How does energy efficiency affect the environment?
It influences greenhouse gas (GHG) emissions and has direct environmental impacts as well.
One of the biggest pollution problems right now is that in developing countries, their population is exploding, but they don't have the money for efficient (expensive) energy and technology. Many of these countries end up using inefficient methods of producing energy and heat, such as burning wood in large open fires, which is extremely inefficient.
There are a whole bunch of ways this affects the environment, so I'll focus on the impacts in countries that can't afford more efficient energy.
First: going back to my example of people cutting down trees, this has a plethera of environmental impacts. The trees are sinks for carbon dioxide, so burning them releases this into the atmosphere and contributes to climate change. Additionally, less trees means less habitat and food for wildlife and a weakened ecosystem, increased erosion (because of a lack of root systems and unhealthy soil) and less rainfall (the reason for this is somewhat complicated, but essentially trees both need rain and attract it).
Second: countries that burn a lot of fossil fuels or wood inefficiently are going to experience an increase in numerous water and air pollutants. For example, excessive coal burning releases nitrous oxide, a major greenhouse gas, so it contributes to climate change, and releases many other pollutants that directly impact the surrounding environment, most notably mercury. Mercury is toxic to many aquatic species if it makes its way into the water supply, and makes its way up the food chain, and thus weakens ecosystems on all trophic levels.
In less efficient energy production, there's much more wasted energy production potential, so you end up releasing more pollutants compared to how much fuel was used.