Achieving sustainability objectives will require changes not only in the way energy is supplied, but in the way it is used. Reducing the amount of energy required to deliver various goods, services, or amenities is one way to address the negative externalities associated with current energy systems and provides an essential complement to efforts aimed at changing the mix of energy supply technologies and resources. Opportunities for improvement on the demand side of the energy equation are as rich and diverse as those on the supply side, and frequently offer significant near-term and long-term economic benefits. Widely varying per capita or per gross domestic product (GDP) levels of energy consumption across countries with comparable living standards—though certainly partly attributable to geographic, structural, and other factors—suggest that the potential to reduce energy consumption in many countries is substantial and can be achieved while simultaneously achieving significant quality-of-life improvements for the world’s poorest citizens. For example, if measures of social welfare, such as the Human Development Index (HDI), are plotted against per capita consumption of modern forms of energy, such as electricity, one finds that some nations have achieved relatively high levels of wellbeing with much lower rates of energy consumption than other countries with a similar HDI, which is composed of health, education, and income indicators. From a sustainability perspective then, it is both possible and desirable to maximize progress toward improved social well-being while minimizing concomitant growth in energy consumption.

In most countries, energy intensity—that is, the ratio of energy consumed to goods and services provided—has been declining, albeit not at a rate sufficient to offset overall economic growth and reduce energy consumption in absolute terms. Boosting this rate of intensity decline should be a broadly held, public policy priority. From a purely technological standpoint, the potential for improvement is clearly enormous: cutting-edge advances in engineering, materials, and system design have made it possible to construct buildings that demonstrate zero-net energy consumption and vehicles that achieve radically lower gasoline consumption per unit of distance traveled. The challenge, of course, is to reduce the cost of these new technologies while overcoming a host of other real-world obstacles—from lack of information and split incentives to consumer preferences for product attributes at odds with maximizing energy efficiency—that often hamper the widespread adoption of these technologies by the marketplace.

Experience points to the availability of policy instruments for overcoming barriers to investments in improved efficiency even when such investments, based on energy and cost considerations alone, are highly cost-effective. The improvements in refrigerator technology that occurred as a result of appliance efficiency standards in the United States provide a compelling example of how public policy intervention can spur innovation, making it possible to achieve substantial efficiency gains while maintaining or improving the quality of the product or service being provided. Other examples can be found in efficiency standards for buildings, vehicles, and equipment; in addition to information and technical programs and financial incentive mechanisms.