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Energy Efficiency

Energy efficiency is measured as the ratio of energy output to energy input, as a percentage. The goal of improving energy efficiency is to deliver the same service to the end user, using less energy.


Disha Veena Giridhar

Business Development Analyst, Efficiency Capital


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Energy efficiency is measured as the ratio of energy output to energy input, as a percentage. The goal of improving energy efficiency is to deliver the same service to the end user, using less energy. 1

Energy efficiency is assessed at different levels, from individual appliances and buildings, to economy-wide and regional energy use. The energy efficiency of a motor would consider how much energy is produced for a given input; similarly, the energy efficiency of a supply chain would assess various inputs (i.e. the energy required to produce, ship, and manufacture component parts) in comparison to the output (the energy efficiency of the manufacturing process itself). 1

Energy efficiency is often used interchangeably with energy conservation, and though the two are related, energy efficiency typically does not require a significant shift in individual or societal behaviour or consumption, as energy efficiency seeks to provide the same energy service. Energy conservation measures on the other hand include forgoing energy consumption, and are often associated with more significantly altered behaviours than energy efficiency measures.

Increasing energy efficiency can reduce greenhouse gas emissions from the energy system, reduce energy demand, and lower costs associated with energy use by reducing energy waste. In the IPCC’s Special Report on Global Warming of 1.5°C, policies that enable energy system-wide improvements in energy efficiency are noted as a crucial stop in mitigating climate change:

“The combined evidence suggests that aggressive policies addressing energy efficiency are central in keeping 1.5°C within reach and lowering energy system and mitigation costs (high confidence). Demand-side policies that increase energy efficiency or limit energy demand at a higher rate than historically observed are critical enabling factors for reducing mitigation costs in stringent mitigation pathways across the board.” 2

Energy efficiency can be improved across energy supply (i.e. energy generation, transmission and distribution) and energy demand (i.e. buildings, transportation, individual and industrial energy consumption). 3


Energy efficiency is a key solution for countries to achieve their emission targets and is a site of continual improvement. However, global progress on improving energy efficiency is slowing down. One important indicator of trends in global energy use is improvements in primary energy intensity, which improved by just 1.2% in 2019. This slowdown in energy efficiency is attributed to rising demand for primary energy fuels from energy-intensive industries, changing weather patterns (i.e. colder winters, warmer summers, and other temperature anomalies), and structural changes (e.g. transportation modes, building floor area per person) and ineffective energy efficiency policy). 4

Direct vs. indirect emissions

Direct Emissions

Direct emissions come from sources that are under the full ownership or jurisdiction of the reporting entity. Emissions released by a company’s factories during the process of manufacturing products would be one example of direct emissions. 5

Indirect Emissions

Indirect emissions are associated with the reporting entity’s generation of purchased energy or sources that they do not own or directly control. These emissions are, however, still related to the reporting entity’s activities and supply chain. Understanding indirect emissions is important because many tasks are outsourced in today’s economy—few companies own the entire value chain of their products. 5

In the context of energy efficiency, indirect emissions are less likely to be a consideration despite representing some of the biggest opportunities to reduce carbon emissions. You may know, for instance, that your fridge is ultra-efficient with electricity in your home, but perhaps the metals inside of it were smelted using coal-powered factories. This area is an emerging – yet critical – focus.

 Greenhouse gas emissions by sector

Understanding the sectoral breakdown of greenhouse gas emissions can help individuals and policymakers understand where improvements in energy efficiency can have major impact.

This data is published by country and sector from the CAIT Climate Data Explorer, and downloaded from the Climate Watch Portal.


Efficiency in the built environment, including residential and commercial buildings, can be improved by retrofitting (replacing less efficient equipment with more efficient equipment), and optimization (adding controls with optimization or updating existing controls for better optimized control of equipment).


The most energy-intensive industries are petroleum refining, bulk chemical manufacturing, and paper and metals processing. Improving energy efficiency in these energy-intensive processes can result in significant energy and operational cost savings.


Efficiency in transportation, including private, public and industrial transportation, can be improved by upgrading to modes of transport with lower GHG emissions or by making behavioral changes , such as using public transportation, biking or walking instead of driving.

See the Avoid-Shift-Improve (A-S-I) approach to implementing sustainable transportation systems.

Energy Efficiency and Policy

Changes to regional and national energy policies are often a key driver and incentive for improvements in energy efficiency across the energy system.

Direct subsidies on energy efficiency investments are a popular form of energy policy, so long as they are appropriately targeted. These are usually temporary measures that prepare consumers for new regulations and promote energy efficiency technologies.

Fiscal incentives include tax credits and reductions that incentivise the adoption or purchase of energy-efficient technologies.These types of policies work well in regions where the tax collection rate is high, provided appropriate education is in place.

Case Study: Balfour, Canada

An audit was conducted on a Senior Citizen’s Centre in Balfour, British Columbia that identified poor wall insulation, inefficient old heating and lighting systems and appliances. After upgrades were made, the centre’s annual energy use and associated costs reduced by approximately 50% (10 MWh/year and $1000/year to 3-4 MWh/year and $350-400/year).

Case Study: Himachal Pradesh, India

 Located in the remote Spiti Valley, the Kaza Eco-Community Centre, which consists of a stone masonry foundation, raw rammed earth walls, and compressed stabilized earthblocks, was designed especially for the harsh winter climate. The primary construction technique is the traditional Spiti rammed earth technique (‘Gyang’), an ancient Tibetan building technology which is a living tradition of earthen construction still practiced in India.

Solar heat requires up to 12 hours to travel through the masonry, regulating interior temperatures for night-time thermal comfort. As the rammed earth is raw, un-stabilized earth of low density, its hydrothermal performance is excellent, effectively generating condensation heat with cold exterior temperatures.

By introducing small innovations into traditional building practices, the centre reinvigorated acceptance of these centuries-old methods and demonstrated that the most sustainable, economical and thermally comfortable buildings in this climate already exist [7].

Case Study: BC STEP Code, Canada

The Province of British Columbia first introduced energy efficiency as a BC Building Code objective in 2008. Ever since, designers and builders have had the option to use either “prescriptive” or “performance” approaches to comply with the code’s efficiency requirements.

To date, the vast majority of builders in British Columbia have pursued the prescriptive approach. But builders have a second option to comply with the energy-efficiency requirements of the BC Building Code: the performance approach. The BC Energy Step Code offers a specific form of this approach.

For governments, the BC Energy Step Code offers assurance that new buildings are performing as billed. Meanwhile, on the other side of the counter, builders have a more flexible option to comply with the energy-efficiency provisions of the provincial legislation. The new standard empowers builders to pursue innovative, creative, cost-effective solutions—and allows them to incorporate leading-edge technologies as they come available.

Over time, as high-performance designs, materials, and systems become increasingly available and cost-effective, the building industry will integrate new techniques into all new buildings. By 2032, the BC Building Code will move toward the higher steps of the BC Energy Step Code as a minimum requirement. The National Building Code of Canada is similarly moving towards this outcome by 2030. 8

Taking Action

There are multiple ways to take action towards implementing energy efficiency:

  1. Consumer Influence: Consumers can drive change by asking for energy efficiency in the buildings that they live/work in.
  2. Consumer Purchases: Consumers can invest in equipment such as energy efficient appliances.
  3. Technology:  Advances in energy efficient technology, including heating/cooling, transportation, and architecture, have the potential to dramatically reduce greenhouse gas emissions if they are affordable and widely accessible.
  4. Policy: Regulators can drive change by introducing stringent building codes to conform to low energy use, or by tax excessive emissions or by providing incentive to implement energy efficiency.
  5. Finance: The market offers multiple financing vehicles to upgrade existing buildings to be more energy efficient, such as private financing, public funding/grants or private/public loans.

Dive deeper

Recent blog posts about Energy Efficiency

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External resources

  4. Moving Forward on Energy Efficiency in Canada
  5. Engine Technologies Impact on Fuel Consumption
  6. Choosing a Fuel Efficient Vehicle
  7. Laustsen, J. (2008). Energy efficiency requirements in building codes, energy efficiency policies for new buildings. IEA Information Paper. Support of the G8 Plan of Action.
  8. Leonard, W. A. (2014). Clean is the new green: clean energy finance and deployment through green banks. Yale L. & Pol’y Rev., 33, 197.
  9., M., & Friedrich, J. (6 February, 2020). 4 charts explain greenhouse gas emissions by countries and sectors. World Resources Institute. Retrieved March 11, 2020, from
  1. European Parliament. (2015). Briefing: Understanding Energy Efficiency.
  2. IPCC. (2018). Chapter 2: Mitigation pathways compatible with 1.5C in the context of sustainable development. SR15.
  3. Environmental and Energy Study Institute (n.d.) Energy efficiency.
  4. International Energy Agency. (2019). Energy Efficiency 2019. IEA, Paris
  5. Word Resources Institute. (2012). A New Global Framework to Measure Greenhouse Gas Emissions from Cities.
  6. Pembina Institute (2016). Balfour Seniors’ Centre. Energy Efficiency Case Study.
  7. Build Up EU. (2016). Kaza Eco-Community Centre.
  8. Building and Safety Standards branch of the Government of British Columbia. (n.d.) How the BC Energy Step Code Works.