Unless there is a shift in world energy policies, global energy demand is set to accelerate, putting increasing strain on the world economy and the environment. Yet 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 research suggests that the economics of investing in energy productivity—the level of output we achieve from the energy we consume—are very attractive. With an average internal rate of return of 17 percent, such investments would generate energy savings ramping up to $900 billion annually by 2020. 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 450–550 parts per million—a level experts say will be necessary to prevent the mean temperature from increasing by more than two degrees centigrade. Moreover, the opportunities to boost energy productivity use existing technologies that pay for themselves and therefore free up resources for investment or consumption elsewhere.
The capital required appears to be well within reach. The annual sum is equivalent to some 1.6 percent of global fixed-capital investment today, or 0.4 percent of current global GDP.
MGI finds that global industrial sectors need just under half of the total capital required to capture the energy productivity opportunities we have identified—$83 billion a year. Residential sectors around the world need some $40 billion a year, roughly one-quarter of the total. The capital needs of commercial and transportation end-use sectors are smaller at $22 billion and $25 billion a year, 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 United States accounts for $38 billion or 22 percent of the total.
A wide range of energy-market failures currently discourage consumers and businesses from embracing higher energy productivity, and they deter investors from making the capital outlays that would help end users to overcome initial financing barriers. These market failures include fuel subsidies that directly discourage productive energy use, a lack of information available to consumers about the kinds of energy productivity choices that are available to them, and agency issues in high-turnover commercial businesses.
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.
The carbon productivity challenge: Curbing climate change and sustaining economic growth Meeting commonly discussed greenhouse gas abatement paths by 2025 while maintaining economic growth will require a tenfold increase in "carbon productivity," the amount of GDP produced per unit of carbon equivalents emitted. The macroeconomic costs of this "carbon revolution" are likely to be manageable at some 0.6–1.4 percent of global GDP by 2030. Read more
Investor summit on climate risk 2008 MGI director Diana Farrell gave a keynote presentation on the case for investing in energy productivity at the Investor Summit on Climate Risk. The event was organized by the UN Foundation and Ceres and brought together more than 450 institutional investors, Wall Street leaders, and CEOs from around the world to consider the scale and urgency of climate change risks, as well as the economic opportunities of a global transition to a clean energy future. For more on the event and to watch the video of the 2008 summit, visit
Leapfrogging to higher energy productivity in China By taking advantage only of currently existing technologies that pay for themselves, China could further its ongoing efforts and reduce total energy demand in 2020 by as much as 23 percent. Lower energy demand would also mean that China could cut its projected oil imports by up to 15 percent and its CO2 emissions by at least 20 percent by 2020. Read more
Wasted energy: How the U.S. can reach its energy productivity potential By capturing the potential available from existing technologies, the United States could cap U.S. energy consumption, as well as its greenhouse gas emissions, at today's levels.
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Curbing global energy demand growth: The energy productivity opportunity There is a large opportunity to contain accelerating energy demand growth in practical, cost-effective ways and, in the process, cut CO2 emissions.
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What is energy productivity? Learn more about this concept and how it applies to policy goals.
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