February 14, 2008 / 7:08 PM / 12 years ago

Energy saving seen most effective in CO2 cutting

UNITED NATIONS (Reuters) - Squeezing more productivity out of the energy that industries, homes and vehicles burn is the most economical way to stifle rising energy demand and control output of planet-warming gases, according to a new report from the McKinsey Global Institute.

View of Finland's Metsa-Botnia paper mill in Fray Bentos September 1, 2007. REUTERS/Andres Stapff

For decades, many countries have mostly invested in finding more supplies of oil, gas and coal to meet the rising energy needs of growing populations, but as energy costs and global warming concerns rise, interest in investing in ways to slow energy demand is beginning to take hold.

“We’ve identified huge opportunities to reduce energy demand and carbon emissions through improved efficiency,” Diana Farrell, the director of the MGI, said in an interview.

Slowing global energy waste at industries like pulp and paper, oil refining and steel, homes and cars could more than halve global energy demand growth from current levels of 2.2 percent a year, according to the report, “The Case for Investing in Energy Productivity,” released by the MGI on Thursday at a United Nations Investor Summit on Climate Risk.

Initial global investments would total about $170 billion per year. But they would pay for themselves through energy savings, with an average internal return rate of 17 percent, the report said.

Industries would need to invest about $83 billion per year, homes would need to invest about $40 billion and transport and commercial sectors will need to invest $25 billion and $22 billion a year, respectively.

Less burning of fossil fuels like coal, oil and natural gas as a result of the efficiencies would cut greenhouse gas output, the report said.

Getting companies to change their energy habits, however, is no easy task.

“The vast majority of global executives say fixing global warming problems can boost profits,” said Farrell. “But few are acting on the opportunities.”

John Holdren, a climate expert at Harvard University, told investors efficiencies can be helpful in slowing global warming, but that much more needs to be done, such as developing new fuels and methods to bury carbon emissions, to stop catastrophic consequences such as flooding from rising seas.

“The low-hanging fruit is wonderful, but we need to reach higher still,” he said.

Reporting by Timothy Gardner; Editing by Christian Wiessner

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