While these recommendations are relevant to all economies, the specific policies that will have the greatest impact will vary depending on the local political, industrial and socio-economic context. They should therefore be taken as a starting point, making local variations depending on the context. In general, in developed economies with large, diverse sources of upstream energy supply, governments can focus on implementing energy efficiency policies to support profitability, competitiveness and emission goals. This is also true in emerging and developing markets, whose limited access to energy combined with higher forecast of economic growth means that a focus on installing the most energy efficient solutions will allow them to deliver economic growth efficiently, while leapfrogging older technologies. Examples of where this has already been done include India, which drove a dramatic uptick in the use of LED (light-emitting diode) lightbulbs through a combination of innovative procurement and financing incentives to both foster demand for a new technology and increase energy access for rural households.8 Mexico used awareness campaigns and training to enhance the competitiveness of SMEs with the adoption of energy management systems (EnMS). Developed countries should also consider the impact of their domestic policies on energy efficiency efforts in EMDEs. For example, robust and transparent standards in developed countries can support the flow of products and technology to EMDEs. Value chain-related policies in developed countries can also have a large impact on the adoption of energy efficient technology and processes in EMDEs. Table 1 shows the key barriers in EMDEs and the suggested policy priorities. Tailoring policies to EMDEs and small businesses Key barriers to investment in energy efficiency TABLE 1 EMDEs SMEs Key barriers for private-sector investment in energy efficiencySmaller domestic private market hampers uptake of key technologies. Nascent markets (e.g. for electric vehicles) require public sector leadershipLack capacity, awareness and financing for energy efficiency interventions. Policy priorities Government procurement to drive adoption of key technologies. Incentives tailored to driving job creation in growth sectors (e.g. climate tech) and support for domestic energy efficiency-related services. Selective regulation and incentives given fiscal constraints, focused on creating energy efficient growth. Support for import of goods that adhere to international energy efficiency standards.Businesses are already taking action. For example, 125 companies as part of the Climate Group’s EP100 have committed to double energy productivity in 25 years, and implement an energy management system in 10 years.7 Leaders in other industry sectors are using cogeneration and digitization to increase energy efficiency and operating efficiencies. Energy efficiency standards for products in many markets are helping consumers save energy through informed choices as businesses add value to more energy efficient products. However, businesses face several key barriers to action, including low awareness of need and solutions, and lack of a supportive policy environment.Alongside this, businesses sometimes struggle to access finance, given the uncertainty over the size and timing of financial benefits, which also hampers the growth of a market for energy efficiency-related assets. Government action can help to overcome these barriers. Finally, the Organisation for Economic Co- operation and Development (OECD) expects 1 in 4 workers to be impacted by the green transition. This creates a talent bottleneck for sustainable production overall, and for increased energy efficiency specifically. New, more energy efficient technologies require new skill sets. And yet, the incentives to impart these new skills are lagging, notably in sectors with high levels of GHG emissions. Transforming Energy Demand: Accelerating Business Action through Government Leadership 6

Transforming Energy Demand 2025