Energy Efficiency Can Make Billions While Fighting Climate Change

The International Energy Agency estimates that one-third of emissions reductions must come from energy efficiency in order to avoid the worst impacts of climate change.
The International Energy Agency estimates that one-third of emissions reductions must come from energy efficiency in order to avoid the worst impacts of climate change.

Energy efficiency could be a several hundred billion dollar investment opportunity in the United States, but better policies are required to unlock broad-based financing from institutional investors, according to a new study by investor advocacy group Ceres.

Power Factor: Institutional Investors’ Policy Priorities Can Bring Energy Efficiency to Scale details the results of a survey of nearly 30 institutional investors and other experts from the energy, policy and financial sectors that identified three areas of policy: utility regulation, demand-generating policies and innovative financing policies. The study finds that these three areas have the potential to take energy efficiency financing to a scale sufficient enough to attract significant institutional investment.

“Energy efficiency offers investors a potent one-two punch: stable returns and an important strategy for mitigating climate-related risks,” said Mindy Lubber, president of Ceres. “Policymakers and regulators should work to unlock capital from institutional investors for energy efficiency by promoting the policies identified in this report. Many of these policies do not require public funds, and they can put money back into the pockets of homeowners and business leaders around the country.”

While solar, wind, hydroelectric and other renewable energy technologies often hog the sustainability spotlight – maximizing energy efficiency using existing technology could create an economic boom while reducing overall greenhouse gas (GHG) emissions.

“The hard truth is that renewables have started from such a tiny base that even with exponential growth, it will take a long time for them to take over a large share of the work now done by coal, oil, and natural gas,” said physicist and economist Robert Ayres, co-author of Crossing the Energy Divide: Moving from Fossil Fuel Dependence to a Clean-Energy Future.

The U.S. economy’s energy demands are too great for renewables to take over from coal and oil over night, according to Ayres. Even if the country’s solar generation capacity doubled every three years over the next decade (a goal set forth by President Obama), it would still only account for 13 percent of the U.S. energy supply.

A more practical route to a clean energy future is building what Ayres calls an “energy bridge” of energy efficiency, using its cost savings to invest in developing renewables to the point where they can take over the lion’s share of energy demands while also significantly reducing overall GHG emissions.

A good place to start is with buildings – they account for roughly 41 percent of total U.S. energy consumption. How can we make existing buildings more energy efficient?

The Ceres report cites three key areas of policy that could help build up a secondary market for building energy efficiency retrofit loans.

Utility regulations

Public Utilities Commissions and other regulators can move the utility business model from a 20th-century model that rewards increasing energy sales to one that maximizes energy efficiency. At the same time, utilities and their regulators can help make energy-efficiency finance programs investment grade through the same protections provided to electricity sales, as well as better data sharing and strong contractor and performance standards.

Demand-generating policies

Investors can highlight efficiency-inducing measures, including building codes and standards, and appliance and equipment efficiency standards to set a baseline of efficiency in the marketplace. Building energy disclosure requirements – such as those adopted by cities like Philadelphia, New York and Boston – can provide both an impetus to do energy efficiency retrofits and the transparency to facilitate investments in more efficient buildings.

Innovative financing policies

Implementing policies like Property Assessed Clean Energy (PACE) bonds, on-bill repayment, credit enhancement, and extending Master Limited Partnerships to combined heat and power (CHP) projects can overcome the challenge of paying for the upfront costs of energy efficiency retrofits. These policies also can provide vehicles for loans that can be packaged and sold to institutional investors.

The International Energy Agency estimates that one-third of emissions reductions must come from energy efficiency in order to avoid the worst impacts of climate change. As much as 75 percent of the electricity used in the U.S. today could be saved with efficiency measures that cost less than the electricity itself, according to Rocky Mountain Institute.

While the U.S. (and the world) must continue the march towards renewables, investing in energy efficiency will help erect an “energy bridge” to traverse the climate change chasm to reach a clean energy future.

Based in San Francisco, Mike Hower is an Associate Editor at Sustainable Brands and writes about companies and organizations engaged in sustainability strategy, clean technology and social entrepreneurship. As a natural politico, he has a soft spot for anything related to public policy and the intersection of business and government, which he also blogs about on Contact him at You  also can connect with him on LinkedIn or follow him on Twitter (@mikehower).

Mike Hower

Currently based in Washington, D.C, Mike Hower is a new media journalist and strategic communication professional focused on helping to drive the conversation at the intersection of sustainable business and public policy. To learn more about Mike, visit his blog, ClimaTalk.

14 responses

  1. Climate change reporting has done to journalism what naughty naughty priests did for religion; 28 years of needless CO2 panic.

    Here is what these lazy copy and paste clowns won’t tell you;
    Science can say a comet hit is real but won’t say their catastrophic climate crisis is as real as a comet hit is. Not one single IPCC warning has ever said it WILL happen, only “could”.

    A climate crisis is the ultimate emergency so how close to unstoppable warming will the scientists take us before they say it’s “inevitable” or “eventual” or “imminent” not just “possible” and “could” and “potentially” etc.? The ultimate crisis needs certainty not another 28 years of “could be” before we condemn the world to the greenhouse gas ovens.
    Be happy a crisis was exaggerated not disappointed.

    1. The more people feel the need to make arguments “against” climate change and hurl epithets at scientists and journalists trying to warn of us the likely consequences if we don’t address the causes, the more obvious it is that the problem is real and causing severe cognitive dissonance for so-called conservatives — who aren’t actually conservatives at all, but apologists for willful ignorance and unwarranted privilege.

    2. For reliable facts on which to base a conversation on climate, refer to Worldwatch Institute’s Annual Report, “State of the World 2013: Is Sustainability Still Possible?” When I first tuned into Worldwatch, I was impressed by the depth and breadth of the research but found the truth horribly depressing. But soon it transformed into a huge positive in the form of motivation to catalyze change. Armchair philosophizing gets us nowhere quick. And, armed with facts, climate need not be a right/left issue. Because it’s bigger than all of us and, if we don’t get in our own way, it can serve to unite us as humans working together in the best interest of ourselves and each other.

  2. It’s not so much about addressing a crisis – being more energy efficient is economically beneficial as well as environmentally beneficial. There’s no denying that oil will run out – even if it’s way in the future – so investing in focusing on energy efficiency now sets up for the future, and if it creates a profitable industry which benefits the economy, then it’s worth doing.

  3. Wise, long-term capital allocation decisions would point you straight toward investments in both energy efficiency and renewable sources.
    Our problem is that Wall Street operates mostly within a three-month window of opportunity and policies created throughout our nation since World War II — during a brief era of cheap energy –encourage waste. Everything from consumer habits that we’ve all learned to depreciation schedules in tax law encourage waste of both energy and resources.
    Since much of the rest of the world has adopted our bad habits, rising global prices will eventually end all our wasteful habits, but it’s going to be a tough row to hoe.

  4. Energy efficiency is the best foundation to the solutions of many of our energy-based problems. Attacking energy efficiency at my family’s 70 year old home, through a Deep Energy Retrofit (DER) solved our problems of a leaky, uncomfortable, and unhealthy home by reducing our monthly energy bills by over 85% and making the house a more beautiful, comfortable, and healthier place to live. At the same time, we’re combatting, in our small way, problems of our economy, environment, and energy security, while laying the base for renewables to provide a larger share of our reduced power needs.
    EE is also the biggest bang for our societal buck – far cheaper than building new power plants, and far better at putting the worst hit industry, construction, back to work.

    Check it all out in my new book, The Greened House Effect, available now where books are sold.

  5. It is unfortunate that this site should buy into the common delusion that energy efficiency is a worthy goal. That misconception has uniformly led to capital destruction on a massive scale and the end is not in sight. Energy efficiency is not an investment, it is an operational expense. Renewable energy and energy independence are worthwhile investments. If you optimize a system for a subordinate objective, you get duck soup, or, more specifically capital destruction.

      1. nope, though that’s part of it. But from strict financial analysis, one faces strongly diminishing returns on energy efficiency, whereas renewable energy produces compound returns. I am looking at it mostly from the point of view of generating energy at the building level which is the natural opportunity for renewables. When you look at it at the micro economic level of individual buildings, the choices are quite stark, yet existing “incentive programs” tend to be denominated in energy efficiency, and together with some shoddy financial analysis they are biased against renewable energy. If you do proper capital budgeting, and model the renewable alternative, you can achieve 50-75% reduction in fossil fuels in older buildings, while with energy efficiency you are hardpressed to achieve anything over 30%. The current vogue of energy efficiency is totally destructive of real estate values at least in any case where there is a workable (economical) renewable alternative, which is almost always the case. As I like to say, 30 years of no energy bills beats 30% “energy savings” any day of the week. It’s more capital intensive up front but worth it in many cases.

  6. “While solar, wind, hydroelectric and other renewable energy technologies
    often hog the sustainability spotlight – maximizing energy efficiency
    using existing technology could create an economic boom while reducing
    overall greenhouse gas (GHG) emissions.”

    Finally, somebody sees this other than myself! Renewable energy sources are so far behind fossil fuels that it’s a pipe dream to expect them to replace oil, coal and natural gas in oour lifetime. Even the US Department of Energy, Energy Information Administration data, fossil fuels are the cheapest way to produce electricity coming in at $0.44 (44 cents) per megawatt-hour, whereas nuclear energy costs $1.59 per MWH, wind energy $23.37 and finally solar energy $24.34.

    As this article points out energy efficiency can go a long way to realistically reducing our dependency on fossil fuels without having us pay up to 50 times more for work electricity

  7. How many of these large commercial buildings have a chimney poking out of their roof?
    What is leaving most of these chimneys? HOT Exhaust.

    Natural gas is an energy that can be consumed so much more than is being done today. This fuel can be consumed to well over 90% Energy Efficiency.

    Natural gas consumed efficiently will have COOL exhaust leaving the buildings chimney.

    Natural gas if consumed efficiently will reduce Global Warming and CO2 Emissions in much bigger numbers than any other energy source.
    Natural gas can be combusted so efficiently that the WATER can be recovered from the Cooled exhaust gases, and this water is very usable.
    Do Not Waste the Water!

  8. Interesting post indeed to better understand underlying issues and opportunities in the USA. I tried to recall here ( all the good reasons that make Energy Efficiency investments a good idea for local authorities. Hope it could help whose who want to convince about the relevance of Energy Efficiency.

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