Table of Contents
Understanding Co-benefits
Energy efficiency is often introduced as a way to save energy and reduce costs. However, it brings along many additional positive effects that go beyond energy savings or lower utility bills. These additional positive effects are called co-benefits. They arise in households, businesses, cities, and at the national level whenever energy is used more efficiently.
Co-benefits make efficiency measures more attractive to decision makers because they show that efficiency is not only a technical or environmental issue but also a social and economic opportunity. In many cases, these additional advantages are worth more in monetary terms than the direct energy savings themselves.
Economic Co-benefits
Economic co-benefits appear both for individual energy users and for the wider economy. For households and firms, efficient equipment, buildings, and processes reduce operating costs. Over time, this frees up money that can be spent or invested in other priorities, which can stimulate economic activity. Efficient industrial processes can make products cheaper to produce, which improves competitiveness in domestic and international markets.
On a larger scale, countries that reduce their overall energy demand through efficiency can lower the amount of energy they need to import. This can improve the trade balance and keep more money circulating in the domestic economy. Governments can also reduce the need to invest in new power plants and network capacity, because lower demand can be met with existing infrastructure for longer. These avoided investments and avoided fuel imports are indirect economic gains created by efficiency.
Efficiency improvements also create jobs. People are needed to design, manufacture, install, maintain, and manage efficient technologies and systems. As building codes, appliance standards, and industrial efficiency programs expand, they can support local industries and skilled labor markets. The jobs created are often diverse, including engineers, technicians, construction workers, auditors, and planners.
Health and Indoor Comfort Benefits
Another major group of co-benefits comes from improved health and comfort. Many energy efficiency measures in buildings, such as better insulation, air sealing, and efficient heating and cooling systems, also improve indoor temperatures and reduce drafts and dampness. Occupants experience fewer cold spots, more stable temperatures, and quieter indoor environments.
This improved indoor environment can translate into better health outcomes. Damp and cold homes are associated with respiratory problems and other illnesses. When homes are retrofitted with insulation and efficient heating, there is often a reduction in medical visits and sick days. Efficient cookstoves and cleaner heating technologies can reduce indoor air pollution, especially in homes that previously used solid fuels in inefficient devices.
In workplaces, better lighting, improved temperature control, and reduced noise from efficient equipment can support higher comfort and concentration levels. This can increase productivity and reduce absenteeism. In schools and offices, students and employees in well insulated and properly ventilated buildings may perform better, not simply because of reduced bills, but because they work and study in a healthier and more pleasant environment.
Air Quality and Public Health
Energy efficiency also affects outdoor air quality. When less energy is required to deliver the same services, power plants and other fuel burning sources can operate less. This can reduce emissions of air pollutants such as particulate matter, nitrogen oxides, and sulfur dioxide. In cities where transport efficiency measures reduce fuel use per kilometer traveled, overall vehicle emissions can fall even if mobility needs remain the same.
Better air quality has clear public health benefits. There can be fewer cases of asthma, cardiovascular disease, and premature deaths related to air pollution exposure. From a health system perspective, this can reduce healthcare costs and lessen the burden on hospitals and clinics. For individuals, improved air quality enhances quality of life and can also translate into fewer work days lost due to illness.
These health-related co-benefits are sometimes large enough that they dominate cost benefit assessments of energy efficiency at the societal level. When policymakers consider whether to support efficiency programs, the avoided health costs and improved productivity from cleaner air can be as important as the energy and climate benefits.
Infrastructure and Energy System Benefits
Energy efficiency can improve the functioning of energy systems and reduce the stress on infrastructure. If buildings use less energy for heating, cooling, and lighting, and if appliances and machinery are more efficient, the overall demand on the electricity grid becomes lower and sometimes flatter across the day.
Lower peak demand can postpone or avoid the need to build new power plants, substations, and transmission lines. It can also reduce the need for expensive peaking power plants that only run during the highest demand periods. In some cases, efficiency improvements in targeted areas can help avoid network reinforcement in rapidly growing neighborhoods or industrial zones.
These effects make the energy system more reliable and resilient. With less strain on equipment, there is reduced risk of overloads and fewer outages. Maintenance costs for utilities may decline, and grid operators can manage the system with more flexibility. When integrated with renewable energy sources, efficiency measures can help align demand more closely with variable renewable supply, which can support a smoother integration of solar and wind.
Social and Equity Benefits
Energy efficiency can contribute to social goals, especially those related to equity and poverty reduction. In low income households, a large share of income may go to paying energy bills. Efficient housing and appliances can reduce this burden and free income for food, education, or healthcare. This is often called reducing energy poverty or improving energy affordability.
Upgrading housing in disadvantaged communities with insulation, efficient heating or cooling, and improved appliances can provide multiple benefits at once. Residents can experience improved comfort, lower bills, better health, and sometimes increased property values. In rental housing, careful policy design is needed to ensure that both landlords and tenants share in these benefits, and that vulnerable groups are not displaced by higher rents after upgrades.
Energy efficiency programs can also be designed to intentionally include marginalized groups. For example, training programs in efficiency related trades can target underrepresented populations, creating pathways to stable employment. Community based initiatives that retrofit homes or public buildings can strengthen local networks and increase trust between residents, municipalities, and service providers.
Productivity and Competitiveness
In commercial and industrial contexts, efficiency is directly linked with productivity and competitiveness. When production processes are optimized, they often use less energy per unit of output and also reduce material waste and production time. This can lower product costs and improve quality. Factories that invest in efficient motors, drives, and process controls often discover additional process improvements that go beyond energy.
In offices and service sector buildings, efficient building systems support a more comfortable working environment. Adequate lighting that uses efficient lamps and smart controls, stable indoor temperatures, and good ventilation can all support better cognitive performance. Over time, this can raise the output per employee and improve the quality of services offered.
For businesses operating in global markets, energy efficiency can mitigate the risks associated with volatile energy prices. Firms that use less energy per unit of revenue are less sensitive to sudden price spikes. This can make them more stable and attractive to investors and financial institutions. Energy management standards and efficiency certifications can also enhance reputation and signal good management practices to customers and partners.
Environmental Co-benefits Beyond Climate
Energy efficiency is often associated with climate benefits through reduced greenhouse gas emissions. However, there are also other environmental co-benefits that are not only related to climate change. When less energy is used, there is typically a reduction in resource extraction, such as coal, oil, gas, and in some cases biomass. This can reduce land disturbance, water pollution, and habitat loss associated with mining and fuel production.
Efficiency improvements can also reduce water use in energy systems. Conventional power plants often require large amounts of water for cooling. If less electricity needs to be generated, water withdrawals and consumption can decline, which is particularly important in water stressed regions. When combined with other changes in the energy mix, efficiency can support broader goals for sustainable water and land use.
By lowering emissions of pollutants beyond greenhouse gases, efficiency measures can contribute to less acid rain formation and lower deposition of pollutants on soils and ecosystems. This helps to protect forests, crops, and aquatic life, which are all sensitive to changes in air and water quality.
Policy and Governance Co-benefits
From a governance perspective, energy efficiency can strengthen institutions and support better policy outcomes. The design and implementation of efficiency standards, labeling schemes, and building codes require coordination among ministries, regulators, local authorities, and industry. Over time, this can build institutional capacity and data systems that are useful for other areas of environmental and economic policy.
Successful efficiency programs can also increase public trust in energy and climate policies. When people see direct benefits, such as lower bills and more comfortable homes, they may be more willing to support further measures in the energy transition. Clear labeling and information campaigns about efficient products can improve consumer awareness and decision making, which can carry over to other sustainability related choices.
For governments, the multiple co-benefits of efficiency can help justify the use of public funds or incentives. When health, employment, infrastructure savings, and environmental gains are included in policy evaluations, many efficiency measures appear more attractive. This integrated view supports more coherent strategies that link energy, health, housing, transport, and industrial policy.
Valuing and Communicating Co-benefits
To make full use of co-benefits in planning and decision making, they need to be identified, measured, and communicated. This can involve gathering data on health outcomes after building retrofits, tracking job creation in efficiency related sectors, or estimating avoided investments in energy infrastructure. While some co-benefits are difficult to quantify precisely, approximate estimates can still be useful for comparing options.
Key principle: When evaluating energy efficiency measures, it is important to consider total benefits, not only direct energy and cost savings. Co-benefits in health, employment, infrastructure, and environment can significantly change which options are viewed as most attractive.
Communicating co-benefits in clear language helps different stakeholders connect energy efficiency to their own priorities. Health agencies may focus on reduced hospital admissions, city planners on improved comfort and reduced congestion, and businesses on productivity and competitiveness. By presenting efficiency as a tool that serves multiple goals at once, it becomes more likely that broad support will emerge for ambitious efficiency actions.