Improved Energy Efficiency: Vital for Energy Transition and Stimulus for Economic Growth

As part of the energy transition process, the German government has set far-reaching energy efficiency targets, including doubling the annual rate of building renovation to upgrade energy performance from one to two percent. DIW Berlin has estimated the additional energy-savings-related investment required to meet these targets and analyzed the impact this could have on the economy. In the long term, the savings on household energy bills far exceed the additional investment. This, combined with further measures to increase energy efficiency in other sectors, substantially reduces energy consumption and greenhouse gas emissions. Even allowing for some elements of uncertainty, these measures to improve energy efficiency have a positive impact on income and domestic demand. They could also result in significantly positive effects on employment, depending on the ratio of productivity gains and new jobs. Nevertheless, the most recent savings are not nearly enough to achieve the German government's energy efficiency targets. Clear and reliable framework conditions are needed soon to increase the number of buildings being renovated to upgrade energy performance. Given the present analyses, which indicate that forcing the pace of energy efficiency improvements has a positive impact on German economic growth and employment, the government's hesitation seems even less justified.