Efficiency Gains Could Cut Energy Use Growth Rate In Half
Investments in energy productivity, should they fully materialize, would pay massive dividends by 2020, according to a new study by the Mckinsey Global Institute. “Additional annual investments in energy productivity of $170 billion through 2020 could cut global energy demand growth by at least half—the equivalent of 64 million barrels of oil a day or almost one and a half times today’s entire U.S. energy consumption,” MGI says in The Case For Investing In Energy Productivity.
Furthemore, the capital necessary for such investment is easily obtainable. In total, it would equal “1.6 percent of global fixed-capital investment today, or 0.4 percent of current global GDP,”
Industrial sectors would need about half of that amount, or $83 billion. Residential sectors would require roughly $40 billion. Commercial and end-use sectors would require roughly $22 and $25 billion, respectively.
“Breaking down capital requirements geographically, developing regions represent two-thirds of the incremental capital needed, with China alone accounting for $28 billion or 16 percent of the total $170 billion annual requirement. The US accounts for $38 billion or 22 percent of the total.”
Other benefits could be achieved without investment. For instance, elimination of fuel subsidies would encourage more efficient use of energy.
Energy productivity is also the most cost-effective way to reduce global emissions of greenhouse gases (GHG).
“Capturing the energy productivity opportunity could deliver up to half of the abatement of global GHG required to cap the long-term concentration of GHG in the atmosphere to 550 parts per million—a level experts say will be necessary to prevent the mean temperature from increasing by more than two degrees centigrade,” the study says.
To overcome today’s barriers to higher energy productivity MGI identified four areas for action:
- Setting energy efficiency standards for appliances and equipment
- Upgrading the energy efficiency of new buildings and remodels
- Raising corporate standards for energy efficiency, and
- Investing in energy intermediaries.
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