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How to promote energy efficiency in the private sector
05/26/2022 Since 2 years

In a new IDB Invest post, the authors consider energy efficiency as a pillar of sustainable development for Latin America and the Caribbean (LAC), being a region characterized by high energy consumption and low productivity. Even more so in a post-pandemic recovery environment that will imply higher energy demand.

The authors draw on a recent study conducted (also authored by them), which describes energy efficiency trends for the region using firm-level data from more than 6,000 companies in 19 countries, drawn from World Bank and Compete Caribbean business surveys. Some of the key findings include:

• Increased energy efficiency and productivity go hand in hand. According to the research a 1% increase in productivity is associated with a 0.4% increase in energy efficiency.

• Energy efficiency varies by sector and company characteristics. On average, the service sector is more energy efficient than manufacturing. The three least efficient sectors are Textiles and Apparel, Plastics and Rubber, and Hotels and Restaurants. Small and medium-sized enterprises (SMEs) are 19% less energy efficient than their larger counterparts. However, large companies are still responsible for the largest share of energy consumption given their higher production.

• Information campaigns and energy audits have proven to be effective in promoting the adoption of energy efficiency.

• Financial institutions can play a key role in promoting energy efficiency among businesses by providing both green credit and information on the benefits of green technologies. IDB Invest works with banks in the region to design such green financing strategies.

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