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IEA: More “Vigorous” Energy Efficiency Policies Needed, Including for Fuel Economy

10.10.16 | Blog | By:

Economies have needed less energy to grow in recent years, especially in China and other developing countries, but more vigorous energy efficiency policies are needed to achieve climate targets, said IEA in its Energy Efficiency Market Report released this week. IEA noted:

“The IEA has identified energy efficiency as a critical ‘fuel’ in the transition to a low-carbon economy. Its analysis has shown that over a third of all emissions reductions needed to reach climate goals by 2040 must come from energy efficiency policies. Efficiency gains in the IEA’s member countries were large enough to power Japan in 2015 making efficiency a critical component of a secure, sustainable energy system.”

Fuel Economy Analysis

This includes fuel economy. IEA noted in the report that mandatory fuel economy standards now cover more than 74% of global vehicle sales and have gradually increased the fuel economy of the LDV fleet, saving 2.5% of global oil demand or 6% of energy consumption in the global road transport sector. For countries that have implemented standards, these savings represent 9.7% of fuel consumption in the road transport subsector.

But more needs to be done across the board (not just for fuel economy), IEA says. “The report demonstrates the central role of government policy in driving energy efficiency. It shows that policies must be strengthened and expanded to boost the potential gains from energy efficiency.” That would include continuing to strengthen existing fuel economy standards in countries, encourage countries that haven’t already to set fuel economy standards.

And, without stating it explicitly, the report seems to imply that policies also need to be set to encourage the growth of electric vehicle sales. IEA states:

“A significant portion of future transport energy savings and efficiency investment will be associated with the increasing market share of EVs in passenger LDVs…Policy is a major driver of the growth in EV sales. Broadly, policies include consumer incentives that make EVs more affordable and regulations on manufacturers that make non-EVs less profitable to sell.”

Savings from vehicle fuel economy standards were approximately one-third of the volume of tight oil production in the United States in 2015, illustrating the potential of energy efficiency as an alternative means of meeting energy demand, according to IEA. The following chart shows the evolution of fuel economy standards 2005-2015 in selected countries.


In emerging economies such as Brazil, China and India, IEA notes the rate of improvement in the fuel economy of new passenger vehicles picked up during the period of falling oil prices.

“China has the world’s largest market for new passenger vehicles, with sales growing at more than 10% per year since 2008. Fuel economy standards phased in there from 2012 have helped to drive average gains of 2.1% annually between 2013 and 2015, despite lower fuel prices. This rate of improvement was significantly higher than the rate achieved between 2005 and 2013 (0.3% per year). Over the next five years, the rate of improvement will need to increase again, if China is to meet its proposed target for light-duty vehicles. The decline in the limit values implies an average annual rate of improvement of 5.0% per year over the period to 2020.”

The degree to which energy-efficient vehicles are, on average, more efficient than average vehicles varies by country: 34% in Japan, 31% in the United States, 25% in Germany, 21% in India and 17% in China, as the figure below shows.


Japan had the most efficient average vehicles and the largest performance gap between average and most efficient vehicles, according to IEA. On average, energy-efficient vehicles sold in the U.S. had lower efficiency than the average new vehicle in India, Germany and Japan. China had the smallest gap in performance between average and efficient vehicles. IEA notes:

“From an energy savings perspective, oil consumption in the road transport sector would have been 160,000 bbl/d higher if the energy-efficient vehicles sold in 2015 were hypothetically replaced by average vehicles. This amount represents 0.4% of global road transport oil consumption, which is similar to the oil consumption of New Zealand in 2015. This amount of savings might seem small, but total energy savings over the lifetime of this fleet of efficient vehicles add up to approximately one billion barrels of oil, similar to the combined publicly held oil stocks of the United States and Europe.”

The average performance level of vehicle standards for passenger and commercial light-duty vehicles has increased by 20% to 25% across countries with vehicle fuel economy standards over the past  ten years. IEA notes:

“While standards have effectively removed vehicles with low fuel economies, a fleet of new vehicles adhering to 2015 standards would still be on average only 33% as efficient as a best available technology (BAT) fleet. However, BATs are not necessarily available in every market, and market conditions such as low fuel prices and high vehicle costs still limit the cost-effectiveness of the most efficient vehicles.”

Other Findings

Other report findings included:

  • Global energy intensity improved in 2015, but the rate of progress needs to accelerate much more;
  • 2015 saw a shift to emerging economies as the drivers of global intensity gains;
  • Energy efficiency is driving down intensity and energy demand;
  • China is driving global energy efficiency progress;
  • Public policy has been the key driver of efficiency improvements, but much more is possible and much more is needed;
  • Policy has also protected the efficiency market from declining energy prices;
  • The energy efficiency market is growing.

With respect to policy, IEA says:

“Policy makers must hold their nerve and continue to broaden the coverage and increase the strength of energy efficiency policies. If climate goals are to be met cost-effectively efficiency improvements must step up over current levels beginning immediately. High energy prices cannot be relied on as a main factor driving investments in energy efficiency. Equally, low prices do not diminish the case for efficiency to be at the forefront of national energy policy. Efficiency policies will need to continue to expand and strengthen even at a time when the short-term pressure to act may be diminished.”

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