Energy productivity can halve CO2 emissions, says report

Improvements in energy productivity could deliver up to half of required greenhouse gas emission cuts according to a report by US-based consultancy, McKinsey & Company. Correct investment could make up 50% of the effort to cap long-term concentration of these in the atmosphere to 550 parts per million.

Energy productivity, as defined by the report, "The Case for Investing in Energy Productivity,” includes both demand abatement and energy efficiency and, like labour or capital productivity, measures the output and quality of goods and services generated with a given set of inputs. McKinsey predicts that, without gains, global energy consumption will hit 613 QBTUs by 2020 – or over 290 barrels of oil a day. Demand in 2003 was 422 QBTUs. The consultancy has identified some 137 QBTUs of productivity gains that can be made over the next 12 years.

Investment in the residential sector offers the best value for improving energy productivity, the report says. With sufficient investment, the sector could realise 26% of the total energy productivity opportunity – some 35 quadrillion British thermal units (QBTUS). The industrial sector offers the greatest gains - 39% or 53 QBTUS by 2020 – but these are highly fragmented.

In total, the residential sector in the US and China represent 45% of the total opportunity. In the US and other developed nations, the chief chance to improve gains (one third) is in more efficient lighting. Another one fifth can be brought about with improving heating and cooling of homes, either in new builds or upgrades.

In China and other developing nations, the adoption of more efficient heating and cooling solutions – including insulation – accounts for one quarter of the overall opportunity. McKinsey estimates that global incremental investment required to make these gains is $40 billion to 2020.

The highly-fragmented industrial sector represents the biggest slice of potential productivity improvement (53%) but would cost $83 billion per annum. Chief gains are to be found in CHP generation, which has a payback period of one to three years, and in the optimization of motor-driven systems.

McKinsey says improving energy efficiency is both vital and attractive. Energy efficiency needs to keep pace with rising demand, the report warns. While energy productivity rose 1% annually from 1980 to 2003, global energy demand is due to rise 2.2% until 2020. Global CO2 emissions will grow by 2.4% annually due to fast-growing coal-intensive power demand in developing countries. But there are savings of up to $900 billion annually to be made by 2020 .