January 5, 2011

Big gains await developing countries if they raise their energy productivity, research by the McKinsey Global Institute (MGI) has found: they could slow the growth of their energy demand by more than half over the next 12 years—to 1.4 percent a year, from 3.4—which would leave demand some 25 percent lower in 2020 than it would otherwise have been (Exhibit 1). That is a reduction larger than total energy consumption in China today.

Policy makers and businesses in developing regions must not be deterred from boosting energy productivity (the output they achieve from the energy they consume) because of the present weakening economic environment and falling oil prices; these do not affect the long-term projections in the study.1 Time is of the essence: developing economies will install half or more of the capital stock that will be in place in 2020 between now and then. Every building or industrial plant constructed without optimal energy efficiency represents a lost opportunity to lock in lower energy consumption for decades.

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