Energy Efficiency Policies around the World: Review and Evaluation

1.3 Definition and Scope of Energy Efficiency

Energy efficiency improvements refer to a reduction in the energy used for a given service (heating, lighting, etc.) or level of activity. The reduction in the energy consumption is usually associated with technological changes, but not always since it can also result from better organisation and management or improved economic conditions in the sector ("non-technical factors").

In some cases, because of financial constraints imposed by high energy prices, consumers may decrease their energy consumption through a reduction in their energy services (e.g. reduction of comfort temperature; in car mileage). Such reductions do not necessarily result in increased overall energy efficiency of the economy, and are easily reversible. They should not be associated with energy efficiency.

To economists, energy efficiency has a broader meaning: it encompasses all changes that result in decreasing the amount of energy used to produce one unit of economic activity (e.g. the energy used per unit of GDP or value added). Energy efficiency is associated with economic efficiency and includes technological, behavioural and economic changes.

Energy efficiency is first of all a matter of individual behaviour and reflects the rationale of energy consumers. Avoiding unnecessary consumption of energy or choosing the most appropriate equipment to reduce the cost of the energy helps to decrease individual energy consumption without decreasing individual welfare.

Avoiding unnecessary consumption is certainly a matter of individual behaviour, but it is also, often, a matter of appropriate equipment: thermal regulation of room temperature, or automatic de-activation of lights in unoccupied hotel rooms are good examples of how equipment can reduce the influence of individual behaviour.