IEA: Supply Chains Challenge Pace of Energy Efficiency Gains

Global energy efficiency improvements are gaining momentum, but supply chain challenges and skills shortages threaten to slow progress towards critical climate targets.

The IEA's Energy Efficiency 2025 report reveals that global energy efficiency is set to improve by 1.8% in 2025, up from around 1% in 2024.

Yet, the rate of progress has fallen to 1.3% per year on average since 2019, well below the COP28 target of a 4% annual improvement by 2030.

The report highlights how efficiency gains are reshaping global trade flows and supply chains, with significant implications for energy security, industrial competitiveness and the transformation of manufacturing sectors worldwide.

Energy imports and security

Energy efficiency improvements have substantially reduced fossil fuel import dependency among energy-importing nations.

Since 2000, efficiency measures have cut the need for fossil fuel imports by 20% across energy-importing countries, according to the IEA. This shift could signal a fundamental change in global energy trade patterns.

In Japan, efficiency policies in transport have reduced oil imports by around 18%, while in the UK, efficiency progress in buildings and industry has halved the requirement for imported natural gas. The EU still spent nearly US$410bn on energy imports in 2024 alone, yet nearly 500 petajoules of gas savings are attributed to efficiency improvements, reducing the need for imported gas.

These developments could mean significant changes for international energy suppliers and the maritime shipping routes that serve them, potentially reducing demand for long-haul fossil fuel shipments.

Manufacturing competitiveness and investment

Industrial energy intensity has improved by just under 1% a year since 2000, allowing the industrial sector to produce around 20% more value for each unit of energy consumed globally.

In the EU, manufacturing now generates about 50% more value while using 25% less energy than two decades ago.

Energy costs remain a critical factor in supply chain decisions. According to the IEA, energy costs can account for up to 35% of total sales in food manufacturing, around 20% in textiles and 25% in non-metallic manufacturing. An IEA survey of 1,000 firms in 14 countries found that 39% of industrial leaders prioritise energy efficiency as their primary response to rising energy costs.

The EU's Clean Industrial Deal commits more than US$115bn between 2025 and 2030 to support energy-intensive industries. Global efficiency-related investment in 2025 is expected to reach almost US$800bn, about 6% higher than 2024, indicating growing confidence in efficiency as a competitive strategy.

Electric vehicle supply chains

The global electric vehicle supply chain is experiencing dramatic geographic shifts.

End-use transport investment is forecast to exceed US$330bn in 2025, driven mainly by electric vehicle sales. Electric cars represented around a quarter of all new light-duty vehicle sales globally in the first half of 2025.

Emerging economies in Asia and Latin America are "new centres of growth", with sales up about 60% in 2024. Chinese automakers are responsible for about 75% of the increase in EV sales in emerging economies in 2024.

Between 2023 and 2024, the share of Chinese brands in total EV imports rose from 1% to 81% in Egypt, 11% to 68% in Indonesia, 17% to 67% in Mexico and 59% to 85% in Brazil. China doubled the budget for its air conditioner rebate programme in 2025 to almost US$42bn.

Supply chain constraints

Despite progress, supply chain constraints pose significant challenges. Nearly 18 million people were employed in energy efficiency in 2024, with employment growing more than 6% year on year. However, among energy efficiency employers, 72% report a shortage of workers.

Construction prices in the EU have risen by more than 20% since 2021, while geopolitical tensions and supply chain disruptions are expected to affect the cost and pace of efficiency projects. These constraints could slow the transformation of global supply chains needed to meet climate targets.

Overcoming these workforce and supply chain challenges will be essential if the world is to accelerate energy efficiency improvements and achieve the ambitious climate goals set at COP28.