Economic theory traditionally teaches that the more resources you save, the more you must pay for the next increment of savings.� This is called “diminishing returns.” This theory only holds if each additional increment is achieved in the same way as the last, but when the design looks at the system as a whole this theory no longer applies. As described in chapter six of Natural Capitalism (www.natcap.org), whole-system engineering can often “tunnel through the cost barrier,” making very large—even order-of-magnitude—savings cost less than small or no savings. This can be done in two ways.

First, you can optimize an entire system for multiple benefits (rather than isolated components for single benefits)—thus getting multiple benefits from single expenditures. When building a house, slightly better windows and slightly thicker insulation will cost more up front but will save energy over the life of the house. Under the old design mentality, you might travel along the curve of diminishing returns to some cost-effectiveness limit where more insulation would cost more than the energy it saves

Whole-system design, however, continues further along the curve to the upper right and makes investments that might not seem cost-effective at first glance. However, they can obtain a previously overlooked benefit: downsizing or even eliminating the heating equipment! RMI’s 1982–84 headquarters through superinsulation, superwindows, and air-to-air heat exchangers together eliminated the furnace, ducts, fans, pipes, pumps, controls, wires, and fuel-supply apparatus. This superefficient design saved 99% of space heating energy, yet reduced capital cost by ~$1,100.

Second, you can “piggyback” retrofits onto changes being made anyhow for some other reason. A 200,000 square foot curtainwall office building in the hot-and-cold climate of Chicago had failed window seals and required reglazing. Simultaneously, its large air-conditioning system needed renovation to replace worn out moving parts and the CFC-eating refrigerant. By spending money in different places—more on superwindows daylighting, efficient lights and office equipment, and less on the downsized air-conditioning system—the building could become four-times more energy efficient at negative net cost. Optimizing the entire building as a system can dramatically improve energy performance and occupant comfort.

Doing the right steps in the right order to optimize whole systems—in this case, both energy and capital savings—can achieve far bigger savings and lower cost than optimizing, say, insulation expense against energy cost. In these cases, the key to a cheaper-to-build (and cheaper-to-run) building was to use expensive windows which traditional slice-and-dice “value engineering” would have eliminated. Shifting the way we think about design can reveal enormous opportunities for resource and cost savings.