How to Fuel the Country While Saving the World

For starters, it could lead the world to a profitable climate solution. Most economic theorists assume that global energy use per dollar of GDP will keep drifting down by just 1 percent a year. But if we could raise that figure to just 2 percent a year, we would stabilize carbon emissions; 3 percent a year would decrease them and soon stabilize climate change (unless the damage proves irreversible). Is a 3 percent annual cut realistic? Yes: the United States has beaten that target in four of the past 10 years, and in 2006 it achieved a 4 percent drop. Since this slightly exceeded growth in GDP, total U.S. use of energy, coal and oil fell slightly in 2006. Nobody noticed. China has beat 5 percent for 25 years; smart companies manage 6 to 9 percent. Moreover, everyone who's saving energy is making money.

To understand why, you must first understand why releasing carbon by burning oil and fueling power plants—which each cause two fifths of global fossil-fuel carbon emissions—is unnecessary and uneconomic. Consider oil first. In 2004, my team prepared a detailed report for the Pentagon called "Winning the Oil Endgame," in which we explained how the United States could become oil-free by the 2040s—led by business for profit. U.S. oil efficiency could be redoubled at an average cost of just $12 per saved barrel. The economics are like buying fuel for between 7 and 15 cents per liter. The key is building trucks, cars and planes that achieve three times greater fuel efficiency than those in use today by integrating ultralight materials, better aerodynamics and tires, and advanced propulsion.

Working with the auto industry, my team has designed a 67mpg (3.6L/ 100km) half-weight, ultrasafe, hybrid-electric SUV. It could be made of light metals or of even lighter and stronger carbon-fiber composites similar to those used in Boeing's fuel-sipping Dreamliner (which is sold out into 2015). The SUV could be made at a cost and pace comparable to current models by using simpler and cheaper techniques, which would cut automakers' costs by two fifths and save the United States so much oil it would be like finding a new, secure and inexhaustible Saudi Arabia under Detroit. In October, Toyota showed a carbon-fiber plug-in hybrid concept car with a third the weight and twice the efficiency of a Prius. Toray, the world's top carbon-fiber maker, announced a $3 billion factory to produce auto parts.

Car buyers, dealers and autoworkers already crave such innovation, and automakers' survival demands it. Today's competitive tsunami will change the managers or their minds, whichever comes first. My team gets the business logic flowing by "institutional acupuncture"—sticking needles into congested cultural blockages. Our analysis led Wal-Mart to require doubled-efficiency trucks that will save it billions and take those trucks to market where everyone can buy them, ultimately saving 6 percent of U.S. oil, more than three times what the Pentagon uses.

Displacing oil by reusing saved natural gas and advanced biofuels could fill the other half of U.S. oil needs at an average cost of $18 a barrel. This means that getting the United States completely off oil would cost only $15 a barrel (the average of $18 and the $12-per-barrel cost of enhanced efficiency)—a fifth of today's price. As you explain this to the nation and business leaders figure it out in the marketplace, competitive pressure will remove the need for new federal energy taxes, subsidies, mandates or laws. Still, innovative policies should be put in place to support rather than distort the business logic. For example, using "feebates"—fees on inefficient new cars, offset by rebates on efficient ones of comparable size—would benefit buyers, enrich carmakers and expand consumers' choices.

As for electricity, more-efficient use could reduce the country's electricity needs by three fourths—and could be achieved more cheaply than simply running an already-built coal or nuclear power station. Energy-saving techniques are getting better and less expensive all the time. One example: my house in the Rockies, built in 1982–84, has since yielded 28 indoor banana crops despite having no furnace and outdoor temperatures that get down to –44 degrees C. Yet building such a heat-tight home actually decreased construction costs by $1,100. Reinvesting that sum, plus an additional $6,000, saved 99 percent of water-heating costs and 90 percent of household electricity plus 50 percent of water use, repaying the extra expense in 10 months (today it would be even cheaper). Pacific Gas & Electric has built experimental passively cooled houses with no air conditioning that remain comfortable when the outside temperatures spike up to 46 degrees C—and that are cheaper to mass-produce than regular houses. Similar savings can be found in industry; by redesigning more than $30 billion worth of facilities in 29 sectors to make them superefficient, my team has routinely made very large energy savings cost less than small or no savings. And these techniques keep getting better and cheaper.