Transforming Energy Demand 2025

1 National planning objectives: By building energy transition plans that focus as much on managing energy demand as expanding clean energy supply, governments can create an enabling environment for investments into energy demand and efficiency- related projects. Decreasing energy intensity also helps countries build resilience to climate-related physical and transition risks, as it reduces the amount of energy supply that must be substituted as part of the energy transition, reducing costs for governments. In addition, many decarbonization technologies will use energy in their operation; to the extent that traditional “demand-side” energy can be optimized, it aids in minimizing the buildout of capacity required to meet total future energy demand. Including energy demand as part of the Nationally Determined Contributions (NDCs) and other country- level planning approaches: As all countries under the Paris Agreement are required to submit NDCs in early 2025, this offers a starting point for countries to then develop demand-side management and energy efficiency pathways for each major sector of their economies. Effective plans should clearly address the demand side, setting direction and removing frictions (for businesses and consumers) to make more energy efficient choices. For example, governments can establish an energy efficiency and decarbonization plan for the steel sector, while supporting this with standards for the use of this new generation of steel on the consumption side of the economy. The IEA Policy Toolkit9 provides a menu of policy options for encouraging energy efficiency. Including energy demand policies in national plans will also support businesses in complying with disclosure and regulatory requirements on planning the energy transition (e.g. the Corporate Sustainability Responsibility Directive of the European Commission). Smart demand-focused policies will also help domestic businesses become more efficient and competitive, supporting economic and development goals (such as job creation, pollution reduction, adoption of net-zero pathways and improved energy access).Additionally, a people-centred approach towards investment in reskilling and upskilling the workforce is needed to accelerate demand-side projects including energy management, grid infrastructure and renewable energy generation in a way that works for people and the planet. This is particularly important for energy intensive activities and industries that are vital to the energy transition. For businesses to deploy new and more efficient means of production, they need a labour market framework that promotes and incentivizes workforce transitions. The inherent challenge prompts public-private alignment and investment to ensure it pays to move into new and more sustainable jobs. Prioritizing market-based and technology-neutral approaches: IBC members have emphasized the effectiveness of a market-led approach to delivering on climate goals, and believe that this should be integral to delivering on NDCs and national energy transition plans. Specifically, a market-led approach is based on setting quantified goals and then allowing the market (i.e. private- and public-sector actors) to find solutions that will drive progress towards those goals. For example, governments could set targets for energy or carbon intensity by sector or industry in their energy transition plans. These targets could then increase in stringency over time. Businesses could work to align to those goals through a combination of new and existing technologies and approaches, without limitations or prescription of the ”correct” way to proceed. This has been proven to work previously, for example, through the reduction in sulphur oxide emissions from marine fuel oil. Regulation was passed to mandate the reduction in the upper limit of sulphur content from 3.5% to 0.5%, without prescribing the way that this reduction had to be achieved.10 This allowed the market to find the route to meet the goal most efficiently, and delivered the desired result.Key building blocks Include energy demand in national planning through NDCs and market-based approaches Transforming Energy Demand: Accelerating Business Action through Government Leadership 7