It isn’t easy to be optimistic about energy resources these days. The supply of fossil fuels on the Earth, the number of rivers amenable to damming, the amount of arable land available to generate biomass, the willingness of citizens to accept the perceived risks of nuclear power—all of these have limits. And it isn’t clear how quickly scientists can develop innovative alternatives.
Furthermore, a recent McKinsey Global Institute (MGI) analysis of the economic sectors most responsible for the end use of energy indicates that overall demand, which has increased by 1.6 percent a year for the past decade, is on track to grow by 2.2 percent annually over the next 15 years (see sidebar “Modeling energy demand”).1 Developing countries such as China account for the largest part of this growth. Curbing demand for energy in the emerging world would mean asking its consumers to reduce their newfound expectations of comfort, convenience, and economic growth—an unacceptable proposition for them.
Is there an escape from the vice grip of finite supplies and surging demand? We believe there is. Both developed and developing economies could use energy more productively by reducing the raw-materials inputs required to produce a given level...