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

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.

Governments must lead by example, making their own buildings, such as schools and hospitals, more efficient, while putting in place building codes and equipment standards, launching national retrofit programs for existing buildings, and harmonizing policies that are key to attracting private investors. As seen when Türkiye renovated its public buildings to become more energy efficient, for example, clear policy signals can mobilize billions in investment and attract commercial financing at scale. Better urban planning to make cities more compact can also help pave the way for new opportunities in efficient heating or cooling and public transport. 

But no one can do this alone. Multilateral development banks and donor partners must join efforts to provide technical assistance and financing for pilot programs while strengthening the pipeline of bankable programs over time. These measures can send a powerful signal to the market, which can, in turn, bring in new suppliers and competition as well as commercial financing.

At the same time, the private sector can help identify what’s holding the market back, and what policies or actions could help improve the investment climate. It is also crucial to devise practical financing and business models that work and that can attract investment and be used more widely over time. 

The World Bank Group is already supporting governments to translate ambition into impacts. Through financing, technical assistance, and knowledge platforms like the World Bank Group Academy, countries can share lessons and innovations to tackle pressing development challenges. As part of this, the Energy Academy on “Scaling Up Energy Efficiency” brings leaders and professionals together to discuss the importance of energy efficiency, barriers, and global solutions, and how to scale it up. 

Implementing comprehensive energy efficiency policies and programs take time, but the rewards are substantial. Countries that have pursued ambitious reforms are already seeing the benefits: Lower costs, stronger economies, and better jobs. Let’s work together to make energy efficiency a driver for inclusive and sustainable growth.