The Economics of Energy Efficiency in Developing Countries

Abstract

Energy efficiency has enormous potential to increase global productivity and prosperity while cutting waste and limiting emissions. We must move quickly, decisively and in concert to enact and expand these bold measures. (Achim Steiner, executive director of the UN Environment Programme; UNFCC 2014)

Barriers to the institutionalization of industrial energy efficiency in Africa: A case study from Uganda

“…More also needs to be done to demonstrate where the energy‐saving benefits are and to make a credible linkage between the benefits to be gained with other policy areas that have broader societal benefits. In developing countries, the argument for energy‐efficiency investment suffers from credibility problems (Fowlie & Meeks, 2020). Evidence and data from computer‐based modeling exercises need to be grounded by what is practically achievable and relevant.…”

“…The International Energy Agency (IEA) estimates that energy efficiency could deliver more than a third of the cumulative GHG emissions reduction necessary to stabilize climate change (IEA, 2018). In developing countries and emerging economies, energy efficiency could potentially mitigate tensions between economic growth objectives and sustainable development commitments (Fowlie & Meeks, 2020). Goal 7 of the UN Sustainable Development Goals outlines a plan to double the rate of global energy‐efficiency improvement by 2030.…”

“…However, there is also a gap between what is on policy documents and the rate of investment in improving energy efficiency. Studies into why the gap persists indicate that industries in developed and developing countries share similar barriers related to market failures and lack of conducive policy or regulatory framework (Compton, 2011; Fowlie & Meeks, 2020; Fowlie & Phadke, 2017; Martin et al, 2012; Sorrell et al, 2011). However, studies also observe some fundamental differences between developed and developing countries due to different economies, cultural contexts and the nature of demand systems.…”

“…However, studies also observe some fundamental differences between developed and developing countries due to different economies, cultural contexts and the nature of demand systems. Thus, in developing countries, where the economy is fragile, the energy infrastructure is unreliable, the quality of supply is inadequate, and the up‐front cost of technologies is high, efforts to institutionalize energy efficiency is particularly difficult (Abdisa, 2018; Apeaning & Thollander, 2013; Fowlie & Meeks, 2020; Fowlie & Phadke, 2017; Olsthoorn et al, 2017; UNIDO, 2011; Weldemariam et al, 2016).…”

“…However efforts are also often hindered by political–institutional barriers or barriers that originate from or are caused by factors directly related to political institutions (Langlois‐Bertrand et al, 2015). In this respect, a political economy approach is valuable to observe the institutional constraints that stand in the way of high‐impact policy interventions to promote energy efficiency (Fowlie & Meeks, 2020; Singh et al, 2012).…”