Energy costs

It is possible to significantly reduce the annual global growth rates of energy use in the long term by improving energy productivity (the ratio of value-added to energy inputs).

by McKinsey Quarterly
Last Updated: 23 Jul 2013

The technology and means are there to do so, but there are various barriers and disincentives facing businesses, such as information gaps and misaligned incentives, that might deter them from improving their energy use.

As such, removing policy distortions or making energy prices and usage more transparent could lead to significant change. Overall, there is the potential to achieve a 25% drop in energy consumption by 2020, leading to a 27% reduction in carbon emissions.

Japan leads the world in energy efficiency because it has had to cope with high energy prices and its government has set high efficiency standards; its coal-fired power plants are 70% more productive than Russian ones.

Making the most of the world's energy resources
Diana Farrell, Scott S Nyquist and Matthew C Rogers
McKinsey Quarterly, No 1, 2007

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