started to happen on energy efficiency.

Now, suddenly, it was clear that the coronavirus pandemic has required governments to focus virtually all their efforts and resources on protecting the health and well-being of their citizens. But at the same time, leaders are also facing the economic impact of the crisis and considering how to create jobs and boost economies once the pandemic is brought under control and activity can ramp back up.

Even though it’s true that some governments may feel pressure to preserve established industries—many of which are fossil fuel intensive and push for a rollback of environmental protections, including climate-related regulations, under the guise of stimulating economic recovery, we should not forget that while COVID-19 may have slowed down economies and may have also reduced emissions globally, the structural long-term challenges of climate change persist.

In that sense, we can say that a well-designed recovery program should not only consider measures to stabilize the economy in the short-term, as lower interest rates, grants and loans for SMEs; but it should also consider investment in all fields of clean energy, specifically energy efficiency, that will maximize the speed and size of impact and job creation while generating long-term benefits for the economy and society such as supporting clean energy transitions around the world and, of course, reduce greenhouse gas emissions. It is a win-win opportunity.

Image 2 – Multiple Climate Opportunities to Stimulate the Economy Source: BCG

So, the answer is: they sure have the best answer.  Countries considering a green recovery, with energy efficiency at its heart, as the 3% Club are, might be a step ahead into faster response to recovery because the drivers are all there! The long-term challenge of climate change, the short-term demands of the Covid-19 stimulus.

Matilde Loureiro | Energy Consultant

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