Resolving the energy efficiency paradox: leveraging benefits for Saudi Arabia’s building sector

This article examines the economics of energy efficiency in Saudi Arabia’s building sector, centering on the “energy efficiency paradox,” the observed under adoption of cost-effective technologies despite their clear benefits—such as reducing energy use and associated emissions. We show that a mix of market barriers and behavioral biases—including split incentives, informational gaps, and the value-action gap—constrains adoption of energy-efficient solutions. Recent modeling suggests that improved air-conditioning labels could save up to 80 TWh of electricity annually, though rebound effects may erode some of these gains. Our analysis shows that tackling market failures is necessary but not enough. Strong building codes must be fortified by behavioral interventions, real-time energy monitoring, and tailored financing to reduce high upfront costs. We propose a multi-faceted approach merging technological advances with demand-side measures to accelerate energy savings. These findings enrich ongoing debates on sustainable construction and offer a novel lens for addressing deep-seated social and market challenges in the energy transition.