Investing in energy efficiency  

The McKinsey Quarterly has an article on the benefits of investing in energy efficiency, pointing out a program that targets "cost-effective opportunities in energy productivity could halve the growth in energy demand, cut emissions of greenhouse gases, and generate attractive returns".

One hundred and seventy billion dollars a year invested in efforts to boost energy efficiency from now until 2020 could halve the projected growth in global energy demand. What’s more, these investments could also deliver up to half of the emission abatement required to cap the long-term concentration of atmospheric greenhouse gases at 450 parts per million, the level experts suggest will be needed to prevent the global mean temperature from rising by more than two degrees centigrade.

The key to achieving these results will be carefully targeting cost-effective opportunities to boost energy productivity—the level of output achieved from the energy consumed. ...

Nevertheless, real obstacles stand in the way of these investments and the energy savings they could generate. One is a set of market and policy imperfections. To name just a few, consumers don’t have enough information about energy-efficient options, fuel subsidies discourage efficient energy use, and landlords and tenants alike resist energy-efficient investments they believe would mostly benefit the other party. A second challenge is that two-thirds of the investment opportunity lies in developing countries, where consumers and businesses face a variety of competing demands for their scarce investment dollars. China alone would need to account for 16 percent of the annual investment that our analysis suggests is needed.

The public and private sectors can do much to overcome these obstacles and facilitate the necessary investments, however. Policy priorities include setting energy efficiency standards for appliances and equipment, as well as removing subsidies and tax breaks for energy consumption. Businesses can raise their efficiency standards and innovate to overcome the information and agency barriers that keep both them and consumers from making economically and environmentally sound choices. In this way, the leaders will capture the significant financial benefits of efficiency and perhaps even create entirely new markets.