One hundred and seventy billion dollars a year invested in efforts to boost energy efficiency from now until 2020 could halve the projected growth in global energy demand. What’s more, these investments could also deliver up to half of the emission abatement required to cap the long-term concentration of atmospheric greenhouse gases at 450 parts per million, the level experts suggest will be needed to prevent the global mean temperature from rising by more than two degrees centigrade.
The key to achieving these results will be carefully targeting cost-effective opportunities to boost energy productivity—the level of output achieved from the energy consumed. In previously published work, the McKinsey Global Institute (MGI) and McKinsey’s global energy and materials practice have described the possibilities for improving the efficiency of lighting, cooling, and heating systems, and of other technologies like vehicles and factory machinery.1 Concerted action could reduce global energy consumption in 2020 by 135 quadrillion British thermal units (QBTU) a year, the equivalent of roughly 64 million barrels of petroleum a day.
We arrived at the figure of $170 billion by estimating the market price of all the large and small investments needed to realize the energy productivity opportunities identified in...