Preface
This report is the result of a yearlong effort by the McKinsey Global Institute
(MGI) and McKinsey’s Global Energy and Materials (GEM) Practice to understand
the microeconomic underpinnings of global energy demand. It is the second of a
two-part series to introduce microeconomic analysis of end-use segments to the
global energy debate.
A group of leaders from McKinsey’s Global Energy and Materials Practice, Pedro
Haas, Scott Nyquist, Matt Rogers, and Jonathan Woetzel, provided strong guidance
to our project throughout. The project team was led by Jaana Remes and
Jaeson Rosenfeld, Senior Fellows at MGI. The project team included Arpit Agarwal,
Florian Bressand, Rahul Gupta, Anders Havneraas, Maya Jolles, Paul Langley,
Shawn Liu, Fabrice Morin, Laurent Poncet, Sebastian Roemer, Erin Tavgac, and
Peter Yeung.
Our project has benefited from support from many colleagues around the world,
and we would particularly like to thank Ivo Bozon, Odd Christopher Hansen, Scott
Andre, Warren Campbell, Tim Fitzgibbon, Morten Jorgensen, Mike Juden, Alan
Martin, Augusto Moreno, Greg Terzian, and Jin Yu. We would like to thank our
senior external advisors Adrian Lajous and Robert Mabro for their valuable input.
We also owe thanks to David Fridley, Mark Levine, Jiang Lin, Lynn Price, and Nan
Zhou from the Lawrence Berkeley National Laboratory for their contributions.
We would like to thank our colleagues in McKinsey’s knowledge services, Tim
Beacom, Egor Chistyakov, Barbara Fletcher, Haruko Nishida, Jessica O’Connor-
Petts, Karin Ohlenforst, Mohan Reddy, Daniela Rodrigues, Reiko Seigo, Susan
Sutherland, Karen Victory, and Peter Zheng, along with Janet Bush and Susan

Lund for providing editorial support. We would also like to thank MGI practice
administrator Deadra Henderson and MGI executive assistant Sara Larsen.
This work is part of the fulfillment of MGI’s mission to help global leaders
understand the forces transforming the global economy, improve company performance,
and work for better national and international policies. As with all MGI
research, we would like to emphasize that this work is independent and has not
been commissioned or sponsored in anyway by any business, government, or
other institution.
Diana Farrell
Director, McKinsey Global Institute
May 17, 2007
San Francisco

Table of contents
Preface 5
Executive summary 9
Energy productivity: The key to curbing global energy
demand growth 17
Policies to capture the energy productivity opportunity 39
Residential sector 57
Commercial sector 105
Road-transportation sector 143
Air-transportation sector 193
Industrial sector 211
Bibliography 281