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October 11, 2016

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Energy efficiency improves despite low oil prices

ENERGY efficiency accelerated last year despite low oil prices, according to a report from the International Energy Agency published yesterday, driven in large part by gains in China.

The 1.8 percent efficiency gain last year came as crude oil prices had dropped as far as 60 percent from 2014 highs, yet still beat the 1.5 percent increase in 2014, and was triple the average annual gain in the previous decade.

Low oil prices typically reduce investment in energy efficiency as the returns are smaller, but the IEA found government regulations concerning vehicles and buildings were driving gains.

While good news for climate change efforts, the efficiency gains come at a delicate juncture for the oil market, with global demand growth slowing and supply rising.

Efficiency helped keep energy demand flat last year in the 29 industrialized nations that are members of the IEA, while it rose by just 0.9 percent in China — the slowest rate in nearly two decades despite a 6.9 percent growth.

China led the efficiency pack, gaining 5.6 percent. Given that it is the world’s second-largest economy, it contributed 0.4 percent to the 1.8 percent global gain.

“China’s progress on energy efficiency is now at a scale where it is making a significant mark on global energy markets,” said the IEA.

The gains from efficiency are as large as China’s rapidly expanding renewable energy sector, and provided the added benefit of cutting air pollution.

While the acceleration in global energy efficiency gains was positive, the IEA noted they would need to shift up from a trajectory of 1.8 to 2.6 percent annual gains to achieve global climate change goals.

However, there is much room for further improvement. The IEA said that efficiency standards still only cover 30 percent of global energy use.


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