Is energy efficiency an effective deficit offset?

A new report from McKinsey & Co. concludes that elevating energy efficiency to a national priority could save American consumers $1.2 trillion by 2020—about the same amount as the projected 2009 Federal deficit (calculated on data from Congressional Budget Office, Annual Budget and Economic Outlook, 1/7/09.


A new report from McKinsey & Co. concludes that elevating energy efficiency to a national priority could save American consumers $1.2 trillion by 2020—about the same amount as the projected 2009 Federal deficit (calculated on data from Congressional Budget Office, Annual Budget and Economic Outlook, 1/7/09. Note: $1.2 trillion is gross savings and does not take into account related investments in energy efficiency ).

According to the management consulting firm, this amount of savings is well beyond the $520 billion upfront investment (not including program costs) that would be required. The reduction in energy use would also result in the abatement of 1.1 gigatons of greenhouse gas emissions annually-the equivalent of taking the entire U.S. fleet of passenger vehicles and light trucks off the roads.

In issuing its report, McKinsey & Co. state that energy efficiency is the "single most promising resource" in pursuing energy affordability and security. In addition to the tremendous savings to consumers and businesses, the report finds that elevating energy efficiency to a national priority could also create 600,000–900,000 sustainable green jobs and reduce our overall energy consumption by 23%, an amount equivalent to the total energy consumption of the entire world for two weeks.

The report also outlines five observations that McKinsey & Co. contend will be relevant to a national debate about how best to pursue energy efficiency opportunities of the magnitude identified and within the timeframe considered in this report. Specifically, an overarching strategy would need to:

  • Recognize energy efficiency as an important energy resource that can help meet future energy needs while the nation concurrently develops new no- and low-carbon energy sources;

  • Formulate and launch at national and regional levels an integrated portfolio of proven, piloted, and emerging approaches to unlock the full potential of energy efficiency;

  • Identify methods to provide the significant upfront funding required by any plan to capture energy efficiency;

  • Forge greater alignment between utilities, regulators, government agencies, manufacturers, and energy consumers; and

  • Foster innovation in the development and deployment of next-generation energy efficiency technologies to ensure ongoing productivity gains.

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