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Efficiency Improvements

A Home Energy Professionals (HEP) Certifications Energy Auditor with Arapahoe County's Weatherization Division, performs a Blower Door Test. Energy audits give homeowners an idea of their home’s energy performance, and this knowledge can be used to reduce a home’s thermal leakage. Source: National Renewable Energy Laboratory.

Enhancing the energy efficiency of processes across sectors will be critical for reducing greenhouse gas emissions from our energy system. Efficiency improvements streamline and reduce actual energy consumption, and facilitates meeting energy requirements through renewable sources. This section explores key efficiency opportunities and anticipated benefits that could be achieved through enacting them across three sectors – buildings, industry, and transportation.

Avoided expenditure on energy due to efficiency improvements since 2000, by sector

In IEA member countries, technical efficiency gains since 2000 reduced expenditure on energy in 2018 by just over $600 billion USD, with the savings from gains since 2015 avoiding over $100 billion USD in 2018. Economic benefits accrued in all sectors, but have grown more recently in the transport sector due to oil price rises. Source: IEA (2019) Electrification Futures Study.

Energy efficiency investment by region, 2014-18 (left) and by sector in 2018 (right)

The left graph above shows how different world regions invest in energy efficiency, and how these investments have been changing during the past years. Worldwide, change in total investments in Energy Efficiency have increased positively. The right graph above shows how the building sector receives the most energy efficiency investments, and about half of those investments go towards building envelopes. In 2018, the Industry sector received almost the same investments as HVAC and Controls in Buildings did. Source: IEA (2019) Electrification Futures Study.
Rocinha Favela in the front, and high-rise buildings closer to the beach at the back, in Rio de Janeiro, Brazil. Rocinha Favela is the biggest urbanized slum in Brazil with approximately 100,000 inhabitants. Source: Alicia Nijdam / CC BY (

Building Sector

The building sector, which includes residential and commercial structures, is responsible for 39% of the total U.S energy consumption (EIA, 2019) and 21% of annual U.S. direct and indirect greenhouse gas (GHG) emissions (1.4 GtCO2e) (EPA, 2019). Globally, buildings and their construction are responsible for over 33% of global final energy consumption and nearly 40% of total direct and indirect CO2 emissions globally (IEA, 2020). The U.S. Energy Information Administration (EIA) projects that global energy consumption in buildings will grow by 1.3% per year on average from present day to 2050, with non-OECD countries having five times the rate of growth compared to OECD countries (EIA, 2019).

The merits of improving the operational efficiencies in the building sector are quite high. Energy efficiency improvements span how buildings are designed, their heating and cooling equipment, and lighting. The U.S. Department of Energy (DOE) estimates that, at the lower end, 20% of building energy consumption can be reduced by leveraging technology known to be commercially viable today (DOE, 2015).

Building Envelope

Wool insulation being installed into a wood framed wall. Sheep wool is an efficient insulator that is renewable, recyclable, and compostable. It also lasts long and is fire resistant, among other beneficial properties. Source: Wikimedia Commons.

The building envelope separates the indoor conditioned environment of the building from the external atmosphere and includes walls, their insulation, windows, foundations, and roofing. Designing and installing building insulation minimizes heat transfer and thermal bridging, thus reducing a building’s energy usage. Advanced Energy Economy (AEE) estimates that proper insulation in buildings can bring down heating and cooling energy demand by 10-15% (AEE, 2016). Improving building envelope efficiency also offers significant cost savings. AEE estimates that building envelope retrofits can have cumulative economic savings of $80 billion across the U.S., with significant savings for individual homeowners and businesses (AEE, 2016).

The DOE’s Better Buildings Initiative has additional resources on building envelope improvement technologies and policies.

As discussed in the Justice in the Transition section, low and middle income (LMI) households often stand to gain more from building envelope efficiency improvements – both because low income housing is often more poorly insulated, and because LMI households spend disproportionately more of their income on heating and cooling costs.

Heating and Cooling

Outdoor section of a heat pump. Source: Kristoferb at English Wikipedia / CC BY-SA (

Space and water heating accounts for nearly 50% of the energy consumption in buildings (IEA,2013). In the 2010s, 85% of residential heating loads and 65% of commercial building heating loads across the globe were satisfied by fossil fuels. Improving heating and cooling energy efficiencies is, therefore, critical. Depending on the current age and anticipated life-span of existing fossil-based HVAC equipment, it can be retrofitted or replaced to significantly improve energy efficiency.

Retrofitting existing boilers and furnaces to include condensing equipment (that retrieves latent heat from condensed steam at the end of the cycle) is an option when current HVAC equipment is far from its replacement timeline. This measure can improve thermal efficiencies by 12-25% with moderate capital investments. When existing HVAC equipment is ready to be replaced, electric air source heat pumps (ASHPs) or solar thermal heaters can be considered. ASHPs offer thermal efficiencies of 300-600%, as opposed to the 60-80% that conventional furnace + boiler systems offer. ASHPs require a low-medium capital investment and can offer superior savings and payback times. When powered by renewable electricity, they can further eliminate the carbon emissions associated with space heating. ASHPs can also provide cooling in the summer months, often more efficiently than conventional air conditioners. Therefore, ASHPs can decrease natural gas consumption in the winter months and electricity consumption in the summer months. Solar thermal heaters offer 100% thermal efficiencies and require a low to medium capital investment. They are a viable option in geographic regions with good sun exposure.

The International Energy Agency (IEA) has detailed information on additional heating and cooling technologies of the future and specific policy recommendations to implement them across the globe.

Residential air source heat pumps (ASHPs) and heat pump water heaters are approaching Levelized Cost of Service (LCOS) (in $/MBtu) parity with incumbent natural gas technologies in moderate to warm climates, but in cold climates, incumbent gas technologies continue to exhibit an advantage relative to ccASHP. However, this observation—based on national average annual natural gas prices—may not apply in regions with above average natural gas prices (e.g., the Northeast), or over months or in seasons with higher gas prices that would make LCOSs for ccASHPs much more favorable. Source: Mai, et al. 2018. Electrification Futures Study: End-Use Electric Technology Cost and Performance Projections through 2050. National Renewable Energy Laboratory.


A National Renewable Energy Laboratory research engineer displays an LED smart light bulb that can be controlled via smart phones. This lighting technology is being used in Home Energy Management Systems to enhance energy efficiency. Source: National Renewable Energy Laboratory.

Global lighting accounts for 15% of global electricity consumption and 5% of worldwide GHG emissions (DOE, 2015). Lighting also constitutes approximately 15% of the electricity consumption in residential buildings and 25% in commercial buildings. Commercial sector buildings such as retail stores and office buildings have large lighting loads that operate consistently for 7-9 hours/day. Lighting energy savings can be achieved by 1) shortening the duration of lighting and 2) using efficient lighting technologies. Occupancy sensors can be installed in buildings to significantly reduce the duration of lighting to only the times people are present. A study that tracked three separate installations of occupancy centers – a mid-sized office, a large office and a school – concluded that energy savings could be between 0.4 and 0.6 kWh/sq ft./year.

Efficient lighting technology is the other piece of the puzzle. Replacing incandescent light bulbs with LEDs can have significant energy and economic savings. The U.S. Environmental Protection Agency (EPA) highlights the success story of Lovell Federal Health Care Center in Chicago where incandescent light bulbs were replaced with LEDs (U.S. EPA) resulting in an annual reduction of 15% in energy consumption (400,000 kWh), the equivalent of 3,357 metric tons of carbon dioxide emissions reduction. In addition to the annual energy savings, reduced maintenance and operation requirements resulted in anticipated savings of $500,000 over ten years.

The business and environmental case for replacing conventional lighting with solid state lighting such as LEDs are well-documented. The cost of purchasing and installing LEDs and CFLs, however, can be starkly different in areas of differing socio-economic make-up. For example, the Urban Energy Justice Lab at the University of Michigan found that LEDs and CFLs were more expensive and less readily available in high-poverty urban neighborhoods (Reames et al. 2018), underscoring the need to craft transition plans for an energy-efficient future that provide targeted support for low income neighborhoods.

Industrial smoke pollution. Source: Adina Voicu / CC0.

Industry Sector

The industrial sector accounts for almost a third of energy consumption in the United States (EPA, 2019) and upwards of 50% globally (EIA, 2019). The industrial sector also accounts for 22% of emissions in the U.S. (approximately 2 GtCO2e in 2019), and a third of global emissions (approximately 11 GtCO2 in 2019). A large portion of these emissions comes from industrial production processes such as iron and steel production, chemical production, petroleum refining and other manufacturing and non-manufacturing activities which are vital to most nations’ economic well-being. Accordingly, advancing industrial energy efficiency can have positive economic benefits.

Over 90% of global GHG emissions from the industry sector come from a dozen industries, including iron and steel manufacturing, chemicals, and cement. Source: Infographic based on AGCI’s 2018 Workshop on Technologies and Policies to Decarbonize the Industry Sector and its subsequent publication by Rissman et al., 2020.

Industrial processes are mostly thermal-based and require the use of large amounts of fossil energy. Decarbonizing the industrial sector is a massive challenge but reducing energy consumption is possible through process streamlining. Installing variable-speed drive motors, process and equipment sensors, energy efficient lighting, and waste heat recovery systems can have significant energy, economic, and emissions savings. For example, it is estimated that fixing leakages in the compressed air systems that most industrial processes rely on would result in over $3 billion in collective savings across manufacturing centers (CAGI). Exelon Energy identifies additional crucial steps industrial facilities can take to ensure efficient operation.

There are several barriers to industrial energy efficiency adoption including internal competition for capital, lack of in-house expertise, and environmental permitting restrictions. The 2015 Congressional report on Industrial Energy Efficiency details these barriers in additional detail.

Nevertheless, there are policy measures and other mechanisms that can help fast-track industrial energy efficiency measures. These include regulations or standards, fiscal incentive schemes such as tax breaks, and state and federal funding to further research and development (R&D). This Lawrence Berkeley National Lab (LBNL) report offers multiple options and success stories. Aside from greenhouse gas reductions, retooling industrial facilities can also reduce other pollutants that cause local environmental harm. This is particularly relevant from an environmental justice standpoint because low income communities and communities of color often live the closest to polluting industrial facilities (Bravo et al., 2016).

Bumper-to-bumper traffic jams the I-25 corridor in Denver, Colorado, U.S.A. Source: National Renewable Energy Laboratory.

Transportation Sector

Transportation accounts for 27% of energy use in the U.S. (EIA, 2019) and is the largest contributor of greenhouse gases, accounting for 28% of U.S. emissions (EPA, 2019). Globally, transportation accounts for 19% of end-use energy consumption and 14% of global emissions (EPA, 2019). Transportation energy efficiency can be improved through two primary strategies – 1) improving individual vehicle efficiencies and 2) improving overall transportation system efficiencies.

Share of U.S. Transportation Sector GHG Emissions by source, 2018 (EPA, 2020).

Ground Transport

National Renewable Energy Researcher working on co-optimization of fuels and engines (CO-OPTIMA) to boost fuel economy and vehicle performance, while reducing emissions. This work advances the underlying science needed to deliver better engines and fuels sooner. Source: National Renewable Energy Laboratory.

Individual vehicle efficiencies can be improved through fuel efficiency enhancements, reducing vehicle weight during the design phase, use of alternative fuels, and through cognizant driving. The Department of Energy Office of Energy Efficiency and Renewable Energy (EERE) has been carrying out research to improve fuel efficiencies with a specific focus on combustion engine drives, lubricant technology and vehicle light-weighting. Light-weighting has proven to be especially effective, with research suggesting that a 10% reduction in body weight can improve fuel efficiency by 6-8% (Scientific American, 2012). Alternative fuel vehicles and electric vehicles also have significant primary energy consumption reductions per mile through lightweighting.

Driving speeds can also have an effect on fuel efficiency; the following chart shows how driving speeds influence fuel economy by vehicle type. Policies and private programs (such as those offered through car insurance companies) could incentivize efficient driving speeds. 

Fuel economy at various driving speeds and by vehicle type. Source: U.S. DOE EERE, Alternative Vehicles Data Center.

The transportation system as a whole can be made more efficient through a slew of measures, including mass transit improvements, ride-sharing programs, effective city planning that promotes walking and biking, and advanced transportation such as autonomous and connected vehicles.

Well-utilized mass transit drives energy and emissions savings across the transportation system by substantially reducing per capita energy consumption. The following table represents the passenger-miles-per-gallon values for various transportation methods. In high usage-rate scenarios, mass transit is the clear winner from an energy efficiency perspective.

Passenger-miles per gallon by scenario and transit type. Source: U.S. DOE EERE, Alternative Vehicles Data Center

Ride sharing, including ride hailing, can increase the utilization rate of individual vehicles and has the potential to reduce the number of cars on the road. That said, ride-hailing can inadvertently detract from mass transit utilization as well as walking and biking, as detailed by a UC Davis report. Ride-hailing can also drive up emissions through “deadheading,” when a ride-hailing vehicle travels without a passenger between hired rides. This climate risk can be curtailed through electrifying ride-hailing vehicles, which can cut emissions between 50-80% (Union of Concerned Scientists, 2020).

Connected and autonomous vehicles (CAVs) are the future of transportation: vehicles that require no interaction from passengers but interact with one another to ensure smooth transportation. CAVs can be energy intensive to operate given the physical fixture requirements and large amounts of data transmitted. Continuous research is being carried out on CAVs across the globe. Research carried out at the University of Michigan has shown that CAVs could enable a base-case energy use reduction of 9% (Gawron et al., 2018). The energy efficiency benefit of CAVs can be offsetted, however, by the increase in their use (“rebound effect”), since lower fuel costs and time costs of travel can induce increases in travel and energy use. They can also lead to “home-shifting decisions,” encouraging people to sprawl to suburbs and exurbs (Taiebat et al., 2019). 

Levels of interactions between CAVs and the environment with positive (+) and negative (-) impacting mechanisms. Source: Taiebat et al., 2018.

An important factor to consider is that, through systemic efficiency enhancements to transportation, the overall access and reliability of transit can be increased. Communities of color have shown to be affected the most by unreliable transportation. Having systematic improvements such as enhanced mass transit access would have life-changing effects. Multiple states in the U.S. have policy recommendations to make transportation more equitable. This PolicyLink report sheds light on transportation inequities and offers policy solutions to curb them.

Wind turbine blades being transported by train through Denver, Colorado, U.S.A. Source: National Renewable Energy Laboratory.

Heavy duty and long-distance transport have long posed a significant challenge to those seeking to decarbonize the transportation sector: Aviation, heavy-duty road transport (i.e. trucking), and shipping (maritime and rail) collectively account for over 12% of all global anthropogenic emissions. As in many subsectors, no single solution will be sufficient to meet decarbonization goals for the highly heterogeneous long distance shipping and freight (which includes heavy duty trucking, maritime shipping, and freight trains), but efficiency improvements will be critical.

Heavy-duty vehicles (HDVs) such as long distance trucking represent more than 60% of energy consumption and fuel use in freight transportation globally, reaching as much as 80% in some regions. HDVs account for less than 5% of the global vehicle fleet on the roads but 40% of energy consumption. Many HDVs rely on diesel fuels which contribute a fifth of anthropogenic black carbon emissions, a carcinogen that worsen urban air quality with severe human health impacts (Miller & Jin, 2018). These disproportionate contributions make HDVs an effective target for fuel consumption and emissions control, contributing to the reduction of climate impacts and costs for truck operators. Vehicle simulation tools can be used by fleet or green freight managers to estimate the potential fuel savings of truck technologies without extensive real-world testing (ICCT, 2019).

Share of freight energy consumption by mode in 2015 (ICCT, 2019).

Maritime shipping also has an outsized impact on global energy consumption and emissions. It accounts for 3.5% of all global emissions, and is forecasted to increase by 150-250% by 2050 if unmitigated. To stay below 2°C warming by 2100, collective international maritime emissions need to decrease by 85% by 2050. This high target may seem daunting, but reduction in emissions at that scale is possible by 2050 with existing technologies. Opportunities for maritime emissions reductions include improvements in vessel size, hull shape, ballast water reduction, hull coating, hybrid power propulsion, propulsion efficiency devices, speed optimization, and weather routing. If implemented at scale, these measures alone could account for 55% reduction in maritime emissions (Bouman et al., 2017). Additional opportunities include measures such as reduced speed in fairway channels, reduced turnaround time for ships at berth (time at berth accounts for half of port emissions), and portside availability of alternative and renewable fuels (Styhre, et al., 2017ICCT, 2020).

The International Maritime Organization (IMO) regulates international shipping and has set GHG reduction standards of at least 50% reduction by 2015 (compared to 2008) for oceangoing vessels, and 70% reductions by 2050 when only considering CO2 emissions (ICCT, 2018). The following chart shows these scenarios:

CO2 emissions from international shipping under IMO’s initial strategy (green and blue lines) vs. Business As Usual (BAU), with cumulative emissions from 2015 to 2075 (ICCT, 2018).