The Incredible Inefficiency of the Fossil Energy System

The report quantifies the massive energy and financial waste inherent in the fossil fuel system, noting that nearly two-thirds of primary energy is lost before providing useful services. It identifies fossil thermal power plants and internal combustion engines as the primary drivers of this waste and posits that the transition to renewables, localization, and electrification will undercut fossil fuels through superior efficiency and lower lifetime costs.

• The global energy system is highly inefficient, wasting nearly two-thirds of all primary energy—approximately 400 exajoule (EJ)—which equates to over $4.5 trillion or nearly 5% of global GDP before any value is created.
• Based on 2019 data, of the 606 EJ of primary energy entering the system, only 227 EJ (37%) provided useful energy. Losses occurred on the supply side (196 EJ) and the demand side (183 EJ).
• Fossil fuel technologies are the primary cause of energy waste, accounting for over 75% of total losses. Specifically, fossil thermal power plants and internal combustion engines (ICEs) together cause nearly half of all global energy waste.
• Energy production losses are dominated by power generation, which wastes 126 EJ per year (worth $540 billion), with coal and gas thermal losses contributing 60 EJ and 30 EJ respectively.
• Work losses in the energy use stage are significant, with 94 EJ per year wasted, primarily due to oil combustion in ICEs, which are on average less than 25% efficient and result in $2 trillion of annual waste.
• The fossil fuel industry's focus on energy volume-add rather than value-add has led to systemic fragility, where inefficient systems are vulnerable to leaner alternatives. This is evidenced by the fact that less than 11% of annual energy investments in the last five years went to energy efficiency.
• Three 'tailwinds'—renewables, localization, and electrification—are driving the transition by eliminating extraction/processing losses, removing the need for long-distance fuel transport, and providing heat and work more efficiently than gas boilers or ICEs.

APA

RMI (2024). The Incredible Inefficiency of the Fossil Energy System. https://rmi.org/resources/the-incredible-inefficiency-of-the-fossil-energy-system/

Chicago

RMI. The Incredible Inefficiency of the Fossil Energy System. 2024. https://rmi.org/resources/the-incredible-inefficiency-of-the-fossil-energy-system/.

Wikipedia

{{cite report |author=RMI |title=The Incredible Inefficiency of the Fossil Energy System |date=4 June 2024 |url=https://rmi.org/resources/the-incredible-inefficiency-of-the-fossil-energy-system/ |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{rmi2024incredible, author = {{RMI}}, title = {{The Incredible Inefficiency of the Fossil Energy System}}, institution = {RMI}, year = {2024}, month = jun, url = {https://rmi.org/resources/the-incredible-inefficiency-of-the-fossil-energy-system/}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }