Two recent events held in Washington, D.C. highlighted the importance of efficiency measures to mitigate global climate change's (GCC) effects. At the Design X Tomorrow: The Future of Technology and Sustainability and McKinsey & Company's launch of Unlocking energy efficiency in the U.S. economy, the common message was simple: increasing the efficiency of energy consumption should be a major priority.

  At the Design X Tomorrow presentation (part of the Cooper-Hewitt National Design Museum's National Design Awards), Dr. Amory Lovins, who was receiving the Design Mind award, focused on opportunities where efficiency measures

Energy efficiency is the key to profitable solutions -Amory Lovins

could have a significant impact on both energy use and economics. Energy efficiency "is the key to profitable solutions [for] climate change, oil dependence, spread of nuclear weapons, and a lot of development problems, and we've been successfully applying it all over the place with many colleagues around the world," Dr. Lovins said. He detailed projects ranging from computing centers, factories and houses to cars and transportation. Dr. Lovins work breaks conventions. Nothing illustrates that quite so well as his own home. Located in Snowmass, CO, the home is super-insulated and utilizes passive solar design so that, even in the dead of winter, it requires no additional energy to heat.

Dr. Lovins eating a banana grown in his home in Colorado.

  Dr. Lovins was adamant that better engineering and design is possible and is in fact teachable. Introducing designers to more efficient and elegant solutions to age-old problems would "irreversibly rearrange the [their] mental furniture." In order to perpetuate the timely renaissance of design and engineering, Dr. Lovins and his colleagues have launched a program called 10XE (for Factor 10 Engineering) to initiate "the non-violent overthrow of bad engineering," by incorporating efficient, "high brain-Velcro" case studies into engineering and design pedagogies.

  Dr. Lovins seems frustrated with the political response to GCC. He stressed that the political dialogue was too focused on the costs of GCC mitigation and ignored the opportunity for serious economic gains. This notion -- that efficiency measures could change the political dialogue from a focus on cost to one on profitability -- is backed up by a study conducted by McKinsey & Company in 2007 on market and GCC mitigation potential of efficiency measures worldwide. At McKinsey's presentation on July 29th they focused strictly on U.S. stationary energy use (non-transportation). This new report helps to contextualize the importance of efficiency measures in GCC mitigation.

  The report, titled Unlocking energy efficiency in the U.S. economy, documents the tremendous upside that efficiency projects could have on the economy and climate change. Broadly, they suggest that investing $50 billion per year over ten years could yield $1.2 trillion in savings and the abatement of 1.1 gigatons of greenhouse gas (GHG) emissions annually. That level of GHG reduction is equivalent to removing the entire U.S. fleet of passenger vehicles and light trucks from the roads. Another, perhaps more striking way of understanding the sheer scale is to compare the potential U.S. GHG reduction from efficiency measures with other countries total GHG emissions. Only five countries currently produce 1.1 gigatons of GHG annually. Eliminating those emissions would be like eliminating all the emissions for Brazil.

Total GHG Emissions in 2005

CO2, CH4, N2O, PFCs, HFCs, SF6 (excludes land use change, includes intl. bunkers) (3)

Obstacles to an efficient economy

  Both Dr. Lovins and the McKinsey team seemed quite aware of the many barriers to instituting global climate change mitigation measures. Dr. Lovins indicated that the most significant barriers were the broken economic and regulatory systems which reward waste and often bar unconventional solutions. The obstacles to realizing the potential efficiency gains documented in the McKinsey report are significant and numerous. First, the overall efficiency gains are highly fragmented across industrial, commercial and residential sectors. "This dispersion ensures that efficiency is the highest priority for virtually no one." (3). Moreover, the scale and application of efficiency measures is highly variable. In 2006 (the most recent year with comprehensive data), there were over 630,000 commercial firms which employed 20 or more employees (5) which suggests that instituting, coordinating, and monitoring efficiency measures just in the commercial and industrial sectors will be extremely complex. The number of firms which can provide efficiency retrofit solutions is limited. Even if governments and industry were to invest in efficiency measures at the level which McKinsey suggests, it would take time to even reach that level because of the limited intellectual resources available. As Dr. Lovins pointed out, the keys to unlocking many of these energy efficiency gains are "not yet in the heads of virtually all designers" and engineers.

U.S. energy efficiency supply curve - 2020

The width of each column on the chart represents the amount of efficiency potential (in trillion BTUs) found that group of measures, as modeled in the report. The height of each bar corresponds to the average annualized cost (in dollars per million BTUs of potential) of that group of measures. (3)

  For the residential sector to see widespread adoption efficiency measures, it must first surmount the primary barrier of initial cost. While many residential projects, such as installing insulation or replacing inefficient appliances are cost effective over the long run, homeowners are frequently dissuaded by the initial cost of installation. The turnover rate of home-ownership can also mean that many homeowners aren't likely to experience the financial benefits of efficiency measures because the payback period for those measures is too long.

Policy solutions

  Effective policy solutions to these entrenched problems aren't readily clear, although there are a lot of ideas floating about. Some level of government guidance however, will be necessary for widespread efficiency efforts to take place. This is especially true in the residential sector. Retrofitting existing homes isn't always optimal, from both economic and efficiency perspectives. New houses on the other hand, should include the latest and greatest of efficiency strategies. Making this happen will take broad outreach to the building industry which demonstrates the economic and technical feasibility of efficient building practices. Builders, engineers and architects must be retrained so they can take advantage of new techniques rather than relying on traditional, and inefficient approaches.

  For commercial entities, it is often easier to justify the initial costs of an efficiency measure when the expected payback is clearly documented. Moreover, for new construction of office buildings and factories and for the development of natural resources, adopting new, energy efficient strategies is often the most sensible economic decision. Frequently, these strategies require no additional upfront costs. Policy should assist firms in making the right decisions, so that companies may do well while doing good.

  For the U.S. to reach the potential which McKinsey outlined, significant steps must be made in the policy arena and on the ground. Many of the ideas which are central to energy efficiency aren't particularly complex or even new. But, unless systemic change occurs, we are unlikely to take full advantage of this vast opportunity and could end up wasting literally hundreds of billions of dollars. In the words of Dr. Lovins, "efficiency is cheaper than fuel."

¹ Factory image credit: www.nciku.com
² Amory image credit: Discover Magazine
³ Report cover image credit, quotation, Efficiency curve image credit: McKinsey & Company
⁴ Top ten GHG emitters chart: Climate Analysis Indicators Tool (CAIT) version 6.0. (Washington, DC: World Resources Institute, 2009). Available at http://cait.wri.org.
⁵ Source: 2006 County Business Patterns.
For information on confidentiality protection, sampling error, nonsampling error, and definitions, see http://www.census.gov/epcd/susb/introusb.htm and http://www.census.gov/csd/susb/defterm.html.