Energy Efficiency: a look at the US, China and India

Energy efficiency is arguably the most promising strategic area to reduce greenhouse gas emissions. By decreasing energy demand, energy efficiency initiatives help reduce:

  • The pressure on our energy system
  • The amount of installed clean energy capacity required to substitute current fossil fuel production
  • Our dependence on foreign fossil fuels, thereby increasing energy independence and stability

While countries have the ability to drastically decrease emissions through energy efficiency measures, their levels of investment and implementation of these options have been mixed.

McKinsey & Company – a multinational management consulting firm – has done several studies on the emissions reduction capacities of different nations – evaluating different measures available to each country and the cost-effectiveness (cost per ton of CO2e reduced) of their implementation. In these studies, McKinsey often uses a Marginal Abatement Cost Curve (MACC) to help illustrate each option’s cost-effectiveness (on the Y-axis) and emissions reduction potential (on the X-axis):

Explanation of a Marginal Abatement Cost Curve (MACC).

McKinsey takes a good look at the emissions reduction potential available through energy efficiency initiatives. Their results show that energy efficiency options tend to have a net economic benefit to society – the total benefits to society are greater than the total costs over the lifetime of the project. Three examples – case studies for the US, China, and India – are looked at in detail:

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Scaling Up Energy Efficiency

Air conditioner in a mosque in Isfahan with a European energy efficiency rating table.

According to the International Energy Agency (IEA), energy efficiency is defined as something that “delivers more services for the same energy input, or the same services for less energy input”. The IEA argues that “energy efficiency represents the most important plank in efforts to decarbonise the global energy system and achieve the world’s climate objectives: in the IEA scenario consistent with limiting the long-term increase in global temperatures to no more than 2 degrees Celsius, the biggest share of emissions reductions – 40% – comes from energy efficiency”. It is one of the most important strategies for reducing Greenhouse Gas emissions and controlling energy demand as our economies grow and develop.

Although energy efficiency measures often bring net benefits to society  – including reduced pressure on energy systems, decreased greenhouse gas emissions, reduced pollution from fossil fuel combustion, and economic savings to energy consumers – these projects are not invested in as often as one would expect.

So, what is keeping us from investing in energy efficiency?

Energy efficiency measures may not be adopted for several reasons:

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