How much and how soon can available energy efficiency technologies produce energy savings?

by Economics & Policy Group Head Charles Kolstad

The Obama and Swartzenegger administrations are pinning a great deal of hope on energy efficiency opportunities to reduce greenhouse gas emissions and cut imports of foreign oil. A new report by the consulting group McKinsey & Co. asks the fundamental question: How much energy/greenhouse gas savings can be achieved by using available energy efficiency technologies, and by when? In a previous report, McKinsey was very bullish on energy efficiency technologies, suggesting that there were a number of opportunities to actually save money while significantly reducing energy consumption. In a new report, released in July, the company is a little less sanguine on these prospects. Although they provide a detailed analysis of the cost advantages of a number of new technologies, they also point out that there are obstacles, both behavioral and structural, to achieving these gains. They propose a five-step strategy to try to achieve some of the gains that seem on the surface to be technologically feasible. This report is recommended reading for gaining a broad view of the economic issues relating to implementing energy efficiency technologies.

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