Information and Communication Technologies: The Power of Productivity

How ICT Sectors Are Transforming the Economy While Driving Gains in Energy Productivity

John A. "Skip" Laitner and Karen Ehrhardt-Martinez

February 2008

Executive Summary

Information and communication technologies (ICT) have transformed our economy and our lives, but they also have revolutionized the relationship between economic production and energy consumption.

Since the early 1990s, ICT applications and systems have become a critical means of achieving both energy and economic productivity.

Huge cost reductions and important new ICT innovations have worked together to drive the expansion and diffusion of new applications that have subsequently enabled the development of additional high-tech products and services, new investments, and new ways of doing things.  In other words, the positive economic feedback generated by most ICT innovations have stimulated higher levels of economic productivity and driven net gains in cost-effective energy savings throughout the U.S. economy.  

How big of an impact?  The available data and statistics now collected by various governmental agencies do not yet allow a precise estimate.  Nonetheless, the evidence is compelling:

• For every extra kilowatt-hour of electricity that has been demanded by ICT, the U.S. economy increased its overall energy savings by a factor of about 10.  These productivity gains have resulted in significant net savings in both energy and economic costs.  The extraordinary implication of this finding is that ICT provide a net savings of energy across our economy.
• The realization of ICT-driven energy savings has been, and will continue to be, dependent upon our institutional and cultural capacity to direct these technologies toward addressing our most pressing energy and climate problems as much as it is about our technological capacity alone.  
• Since 1970, the United States has dramatically reduced the amount of energy required to support economic activity. Today, it takes less than half the energy to produce a dollar of economic output as it did in 1970. U.S. energy consumption per dollar of economic output will have declined from 18,000 Btus in 1970 to less than 9,000 Btus by the end of 2008. That gain in energy productivity enabled the economy to provide approximately 75 percent of the new demand for energy services through energy efficiency improvements.
• Information and communications technologies have played a critical role in reducing energy waste and increasing energy efficiency throughout the economy.  From sensors and microprocessors to smart grid and virtualization technologies, a strong correlation is found among efficiency, productivity, and energy savings.  And while discrete technologies have successfully enabled significant energy savings, system-wide energy savings have also emerged from the growing ubiquity of ICT systems and technologies. 
• The evidence suggests that we have yet to optimize the full range of opportunities for additional gains in energy and economic productivity.  For example, the Climate Savers Computing Initiative estimates that today’s standard desktop computers waste nearly half the power delivered to them.  For that reason, the industry has committed to a 50 percent reduction in power consumption in computers by 2010.  These types of initiatives will improve the energy efficiency of critical appliances and equipment.  In addition, the continued expansion of ICT equipment in everyday household and business functions, as well as the substitution of ICT for travel, will provide the means through which additional efficiency gains will emerge.  These accomplishments will require a set of smart policies to further catalyze the optimal development of ICT so as to maximize energy and economic productivity.

ICT systems have revolutionized the relationship between economic production and energy consumption, becoming a critical energy and economic productivity tool for consumers and industry alike.  Despite the significant energy-saving potential of ICT, they have generated a notable lack of recognition due to what might be called “the ICT energy paradox.” The paradox is one in which more attention tends to be paid to the energy-consuming characteristics of ICT than to the broader, economy-wide, energy-saving capacity that emerges through their widespread and systematic application.  Given the economic and energy challenges that await us, as a nation we should commit to the realization of the energy-saving opportunities that new ICT opportunities provide.

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43 pp., 2008, $25.00, E081