There are two ways you can make your water heater more efficient. One, wrap it in an insulating blanket. It costs only about $25 at your local home center, and it will cut your carbon emissions by up to 1,000 pounds annually. Two, turn down the thermostat from 140 degrees (the standard factory setting) to 120 degrees. Each 10-degree reduction reduces your carbon emissions by 600 pounds (electric) or 440 pounds (gas) a year.